With all of this going on in the background, the pair remained in consolidation mode for two weeks. Price has continued to swing around the key structure level at 135.14, giving both resistance and support to the PA several times as illustrated by the red circles in the chart. Linked under Related Ideas you will find the last trade idea on this pair, where a played out profitably hitting both profit targets for a total distance of 167 pips. The above-mentioned key structure level played a big role in that trade.
Since consolidation provides a fertile ground for advanced price patterns, I scanned the chart again. We can see a pattern forming on the 30M timeframe, which I just placed on my watch list. It has only traveled 30% from C towards the potential reversal zone and still has some way to go. When defining the PRZ for a , we look at the projection of three levels. I: the of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2000 BC ).
This defines a tight zone, 17 pips wide, represented by the orange lines in the chart. There is nothing imminent about this trade, but it’s an interesting trade candidate to keep an eye on based on if… then… reasoning. Should the price drop enough to eventually test the PRZ, stabilise and reverse convincingly, I would enter long. I am playing a pattern recognition probability game here and harmonics are a high probability reason to enter a trade. SL goes 10 pips behind the next . TP1 = of AD and TP2 = of AD.
There are 127 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 3.4!
UPDATE 1: Price broke below and closed below both the key structure level at 135.14 and the B point. It´s now well on its way (65%) towards the potential reversal zone.
UPDATE 2: As you guys know, I don’t blindly enter at the D point, but I observe price action in the potential reversal zone. When the price reached this zone it tested it superficially, reversed a bit and then came back for a retest. On this retest it clearly overshot the zone so I did not enter any trade. That´s when a reversal kicked in and price shot up to pass the reversal zone to the upside. I entered long on this momentum. Price continued its way up, aided by the news that a deal has been reached between Greece and the Euro group, hitting both profit targets for a total of 121 pips.