Has EUR/USD finally bottomed out? Its long-term range support was able to keep losses in check with a reversal candlestick to boot! Think I should go long?
EUR/USD Trade Setup
On the pair’s weekly timeframe, it can be seen that price made a spinning top candle right at the long-term range support around the 1.0500 levels. The next weekly candle closed just above the high of the spinning top, confirming that bulls are gaining energy. True enough, the pair staged a strong rally at the start of this week even after the Italian referendum results sent fresh political and fiscal jitters across the region.
At the same time, stochastic is already indicating oversold conditions, which means that the pair is tired from its dive. This could draw buyers back in and even push EUR/USD back up to the long-term range resistance at 1.1450 or at least halfway there until the 1.0900 levels.
I haven’t set actual entry orders yet since I plan on watching how price action plays out in the next few sessions first. I’m hoping for a pullback entry on the short-term charts but I’m also open to going long on a move past the 1.0800 mark. If I’m able to catch a long position, I’ll set my stop below the 1.0500 lows.
We’ve still got the ECB rate statement lined up this week so there probably won’t be any shortage of volatility. Policymakers could decide to extend the QE program past the March 2017 end-date so euro bulls might book some profits and allow a pullback to happen before the actual event.
Meanwhile, the dollar seems to be shrugging off upbeat U.S. data these days. After all, the Fed rate hike in next week’s meeting appears to be fully priced-in and bulls might soon cash in on their gains as well. FOMC officials might emphasize that they don’t plan on tightening again anytime soon since they’d rather wait and see how the Trump administration’s fiscal plans could affect the U.S. economy first.
As always, 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 simply follow what I do.
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