EUR/USD Forex Signal: Wide Consolidation

Adam Lemon

Both currencies are relatively strong.

Last Tuesday’s EUR/USD signals were not triggered, as there was insufficiently bearish price action when the resistance level identified at 1.2233 was first reached.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered between 8am and 5pm London time today.

Short Trade Idea

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2277.
  • Place 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 Idea

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.2129, 1.2126, or 1.2106.
  • Place 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 last Tuesday that we were seeing what looked to be the completion of the final shoulder in a medium-term bearish head and shoulders chart pattern. However, for this bearish pattern to complete, the price would have to break below 1.2160.

I thought that the best thing for traders to do with this currency pair was to wait for a daily close below 1.2160 for a bearish signal or above 1.2260 for a bullish signal.

This was a good call, insofar as it was good enough to stay out of trouble, as the price has just been going sideways and making any kind of profitable trading very difficult.

The consolidative price action has invalidated all the former support and resistance levels near to the current price and opened a wide technical area of consolidation between 1.2277 and 1.2129. The price has been trading within this range for the past two weeks.

As both the USD and the EUR are relatively strong currencies, I expect that this consolidation will continue.

Therefore, I see the best approach towards this currency pair as trading reversal from either 1.2277 or 1.2129 if they set up.

EUR/USD

Concerning the USD, there will be a release of the ADP non-farm employment change forecast at 1:15pm London time, followed by unemployment claims at 1:30pm and ISM Service PMI data at 3pm. There is nothing of high importance due regarding the EUR.

Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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