EUR/USD Forex Signal: Strong Bearish Breakdown

Adam Lemon

Last Thursday’s EUR/USD signal produced a losing long trade from the bullish bounce at the support level I had identified at $1.1536.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be taken 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 $1.1467, $1.1513, or $1.1563.

  • Put the stop loss 1 pip above the local swing high.

  • Adjust 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 $1.1394.

  • Put the stop loss 1 pip below the local swing low.

  • Adjust 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 Thursday that the technical picture had become slightly more bearish but needed to make a daily close below $1.1529 before a real strong bearish breakdown could happen. I noted there was plenty of support around the big round number t $1.1500 and suggested that a short trade from a retest and rejection of $1.1624 would probably be the best opportunity.

The price never quite reached $1.1624 but my call was on the right track, as a short from the area above $1.1600 could have been taken profitably later in the week.

Yesterday we finally got the daily (New York) close below $1.1529 that I was seeking, and the price is continuing to fall strongly to new 1-year lows as the London session gets underway. The price now has room to fall all the way to the next round number at $1.1400 without encountering any support. Yesterday’s bearish movement was about twice the typical daily range of volatility, and that is always a sign in this currency pair that the movement is more likely than not to follow through over the next day. Therefore, today is very likely to be a down day, and the price may well fall all the way to $1.1400 just over the course of today’s London and New York sessions. The euro is weak, and yesterday’s release of surprisingly high US inflation data is pushing market expectations in favour of an earlier US rate hike, which is boosting the US dollar, plus risk-off sentiment is also boosting the greenback.

There are several reasons to be very bearish in this currency pair, and I take a bearish bias here today.

EUR/USD

There is nothing of high importance due today concerning either the EUR or the USD.

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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