There is plenty of news coming out today on the €, with several pmi´s and updates on the Greek debt negotiations hitting the wires. Greece no doubt will have the biggest impact here and a resolution should be imminent. I must say I am somewhat surprised to see this pair has held up the way it did. Zooming out a bit, we can see that since the beginning of February, this pair is trading in a narrowing range in the shape of a symmetrical triangle on the 4H timeframe, vacillating up and down and converging towards a single point (the apex).
This printing of lower highs and higher lows is commonly associated with a directionless market where neither the bulls nor the bears are in control. The Greece situation and the diverging economies as well as diverging monetary policies by the FED and ECB keep me overall bearish on this pair, but I have to accept that there has been no clear direction on the 4H timeframe for several weeks.
Breakouts could generally happen 3/4 of the way towards the apex, which means it could be due. The regular bearish RSI divergence indicates underlying weakness and possible trend change towards downtrend. I am therefore watching for a breakout to the downside. For me to enter short, the following steps need to occur: (1) price breaks below and closes below the lower trend line, (2) price retraces back up, to test this trend line and (3) price stalls, stops and reverses.
In terms of trade management, I would make TP1 equal to my double my traderisk (with SL above the lower trendline and the horizontal resistance at 1.1360), and TP2 would be the support at 1.1150. As soon as TP1 would be hit, I would move the SL manually to break even enjoying a risk free trade hunting for TP2. If TP2 would be hit, we would have a double bottom pattern, but that would be for another trade setup.
There are 188 pips to be made (if this pair follows all the steps in the script) and the trade has a reward – risk ratio of 5.7!
UPDATE: Today´s breakout proved to be a fakeout. I will continue to observe this triangle for potential new breakouts.
UPDATE 2: I entered the trade after a new breakout of the price pattern occurred, followed by a retest of the lower trend line and a reversal. Yesterday TP1 was missed by 9 pips. But the weakening of the USD continued this morning and after a sudden spike the price came back in the triangle and the trade was invalidated. That’s why we have a SL in place, to minimize the loss.
POSTSCRIPT: Those who follow the chat room know that I revenge traded this one, now with the SL above the triangle. I took it off last night after a 151-pip move. All's well that ends well!
This printing of lower highs and higher lows is commonly associated with a directionless market where neither the bulls nor the bears are in control. The Greece situation and the diverging economies as well as diverging monetary policies by the FED and ECB keep me overall bearish on this pair, but I have to accept that there has been no clear direction on the 4H timeframe for several weeks.
Breakouts could generally happen 3/4 of the way towards the apex, which means it could be due. The regular bearish RSI divergence indicates underlying weakness and possible trend change towards downtrend. I am therefore watching for a breakout to the downside. For me to enter short, the following steps need to occur: (1) price breaks below and closes below the lower trend line, (2) price retraces back up, to test this trend line and (3) price stalls, stops and reverses.
In terms of trade management, I would make TP1 equal to my double my traderisk (with SL above the lower trendline and the horizontal resistance at 1.1360), and TP2 would be the support at 1.1150. As soon as TP1 would be hit, I would move the SL manually to break even enjoying a risk free trade hunting for TP2. If TP2 would be hit, we would have a double bottom pattern, but that would be for another trade setup.
There are 188 pips to be made (if this pair follows all the steps in the script) and the trade has a reward – risk ratio of 5.7!
UPDATE: Today´s breakout proved to be a fakeout. I will continue to observe this triangle for potential new breakouts.
UPDATE 2: I entered the trade after a new breakout of the price pattern occurred, followed by a retest of the lower trend line and a reversal. Yesterday TP1 was missed by 9 pips. But the weakening of the USD continued this morning and after a sudden spike the price came back in the triangle and the trade was invalidated. That’s why we have a SL in place, to minimize the loss.
POSTSCRIPT: Those who follow the chat room know that I revenge traded this one, now with the SL above the triangle. I took it off last night after a 151-pip move. All's well that ends well!
You don´t need to be a weatherman to know which way the wind blows - B. Dylan