EUR/USD – Bullish Reversal Or A Flash In The Pan?

We mentioned that the Friday session would decide the fate of our short position in EUR/USD. We witnessed a rebound and our positions were automatically (and profitably) closed. What kind of action is warranted, is it time to consider opening a long position or not? What about the Japanese yen and the Canadian dollar?

Let’s jump right into charts.

EUR/USD – Sizable Invalidation

EUR/USD - weekly chart

 

The weekly chart shows that the medium-term picture hasn’t changed much as EUR/USD is still trading inside the blue sideways trend. The price action is compressed and attempts at breakouts and breakdowns in recent weeks have been short-lived. The indicators do not speak the same language as RSI does not indicate any presence of a trend and Stochastics still has a way to go and flash a buy signal. Only the CCI may have some bullish implications here, but we’ll discuss that in greater detail below the following daily chart.

Let's move right to it.

EUR/USD - daily chart

 

On Friday, EUR/USD moved sharply higher and invalidated the earlier breakdown under the lower border of the brown rising trend channel, which is a bullish development. In fact, it’s too bullish for us to continue to hold the short EUR/USD position – the position was automatically and profitably closed at the pre-determined level (our subscribers were prepared in advance) and we decided not to re-open the position based on what we’re seeing today.

Earlier today, the pair pulled back a bit, but the buy signals generated by the daily indicators remain on the cards, supporting the currency bulls and another upswing. Stochastics is showing a decent momentum with further room to grow and is not in a toppy position. Further, CCI has a potential to rise and RSI is far from levels previously marking local tops. Today's session will provide clues to whether we are seeing only a minor correction to Friday's bounce or not.

If the pro-growth scenario is indeed the case and the pair extends gains from the current levels, we’ll likely see a test of first the upper border of the brown triangle, and possibly also the orange resistance zone in the coming days. 

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