EUR/USD Moves from Trendline Resistance
The EUR/USD has continued to be in the world’s eye as a symbol for economic recovery around the globe. It has been the USD prevailing in strength, holding on to its reserve currency and safe haven status. From the August 29th high of 1.4548 the Euro has declined over 1400 pips to the October 4th low of 1.3144. As the trend continues to develop, traders can look for signs of weakness to sell the pair.
Fundamentally, the market has enjoyed a risk on environment over the past four days. This has culminated in the NFP (Non Farm Payroll) news announcement this morning. More jobs were created in September than expected, resulting in traders moving outside of traditional safe haven currencies. Next week the Economic Calendar brings German CPI and USD Jobless claims to give us a better picture of any potential economic recovery.
Taking Price in to a 4Hour chart we can clearly see resistance being formed on our price channel. Resistance resides currently at 1.3525. This point is found by connecting a trend line from the September 25th high (1.3824) to the September 29th high (1.3678). Knowing channel resistance offers us opportunities to use indicators to enter in with our trend, while maintaining good risk management.
My preference is to sell the EUR/USD on a crossover of CCI from overbought levels, confirming the turn of price. Orders should be placed as near resistance as possible, to sell at 1.3525 or better. Stops should be placed over resistance at 1.3690. Limits should be placed at 1.3125 for a clear 1:2 risk reward ratio.
Alternative scenarios include price breaking through resistance and price resumes making higher highs.
---Written by Walker England, Trading Instructor
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