EUR/USD: Potential Long Opportunity

Published 09/02/2011, 03:18 PM
Updated 07/09/2023, 06:32 AM


cashmechanics.com

EUR/USD is still trading inside of a tight consolidation on the 4 hour chart.  The recent retracement back to the 1.4200 - 1.4250 area has price action sitting near an intra-range support.  The 1.4150 is where I anticipate significant support as evidenced by recent price action.  If price can stabilize between the 1.4200 and 1.4150 area, a swing trade buying opportunity can emerge.  The key is to wait for confirming price action within this supportive range.  Confirming price action can take many different forms.  The most common and easiest to identify would be indecisive candlestick patterns such as spinning tops or dojis.  Also keep an eye out for common reversal patterns such as hammers, inverted hammers and bullish engulfing candles on 1 Hour or 30 minute time frames.  One other obvious confirmation would be when price takes out a minor resistance level such as the 1.4300 area, but waiting for that to enter a long trade puts you at a less attractive reward to risk ratio if you consider the low of the move and its potential target near the 1.4450 area.
Beyond the 1.4150, the next historical support is at the 1.4050 level which has been in play since early May of this year.  If taking any long positions within the 1.4150 - 1.4200 zone, 1.4100 can serve as a good reference point to define risk.  This means a stop can be considered in the 1.4080 area.  Depending on your entry, this stop can present anywhere from 70 to 100+ pips of risk. A potential target for a trade of this nature is the 1.4430 area which gives you a possible profit of around 250 pips and a reward to risk ratio of roughly 2.5 : 1.
If selling pressure in this pair continues below the 1.4150 especially without any signs of stability, stay away from longs until the price action offers a clearer picture.

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