6E Yuck

The Euro chart is not giving us much to work with here. Let's wait for a good trade setup.

The Euro has rallied strongly after breaking the 1.4241 downtrend line but has now dropped pretty far today. As the chart currently stands I don’t see a good trade opportunity one way or the other. I tend to shy away from shorting follow big down days but if I had to guess one way or the other I would bet on further downside at least to the 1.2869 support from the 20 day moving average. However the Euro just barely broke yesterdays 1.2956 low and is hovering in the vicinity which could turn into a trap reversal back to the upside so it’s just not worth shorting it at this point.

The trap reversal trade idea is fairly low risk, today’s low is at 1.2933, currently the Euro is at 1.296, so you would risk about 27 pips on a trap reversal trade. But again the Euro is still in a downtrend. It would have been nice if the Euro had broke above 1.3142 or at least the 50 day moving average before turning back to the downside, that might make buying this dip a little more attractive. Furthermore there’s nothing stopping the Euro from dropping to new lows (below 1.2627) from here. It could happen!

I would rather wait a few more days for a better long opportunity to present itself. I’m not keen on shorting the Euro just yet either because having broken the 1.4241 downtrend line, I’m still expecting a big bounce to the 1.37 area.