EURUSD Channel Support Retest – Oct 27, 2014

0
107
EURUSD Channel Support Retest - Oct 27, 2014

EURUSD Channel Support Retest - Oct 27, 2014

EURUSD has recently broken below the bottom of the rising channel forex pattern on its 1-hour time frame, indicating that the downtrend might resume. Before that happens though, a quick pullback might be in the works after price found support near the 1.2600 handle.

Using the Fibonacci retracement tool on the downside break indicates that the 61.8% Fibonacci level lines up with the broken channel support and is close to the 1.2800 major psychological mark, which might serve as EURUSD resistance. Stochastic is already in the overbought area, suggesting that selling pressure could return.

EURUSD Trade Setup

For now, the pair is testing the 38.2% Fibonacci retracement level, which lines up with the 100 simple moving average. This short-term SMA has just crossed below the longer-term 200 SMA, indicating that selling momentum is building up. MACD, however, indicates that buyers may still be in control for now.

Take note that the 200 SMA is close to the 50% Fib, which might also act as near-term resistance for EURUSD. Shorting at any of the Fib levels with a stop above the 1.2800 handle or back inside the channel could yield a good return on risk if one aims for new lows. Moving the stop to entry once price tests the 1.2600 area could be a good way to limit exposure.

Event risks for this EURUSD trade include the release of the German Ifo business climate index, which might reflect a small drop in optimism. If the actual figure comes in stronger than expected though, EURUSD might be in for a higher bounce. A weaker than expected report could push the pair southbound again.

Another report to watch out for today is the US pending home sales data, which might reflect a 1.1% gain after losing 1.0% in the previous month. A stronger than expected recovery could lead to a sudden dollar rally, which might be enough to push EURUSD below 1.2600.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

SHARE
Previous articleUSDCHF Forex Trade Retracement Setup – Oct 27, 2014
Next articleGoogle Shares Poised to Recover – Oct 27, 2014
Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.