EUR/USD: At Key Potential Inflection Point
PipHut | Oct 22, 2014 01:40AM ET
EUR/USD Daily Analysis: EUR/USD has continued to bounce around in its long-term bearish flag pattern (see daily chart for best view of this, between orange dotted lines). As we mentioned yesterday, we normally expect to see one of two outcomes: the traditional, bearish break below the flag pattern that would extend the longer-term bearish trend. Or, a short-squeeze that pushes price well above the flag pattern but is ultimately sold back down after a rally to the 38.2 or 50% retracement levels (on daily chart).
In the short-term, however, the pair is at a key potential inflection point: at the bottom of its channel after at least two waves up. A break below 1.2700 could signal the fulfillment of the bearish flag pattern and bring about extension to 1.2500 (and below, but we’ll deal with that when we get there). On the flip-side, we expect plenty of short-term buying here as traders buy at the bottom of its flag channel, betting on a return to 1.29.
Our Preferred Trades*: We will stay flat as our preference is to either buy on a large extinction rally (short-squeeze) or wait for the bottom of the channel to fall out (bearish confirmation) and then get short on rallies. Short-term traders could get long here looking for a return to the top of the channel, with the risk obviously being that the flag pattern gets fulfilled.
Yesterday’s EURUSD SwingPRO Signal Result: No trades taken yesterday.
Today’s SwingPRO Signal: Flat on lack of desirable setups.
*CandlePRO: CandlePRO can be used in conjunction with our daily analysis and “our preferred trades.” For example, if we prefer “going short” or “selling a rally” then we would look for bearish candlestick signals after a rally or near resistance levels. Alternative if we prefer “going long” or “buying a dip” then we would look for bullish candlestick signals on price drops or near support levels.
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