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It seems like Eur/Usd is still steadily on it's way to higher grounds, albeit with rather large swinging movements. I expect the pair to continue to head higher over the coming weeks still, with an initial target of 1.2600.
Let's take a look at some charts and find technical reasons to confirm my prior statement because trading is all about logical, technical reasoning and not about emotions or opinion.
The above chart is a weekly chart of Eur/Usd. Technical indicators on the chart are as follows:
Based on the weekly chart above there are 3 technical reasons to expect further upside movement:
1- The slow stochastics have crossed and are pointing upwards from previous oversold conditions.
2- There is a divergence with the RSI and price action where the price action made a lower low but the RSI made a double bottom.
3- The candlestick formations of the last 2 weeks are both bullish formations, one being a bullish engulfing candle and last week's candle being a hammer candle.
Looking at only one time-frame is not sufficient, so let's zoom in a little bit and take a look at the daily chart too:
The above chart is a daily chart of Eur/Usd with the same technical indicators as on the weekly chart.
On the daily chart the technical indicators are looking a lot more positive than on the weekly chart, and this is because the daily chart is far quicker to reflect short-term trend changes than the weekly chart is.
1- The RSI is above 50 which is bullish.
2- The slow stochastics are pointing up and above the 50 level which is bullish.
3- The MACD histogram is above the zero line which is bullish.
4- Price action is above the 21 EMA and just today poked through the 50EMA.
5- There is a bullish divergence between price action and the RSI. Price action made a lower low recently while the RSI made a higher low, meaning that usually the price action follows in the direction of the divergence.
I would expect the initial target and first level of heavy resistance to be around the 100EMA on the daily chart, which currently is around 1.2639. Based on the daily chart I would say support for any pullback would be the 21 EMA which is currently 1.2296, but based on the weekly chart it would be possible to test last week's low of 1.2141.
While we are currently trading at 1.2358 at the time of me writing this. I would attempt a long position at around the 21 daily EMA around 1.2300-1.2290 with a short stop of 30 pips. If it declines further then I would attempt another long position around the low of last week at 1.2150 with another short stop of 30 pips. This is a small risk trade with big upside potential.
Although I create the entry point levels based on the daily and weekly technical charts, I still like to look at smaller time-frame charts (like 4 hourly and 15 minutes) at the time of price action coming near those levels. If for example price action nears my initial trading recommendation of 1.2300 and the 4 hourly chart looks like it's probable for further decline, I may not take that trade and wait for my second trading recommendation.
This is just another small thing that you can do to maximize your trading profits with forex, and something I suggest you do.