Spotted a potential forex trade opportunity on EUR/USD! What do you think of the 1.1400 level as a resistance for the pair?
I was looking for trade ideas this week when I zoomed out and spotted this one on the daily time frame. As you can see on the chart below, EUR/USD hasn’t traded above the 1.1400 major psychological handle since the start of 2015.
What caught my attention was that the pair is also showing a bearish divergence right around the time when it’s also throwing out one doji after another on the daily chart.
Fundamentally it also makes sense to short the pair. Mario Draghi and his friends are still huddling over ways to introduce more stimulus into the economy. On the other side of the pair, Janet Yellen and her gang are still on track to raise their interest rates (though not in the same pace as we initially expected).
Over the next few days we’ll see Uncle Sam’s retail sales and inflation reports, both of which are expected to print better numbers than the previous month. If they do print as expected, then we might see a renewed demand for the recently weakened dollar.
I’m planning on risking an initial 0.25% of my account at the 1.1400 handle with my stop 250 pips away to make room for long-term volatility. I’ll also add another 0.25% once the pair pops up a bearish candle among the dojis. My initial profit target is at around 1.1000 but I can adjust depending on the fundamental landscape at the time.
What do you think about this short EUR/USD trade? Should I wait for the 1.1400 handle or should I just ride the anti-dollar wave and look at the other pairs?
Let me know what you think!
P.S.: Remember to never risk more than 1% of a trading account on any single trade and to adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Better yet, read the Risk Disclosure!