EUR/USD is set to have a busy end to the week with a slew of economic updates coming from both Europe and the U.S. Will this sweet technical setup play out in the favor of the bears?
Resistance Confirmed on EUR/USD?
On the four hour chart above of EUR/USD, we can see a few technical arguments that the market may be getting back to its selling ways. We can see that the pair has found resistance at not only the 38% – 50% Fibonacci retracement area (which is also the previously broken support area), but there’s also a bit of bearish divergence between the price and stochastic indicator. It looks like the bears have already taken these cues to sell as we’re seeing selling momentum during the U.S. trading session.
I like this setup as we’ll get a busy economic calendar for both the euro and the Greenback on Friday, most notable is the latest business survey updates from Europe. Expectations are for those numbers to mostly bounce, but it’s also likely a good chuck of the updates will show contractionary conditions. The other notable potential catalysts are the U.S. business and consumer survey updates, which have expectations of also showing some improvement.
On net, the odds do favor the Greenback over the euro, which when combined with the technical picture, makes for a pretty good trade setup. Overall, my goal is that this turns into a longer-term swing trade to play my macro bias that favors the Greenback over the euro (e.g., U.S. interest rate differential advantage, & inflation & growth rate out performance).
I’ll be scaling into a short position, starting at market up to the 61% Fib area. My max stop will be one daily ATR from today’s highs, and my max target will be the October lows. Here’s what I’m doing:
Short half position EUR/USD at market (1.1058), max stop at 1.1155 for 0.50% risk, max target at 1.0905
Short half position EUR/USD at 1.1095, max stop at 1.1155 for 0.50% risk, max target at 1.0905
I’ll be risking 1.00% of my account if both positions are triggered for a max 2.37:1 potential return-on-risk. I may close down the position early/close open short orders to limit my max loss if Friday’s data/market reaction isn’t as expected.
Stay tuned for updates and 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.
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.