Forex Trade Idea: EUR/USD Range Resistance?

We’ve got a potentially action packed forex calendar ahead of us, so I’m going with a conservative setup on a textbook range pattern on EUR/USD. Will the sellers hold if retested?

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EUR/USD 4-Hour Forex Chart

EUR/USD 4-Hour Forex Chart

As I mentioned above, we’ve got a slew of top tier events coming up on the economic calendar, most notably the FOMC meeting and monetary policy decision this Wednesday. There’s an air of uncertainty surrounding the event in that with the commodity selloff and global growth issues, the idea of more interest rate hikes from the Fed may have to go on the back burner. This could obviously introduce a lot of volatility, which is why I’m going to be a little more conservative than usual.

I still like the Greenback against most majors because of its relative economic strength to other major economies and hike-minded monetary policy, especially against the euro since Draghi discussed concerns with growth and inflation, as well as potentially extending quantitative easing. So, I’m looking to build a short position, but only if there is a pullback higher this week, which we may get if the FOMC sounds a bit more dovish than they did on the global economy or on future hikes at the last meeting.

Technically, the pair has been in a sideways pattern throughout December and January, so a retest of the top of that range could draw in sellers once again, considering what came out of the ECB meeting last week. For this week, I’ll look to build a short position there, with a max stop well above the range and initial target at the bottom of the range. Here’s what I’m doing:

Short quarter position EUR/USD at 1.0900, max stop at 1.1125, initial target at 1.0700
Short quarter position EUR/USD at 1.1000, max stop at 1.1125, initial target at 1.0700

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.64:1 if both positions are triggered. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • Marco

    Is that a market/limit order for $1.09

  • Personally I’m not making any trades on the EURUSD unless and until it breaks-out of that ranging box AND comes back, retouches and bounces off of the 1.0742. IMHO anything is doing the yoyo back and forth with this pair. It has been ranging since December 7, 2015.

    • Pipcrawler

      Hey FXALTareeq…thanks for your analysis. If you’re not making any trades on EUR/USD, what else are you looking at?

  • Marco

    Sold at $1.09 over the FOMC kerfuffle…

    • Pipcrawler

      Glad to hear you got in since the market dropped ahead of the weekend. Good luck this week!

  • Marco

    Sold at $1.0830 bought again short $1.09

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