EUR/USD Forex Signal: Breaking to Multi-Month Lows

Adam Lemon

The new resistance level at 1.1856 looks pivotal.

Last Tuesday’s EUR/USD signals produced a losing long trade entry from the bullish bounce at 1.1882.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered before 5pm 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 1.1856 or 1.1882.
  • 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 Ideas

  • Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 1.1837, 1.1825, 1.1802, or 1.1795.
  • 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 the bigger picture was one of a bearish turn beginning to look decisive below 1.2000. This longer-term bearish picture is why I thought that the best opportunity that might arise here would be a bearish breakdown below 1.1900 and then 1.1882.

This was a good call as the price has continued to fall since then in line with the long-term trend, breaking the key multi-month low at about 1.1851 a few hours ago. When the EUR/USD is reaching long-term lows or highs, the trend has been more likely than not to continue, so I expect it is probable that still lower prices will be reached over the coming days.

There is a new resistance level at 1.1856 confluent with previous pivotal support, which the price is rejecting from below as the London session gets underway. Provided the price holds below that level, it is highly likely to make a significant new low today, so I am very comfortable taking a short trade from that level if a firm bearish reversal is printed on the hourly chart.

The price is likely to see new lows over the coming days even if today is an up day, but for day traders, watch what happens at 1.1856.

EUR/USD

Concerning the EUR, there will be a release of German Final Manufacturing PMI data at 8:55am London time. Regarding the USD, there will be a release of ISM Manufacturing PMI data at 3pm.

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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