Trading EUR/USD’s Range Resistance

Who’s up for a long-term trade on EUR/USD? I hope you are because I found a cool forex range setup on the pair. Here’s what I’m up to!

As you can see on the chart below, EUR/USD is having trouble breaking above the 1.1400 mark. A quick look at the daily chart shows us that the level is actually a pretty major resistance, one that hasn’t been broken since 2015. What made me zoom in on this setup faster than I can spot a hot pair of shoes on sale is the bearish divergence that’s showing up on the daily chart. Is that a steal or what!

EUR/USD Daily Forex Chart

EUR/USD Daily Forex Chart

Fundamentally I’m all for buying the Greenback in favor of the euro. Though last Friday’s NFP report cooled down expectations of a June rate hike from the Fed, market players are now starting to price in a JULY Fed rate hike since most of Uncle Sam’s leading indicators are still pointing to the direction of a recovery.

On the other side of the trade, Mario Draghi and his gang are just getting started on their stimulus efforts. In fact, the start of the ECB’s next batch of LTROs is one of the factors why the euro climbed a bit earlier this week. Looking at the bigger picture though, we’re still left with a big divergence in the ECB and the Fed’s monetary policies.

For this trade I’m planning on risking 0.25% at 1.1350 with another 0.25% set just below the 1.1000 mark. Can’t be too careful about that mini rising trend line on the chart! I’m placing my stops above the previous highs (1.1650) and targeting the range support at the 1.0600 area. All in all that should give me a 3:1 reward-to-risk ratio and a maximum possible gain of 1.50%

Here’s the initial plan:
1st position: Short at 1.1350, stop at 1.1650, profit target at 1.0600
2nd position: Short at 1.0950, stop at 1.1650, profit target at 1.0600

What do you think of the setup? Is this something that goes well with your own biases on the euro and the dollar? Got any tips on how I can handle this one?

Thanks! XOXO,

Huck

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  • forzion

    I would say that good luck with this one.

    Looking at the chart, there is always possibility to get some pips each direction. My opinion is that after that long candle on NFP friday traders look for some retracement to enter long. I try to be quite flexible with this pair. I was bullish for EUR and after fed officials comments I was prepared to change in favor of dollar even if it retraces from recent lows but this was not a simple retracement, that NFP was awful. It was very strong price action northward and we have got another higher low. There is no breakout towards north for now but if it happens where would the price stop? There are lot of surprises in the air which can negatively impact hunger for dollars.

    But I think that first position is worth of trying the other one at strong support/resistance level can be quite useless. We did not see a big breakout at this pair a long time. We could see one soon upward or downward doesn’t matter if someone plays the breakouts. I like rather enter at range top or bottom to opposite direction than at breakout.

    I am holding one short position from 1,1500 and one long from 1,1250. Now I will wait and see.

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  • Hey Gvs!

    Where were you able to short? Were you able to book profits? The pair popped up enough to spook me out of the trade.