EUR/USD: Key support at 1.1745 seems to be breaking down
Yesterday’s signals were not triggered, as the bullish price action took place below all the identified support levels.
Today’s EUR/USD Signals
Risk 0.75%.
Trades may only be entered between 8 am and 5 pm London time today.
Short Trade Ideas
- Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.1775 or 1.1826.
- Put the stop loss 1 pip above the local swing high.
- Move the stop loss to break even once the trade is 20 pips in profit.
- Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
- Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.1685.
- Put the stop loss 1 pip below the local swing low.
- Move the stop loss to break even once the trade is 20 pips in profit.
- Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
EUR/USD Analysis
I wrote yesterday that the nearest support level at 1.1826 looked strong, and we still had a valid long-term bullish trend in force, so I was prepared to take a long trade following a bullish bounce at 1.1826 if it happened today, though it looked likely to be a quiet day in the market.
I was completely wrong, as the market fell to risk-off sentiment yesterday and the U.S. Dollar strengthened markedly, with the price falling and breaking cleanly through a couple of support levels, and even going on to breach and invalidate the support level I had seen as sitting at 1.1745.
This is a bearish development as this area around 1.1745 has been the lower boundary of the long-term bullish consolidation which we have seen play out over recent weeks.
We are still seeing bearish momentum in this currency pair. Stock markets are more stable so far today, but the dollar still seems to be strong, so I think we are most likely to see a further bearish breakdown.
If the price can get established below 1.1725 later, it is quite likely to fall further to test the support level at 1.1685. I am still prepared to take a long trade if we get a bullish bounce there. If the price gets established below 1.1685, that will be a very bearish sign.
There is nothing of high importance scheduled today regarding the EUR. Concerning the USD, the Chair of the Federal Reserve will be testifying before Congress at 3:30 pm London time.