EUR/USD Forex Signal: Bullish Within Bearish Channel

Adam Lemon

Last Tuesday’s EUR/USD signals produced a nicely profitable short trade from the bearish hourly doji candlestick which rejected the resistance level identified at 1.1801.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered between 8am and 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 1.1823 or 1.1850.

  • 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 1H1 time frame H1H1H1 time frame immediately upon the next touch of 1.1786, 1.1754, or 1.1733.

  • 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 although we had a valid bearish price channel and a strongly risk-off market environment which was producing firm flow into the USD, I wanted to see the price breaking to new lows before taking a bearish bias here, but another alternative was to use the bearish price channel and look for a short trade from the upper half of the channel.

I was correct to warn bears not to enter new short trades until we got a New York close below the support level at 1.1771, which did prove to be pivotal.

The technical picture is essentially unchanged, with the bearish channel holding and the price unable to make a breakdown below it, frustrating shorts.

We have seen a short-term bullish development evidenced by the breakout above the short-term descending trend line shown within the price chart below, which has been confirmed by the price holding up above the new support level at 1.1786. Although I have not marked it as a resistance level, we seem to also have selling at 1.1800.

The weak long-term bullish trend will not be fully invalidated until the price gets established above 1.1850 which is the truly pivotal level for aspiring bulls.

The price has respected this technical analysis but as we are getting the monthly ECB policy release later today, there is likely to be volatility which may not respect the technical picture. The best approach will be to wait some minutes after the release and subsequent press conference then be prepared to trade a reversal from a price extreme that hits a support or resistance level once a reversal starts on a relatively short time frame.

EUR/USD

Regarding the EUR, there will be a release of the European Central Bank’s Monetary Policy Statement and Main Refinancing Rate at 12:45pm London time, followed 45 minutes later by the usual press conference.

Concerning the USD, there will be a release of unemployment claims data at 1:45pm.

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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