I entered short EUR/USD at 1.1207 after prices followed the appearance of a bearish Harami candlestick with a break through trend line support guiding the pair higher since late July.
The pair found interim support above the 1.11 figure, stopping short of reaching the trade's initial target at 1.1097, and bounced after carving out a bullish Morning Star setup. Prices tested well above the 1.13 figure but failed to secure a daily close above 1.1263, which I set as the condition for a stop-out.
Perhaps even more importantly however, EUR/USD did not break back above the trend line whose breach triggered the short nor a longer-term support-turned-resistance barrier set from December 2015, painting gains as corrective. The Euro's inability to hold onto gains even after the ECB signaled it had not discussed stimulus expansion is likewise encouraging.
With this in mind, I will continue to hold the trade. The US Dollar seems likely to find strength if comments from Fed Governor Lael Brainard - considered the most dovish on the rate-setting FOMC committee - echo the hawkish tone of remarks from other Fed officials while on-coming releases of retail sales, inflation and consumer confidence data do not fall too far below expectations.
As before, the initial target is at 1.1097 and a stop-loss will be activated on a daily close above 1.1263. I will book profit on half of the position and move the stop-loss to breakeven when the initial objective has been reached.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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