EURUSD: Potential Trading Opportunity

Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.

 

Eurusd is currently sitting atop a broken channel resistance line on the daily chart. However, having failed to breach 1.4900, settled in a 100-piphorizontal range with the base at the 1.4760 daily support. Yesterday, an attempt was made to breach the range resistance, but the strong one hour close above the range support, was followed by an equally strong bearish bar that brought it right back inside the range. The major resistance above at 1.5100 remains a  coveted target for the bulls. In light of the fact that we recently had a breach of the monthly trendline, and also the failed attempt to break out bullish, I am inclined to think that we could be headed for a breach of the range support, and a retest of the monthly breakout level. The chart below shows the daily channel support approximately at 1.4400. This would be a major target for shorts. There is some mid-channel support at 1.4600s, so if that level were to be breached, I could see the pair heading for 1.4400.

TRADE SETUP

 

In reference to the diagram on the 4-hour chart below, I am watching for a breach and retest of the range support at1.4760 to enter short. The appropriate area for my stop loss would be above the top of the range at 1.4930. The targets I am considering are: 1.4600 and 1.4400. Please note that a short entry will depend on a breach of the channel support. If the trade setup does not play out I will stand aside.

 

Thanks for reading, and please let me know what you think regarding the Eurusd. Safe trading!

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  • Hi Sayed. Thanks for your comments. I appreciate your sharing your views. Regarding the stop loss, I recommended placing the stop above the range initially because although it didn’t happen in this case, range breakouts are often followed by a spike into the range for a retest. That is why I thought it advisable to place the stop above the range. It might have been necessary to reduce the normal trading sizes to compensate for a bigger stop, but the stop loss could be brought lower as the short trade progresses. Additionally, more positions can later be scaled in. Have a nice weekend.

  • Sayed

    I believe that EUR/USD can make a dip to 1.4400 level, but I do not understand atall why we
    have to place a stop loss position above 1.4960 level. This is too far and suppose if the market
    take a U turn again then is it adviseable to lose such big amount. Stop loss at small distance is always fruitful like 40 pips or 50 pips maximum with a proper ration of profit/loss. With stop loss
    positions at smaller distance will always take you with the trend, upward or downward or even
    sideways.
    Shahzad