Hello Forex traders!
My trip to Lithuania has approached an end. It was a wonderful and interesting trip / experience and I hope the seminar attendees were able to learn a thing or two from me. 🙂 After a couple of short nights and early wake-ups calls, it’s good to be back with m usual daily technical analysis! Although I do hope that you enjoyed yesterday’s article and its comparison to jet planes 🙂
In any case, yesterday of course was the NFP news announcement and the figure was lower than expected, which did substantially weaken the US Dollar. Today, however, the USD rebounded in trading session – primarily against the AUD, NZD and CAD. These commodities currency pairs also lost ground against the EUR and GBP.
BREAK OF 1.37!
Today’s focus however will be on the EURUSD. The key reason for our keen interest in the EU is the fact that it broke the key long-term top, resistance and 2013 high of 1.3710 – not an unimportant event.
More ever, the daily candle has closed above the resistance level which confirms that the bulls remained in control the entire day. That is the major difference between the EURUSD, GBPUSD and AUDUSD, where the Cable is near major weekly resistance and the AUDUSD has not yet broken the 50% Fibonacci of the weekly down move.
Why is this break so important? It confirms that the daily top and 2013 high was not the beginning of a major bearish move down. The break of 1.3711 means that upside has fully regained control and could push this currency pair higher in the near to intermediate future.
TRADING ROOM SETUP
In fact, there is a great trade setup on the EURUSD 1 hour chart. Whenever a major level breaks, it tends to have the opposite effect on price. Resistance becomes support and support becomes resistance. This is a typical example of major resistance breaking and potentially becoming support…. Especially if the daily close is above it and we see lots of price action above the previous resistance. The target is up to the 1.3835.
Why 1.3835 and how high can the EURUSD climb up? In the short-term future we must realize that there is a 61.8% Fibonacci retracement level on the weekly chart at 1.3835. That certainly has the potential to stop the EU for a while and we should not expect or plan on an immediate thrust though that level. Remember, we are always looking for spots on the chart where we can expect an edge – not a coin flip with weak reward to risk ratios.
After a decent correction has taken place on the 1 hour chart (look for a trend line with minimum 2/3 hits), then a continuation up to 1.40/1.41/1.42 levels could be likely and approaching us soon. See chart above for upside potential.
The EURUSD is showing strong signs of bullishness but we do need to be careful of resistance. As long as we trade safely with the trend, we can keep riding the tide all the way up to its peak.
Thanks for your reading and sharing of this article and Good Trading!
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