Trading the EUR/USD

The Current EUR/USD price in the last two years saw two trends trade within the confines of a larger price move. In February 2013, we saw a significant top at 1.3712 then a retracement to the Greek crisis lows at 1.2747 in April 2013. Both count as historic Peaks particularly when 1.2760’s was tested July 2013 and lows never broke below 1.2747. The current trend began from the 1.2760 lows and saw a high at 1.3965 March 2014. What’s the significance of 1.3965? That’s where the larger price move factors as consideration.

Chart for EUR-USD

In July 2008, the EUR/USD again hit another Peak at 1.6047 and witnessed its bottom June 2010 at 1.1883. If highs and lows are connected and averaged together then the Peak top calculates to 1.3956, the high was 1.3965. For now, 1.3965 becomes our top and the level to break to see higher prices.

When a Peak top or bottom breaks, it means prices are heading far higher or far lower in a true trend where we buy dips or sell tops for a considerable period of time. The period of time depends on which time frame the break occurred: daily, weekly or monthly. This gives you an idea how long the trend will last. Two more points for consideration and that’s prior tops and bottoms from the minor trends.

The move from 1.3712 to 1.2747 would see a Peak at 1.3229 and the reverse scenario where 1.3965 is our top vs the 1.2760 lows means another Peak at 1.3356. Through two years up-and-down price-trading and minor peaks along the way, 1.3229 and 1.3356 today is actually 1.3341 and 1.3485. Both lines must break to see EUR/USD target lower prices. So where are prices presently and where are we going?

If we connect the most significant point from 1.3485 -1.3965, then the area at 1.3725 becomes a high/low, long short Peak line.

On my daily chart, the two lower rising lines below current prices is my 200 and 253 day moving average line that come in today at 1.3648 and 1.3570. Both must break to consider a run to 1.3485 but the problem with this scenario is my two drawn blue lines  are my 100 day average and distribution average, both record at 1.3716 ( Distribution average) and 1.3705 ( 100 day average). Interesting how both points fit perfectly with my Peak line above at 1.3725. Until both lines break, we have longs on our hands.

Normally I don’t target highs and lows but previous highs and lows happen to work in this instance so I’m looking for longs to the April 2 or 3 highs at 1.3813 and 1.3819ish. Upon that point, prices become overbought and I would look for a possible reversal back to target first a break of 1.3725 then 1.3705 and 1.3712.

 

Author Bio: Brian Twomey is a 10 year trader and author of Inside the Currency Market: Mechanics, Valuation and Strategies. Site: btwomey.com, contact: [email protected], twitter: @authorbtwomey

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