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Today's focus is once again on the Eur/Usd. We've had quite a rally from the 1.2040 low a couple of weeks back and from the charts I can see a very real possibility that there are another few hundred pips to the upside in the coming days and weeks.
Let's take a technical look at some charts and see why I've concluded that there is likely more upside coming.
From the chart above I deduce the following:
1- The MACD histogram, RSI and slow stochastics are all bullish but getting close to overbought levels. However, in bullish trends, indicators tend to remain in overbought levels for extended periods of time.
2- Price action is above the 21 and 50 EMA, and struggling with the 100 EMA.
3- Price action is still below the descending trendline from way back in 2011. That point would currently be around 1.2650 which is still another 100 pips or so higher than current levels at the time of writing this.
From this daily chart I would attempt a short at around 1.2650 with a tight stop to take advantage of the power of that descending trendline. Let's take a look at the weekly chart:
From the weekly chart above I deduce the following:
1- MACD histogram is bullish.
2- RSI is below the 50 level which technically is still bearish.
3- Slow stochastics are pointing to the upside which is bullish.
4- Currently price action has found resistance with the 21 EMA. The next resistance would likely be the 50 EMA on this weekly chart, which coincides with the horizontal previous support which now too becomes resistance, at around 1.2980.
Attempt a short around 1.2650 with a stop of 20-30 pips. If you get stopped out, reverse trade and go long with a stop of 30-40 pips.
The idea behind this trade is to take advantage of the power of the descending trendline and the expectation of a pullback at this level. However, there is the chance that price action will blast right through this level and continue towards the 1.2980 level in which case we'd like to take advantage of that rally.