Thursday, 7 April 2011

EURUSD- whats the trade?

There are lots of opinions flying around in the build up to the ECB announcement shortly. As ever, let price and the charts be our guide. I have 3 charts here which are very simple and show the significance of these current levels:

EURUSD Weekly:
Price has rallied right into a significant weekly trendline.

Price is trying to break the previous highs at 1.43. This is still a potential Double Top trade/ Bull trap if we see price  reverse here and take out yesterdays lows. Furthermore, momentum is clearly waning here and price is trading in a potential ending wedge pattern

EURUSD 60mins: 
Yesterday we saw a strong breakout of the recent range with strong momentum. Thus, our trade should be to buy the first pullback against this breakout level. Price is correcting back to this 1.425 level currently. Thus, short term traders could be looking to get long here with stops below 1.4230. I would prefer to wait for the announcement and see a bullish reversal to confirm. Any close back below 1.42 is BEARISH and would trigger the Daily Double Top pattern.

Thus in conclusion, we are at a significant juncture. The bigger picture is indicating some real resistance at this levels and a potential bull trap/double top. However, price has clearly broken out on the lower time frame and as long as 1.4220/1.4250 holds, the short term trend remains bullish. Thus, focus on the price action and use these setups to guide your trade. I am looking to buy around 1.4250/1.4230 for the support play and will be shorting below 1.42 for a bigger picture short.