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Strong Bullish Bounce at 50-Day SMA

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Euro holding up well against firm US Dollar.

My EUR/USD signal yesterday was not triggered, as the bullish price action took place below the support level which I had identified at $1.0766.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be taken before 5pm London time today.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.0766 or $1.0802.
  • Place the stop loss 1 pip above the local swing high.
  • Move the stop loss to break even once the trade is 20 pips in profit.
  • Remove 50% of the position as profit when the price reaches 50 pips in profit and leave the remainder of the position to ride.

Long Trade Ideas

  • Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.0692, $1.0634, or $1.0602.
  • Place the stop loss 1 pip below the local swing low.
  • Move the stop loss to break even once the trade is 20 pips in profit.
  • Remove 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to ride.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

EUR/USD Analysis

In my analysis yesterday of the EUR/USD currency pair, I thought that we would see consolidation above the $1.07 handle during the London session.

I was wrong about this, as the price broke well below $1.07 to reach the 50-day SMA where it bounced hard and then went on to recover all its lost ground. Although as it bounced back quickly after getting below there, I was correct in spirit if not in fact.

The price rose yesterday to hit the nearest resistance level at $1.0766 before bouncing down again. However, the significant thing now is that the price is gradually but persistently rising over recent hours. Overall, the technical picture points to a bullish recovery continuing after yesterday’s low, so I think we are likely to see an up day today.

What moved the price yesterday was Fed Chair Jerome Powell’s remarks about inflation (its coming down fine and will hit 2% in 2024) and rate hikes (we might need more if the data demands it) – it was all about the US Dollar and little about the Euro. The overall effect of Powell’s remarks is likely to be a slightly weaker US Dollar, but what is significant is that the US Dollar’s bullish momentum seems to have run out of steam, while the Euro remains a relatively strong currency. This gives more ammunition to the bullish case here.

I take a bullish bias, but I think that the price will remain between $1.0692 and $1.0766 today, so I think a scalp off either level could be a good trade – I prefer a long trade from $1.0692 or even $1.0700 if there is a bounce at the first touch there.

EUR/USD

Regarding the USD, Federal Reserve Member Williams will be interviewed today at 5pm London time. There is nothing of high importance due today concerning the EUR.

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