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EURUSD: Waiting to Re-Enter Short Position

By , Currency Strategist
06 September 2012 02:58 GMT

Strategy: Pending Short

We entered short EURUSD at 1.2556 as prices put in a Bearish Engulfing candlestick pattern below resistance at the top of a Rising Wedge pattern carved out since late July. Prices narrowly triggered our stop-loss with a daily close above 1.2588 on yesterday’s candle, yielding a small loss (-42 pips).

Overall positioning still appears ripe for a downward reversal, with prices continuing to hover below Wedge resistance. That barrier is reinforced by the top of a long-term channel set from late-August 2011 while negative RSI divergence reinforces the case for a downside scenario.

With that said, a clear-cut entry signal is absent and the upcoming ECB rate decision creates a major event risk overhang that could materially change the setup. We will stand aside for now and allow positioning to develop before re-entering short.

EURUSD_Waiting_to_Re-Enter_Short_Position_body_Picture_5.png, EURUSD: Waiting to Re-Enter Short Position

Daily Chart - Created Using FXCM Marketscope 2.0

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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06 September 2012 02:58 GMT