ICmarkets
Short

Harmonic sell zone with confluence seen on the EUR traders...

FX:EURUSD   Euro Fx/U.S. Dollar
218 0 6
The value of the EUR strengthened during yesterday’s trading, bringing price to highs of 1.1193 on the day. What this also did, as can be seen from the H4 chart, was form a nice-looking H4 Harmonic bearish Gartley pattern – the potential reversal zone (PRZ – yellow box) can be drawn from 1.1216/1.1191.

From where we’re standing, this is a very high-probability sell zone for the following reasons:

• The H4 Harmonic pattern is bolstered by daily supply at 1.1215-1.1264.
• Recently came off of a strong move from a weekly supply area seen at 1.1533-1.1278.
• The psychological number 1.12 is positioned within the Gartley PRZ.

Our suggestions: Usually, we would look to short this pattern without lower timeframe confirmation given the higher timeframe confluence. However, for a pending order to be placed we absolutely need all structures to fuse beautifully. The only grumble we have in this particular situation is the fact that the USDX ( U.S. Dollar index             ) shows a major-league H4 support around the 95.20 region, and when current price in this market stands at 95.42, it’s a little concerning. With that being the case, the USDX could potentially drop lower to connect with this barrier, thus pushing the EUR higher. Now, as far as we’re concerned, all this means is instead of entering at market we’re going to attempt to enter with lower timeframe confirmation once/if price drives higher into our Gartley PRZ.

For ways of confirming a higher timeframe zone, we look for a lower timeframe demand to be engulfed and retested, a trendline break/retest or a collection of selling wicks preferably forming around a lower timeframe resistance. We search for lower timeframe confirmation between the M15 the H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 5-10 pips beyond confirming structures.

Levels to watch/live orders:

• Buys: Flat (Stop loss: N/A).
• Sells: 1.1216/1.1191 (Stop loss: dependent on where one confirms this area).
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