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EURUSD Trend Change?

EURUSD Trend Change?

Richard Krivo, Trading Instructor

Instructor's Response:

 
While you make some good observations, keep in mind that our primary tool in determining the direction that we want to trade a pair is the direction of the trend on the Daily chart...not the RSI.  You accurately noted that the Daily trend is down on this EURUSD pair.  That being said, we would be best served looking for opportunities to short the pair.
 
Using the RSI to that end, we would wait for it be above 70 and then close below 70 to determine that bearish momentum is in favor for our trade.
 
The 1:2 Risk Reward Ratio that you mention is right on the mark...well done.
 
Taking a look at the full view of the Daily chart on the EURUSD pair below, the downtrend is still in force.  Even though the pair has been ranging a bit over the last month or so, shorting opportunities will still provide a trader with the greater likelihood of success.
 
For a trend reversal we would be looking for price action to begin building higher highs and higher lows over an extended period of time. Also, we would want to see levels of resistance taken out as the pair moves higher.  The levels in this case, R1 and R2, are marked on the chart.
 
chart 4 27 10

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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