The EUR/USD Recovers to Move Higher. Right?

EUR/USD (1.2734)

• Resistance Levels: 1.2805, 1.2850, 1.3070
• Support Levels: 1.25, 1.2315, 1.2150

The euro has bounced higher as we are making a correction higher. Please refer to the above MT 4 daily chart. As I just said this move is corrective as we thought we were bouncing higher after the false hammer. That moved lost momentum fast.  This indicates a bearish move is still ahead.

Let’s look at the technical analysis. We need a break below the support congestion area that starts at 1.2535 and ends at the key technical level of 1.25 to expose the support at 1.2315. If this happens, the sellers will come out in force and make a run at 1.2150. This level should hold causing a move higher and back into sideways trading.

At this point, we need a close back above 1.2805 to indicate a true bottom in place. This would be enough to suggest the buyers are entering the market to challenge 1.2850.

Let’s discuss a trading scenario. As always this is for learning purposes and does not constitute trading advice. Remember that I was looking to enter a short sale above 1.27 at 1.2709. Why? I feel the overall bearish sentiment remains with the euro and I see no strong bullish reversal signals. I am now eyeing 1.2530 as a target. In this scenario a stop loss neat 1.2880 will help with downside losses.

Interesting setup. Study your four hour and daily charts and let me know what you think.