Divergences and Inflection Levels Galore on EUR/USD

Good evening! We got a few second tier events on the Forex calendar today with no major surprises, so it was an environment perfect for some support & resistance plays. EUR/USD was the perfect example today as divergences signaled some easy setups.

Before you move on, for those who are not familiar with my day trading framework, signals, setups, or acronyms, please visit my discretionary day trading blog here.

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Looking at the chart above, we can see distinct divergence setups that lead to three easy trades giving you at least 60 pips each.

1. Just before the start of the European trading session, the market was grinding higher and tested the Previous Day High (PDH) while stochastics were making lower “highs,” creating a divergence. This is a setup indicating a reversal, and it looks like sellers jumped in strong as soon as the Euro session opened up. Within the hour, the market dropped around 90 pips max.

2. At the previous day low, stochastics indicated oversold conditions. Buyers jumped in and with the help of positive Euro data on the FX calendar, the pair rallied a max 120 pips from the lows to the highs.

3. As I mentioned in my blog yesterday, the daily ATR can draw orders and influence price action. Today, the top DATR and minor psych level (1.3750) held like a champ as resistance. On the third touch, we can see divergence again, indicating that a breakout higher was probably no go. Also, with weak US durable goods & initial claims data clocking in weaker, risk aversion sentiment helped the sellers and drive the pair lower almost 80 pips.

4. Finally, we got one more divergence signal at the Day Open Price (1.3690) as well as a spinning top. This potential reversal setup played out like clockwork for a rally of almost 60 pips higher.

Well there you have it–four great range setups on a non-major event day that all turned out pretty well. If you caught each turn perfectly, that’s a max 350 pips of movement to catch. Of course, no one trades perfectly, especially myself, and you don’t need to be perfect to profit. Even catching one of these moves and being positive 100 pips with proper risk management can mean a nice increase in your account for the day.

Well, that’s all I got for today folks! Thanks for checking out my review and stay tuned for more. Sign up above for our Twitter, Facebook, or my email updates to be notified of my “Pick of the Day” to reinforce or learn something new right away! Good luck and good trading!