Who’s up for shorting the euro against the dollar? If you are, then this forex trading setup is for you!
Last week we talked about how the divergence between the Fed and the ECB’s monetary policy biases is making it attractive for EUR/USD bears to attack. And then there was the broken triangle support, which presented a neat break-and-retest trading opportunity.
If you shorted EUR/USD at 1.1200 earlier this week, then here’s a virtual high five for you! You just made pips on a 1/2 WATR move!
Now that the retacement play has…played out, it’s time to look for new opportunities to short.
As you can see, EUR/USD has bounced from last week’s high and this week’s bottom ATR levels. Right now it’s trading at the 1.1175 area, which lines up nicely with a falling channel and the 200 SMA resistance on the 1-hour time frame. Lastly, stochastic is hanging around in the overbought region.Will EUR/USD extend its downtrend in the next couple of sessions? Or are we actually looking at a bounce from a range support that’s been valid since late May?
A break above the resistance area that we’re watching could take the pair back to the 1.1200 MaPs, if not the June highs nearer to 1.1300. This is certainly possible especially when word around the hood is that not a lot of traders are as hawkish on the economy as Fed members are.
On the other hand, if the pair gives in to downside pressure and breaks below last week’s lows, then we have one more point on the side of the bears who are watching the daily chart for a longer-term resistance bounce. Unfortunately, a move this major would need another catalyst and I don’t see one coming at us anytime soon.
What do you think? Would you short the euro against the dollar right now? Or would you wait for a better entry or another catalyst before putting on a position?
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