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A trade opportunity at EUR/USD resistance
By John Jagerson, 30 July 2007 I am not entirely convinced that the USD is going to weaken in the short term. Although I think its destiny, this year, will be to set another round of record lows against the majors in the short term, I think, there is enough fear and volatility out there to push it back up. In light of that attitude I have a trade setup that I am looking at that seems interesting as a swing (1-4 days) trade opportunity. The analysis I am using is pretty simple and could easily be triggered in the short term particularly in light of the labor report we are expecting from the Euro-zone tomorrow morning. As you can see in the chart below, I have drawn a fib retracement from the bottom of the last downturn at 1.3270 to the top of the recent "anti-USD" trend at 1.3850. The market ran away last week and stopped at the top of the bull flag from early July at the 38% retracement level. We got a nice bounce back up today as investors cooled off a little and are currently sitting at the bottom of the one-day consolidation we had last week and the 23.6% level. I like the prospects of a bounce back down. I have my trade setup like this - If the market drops below the middle of today's price action forming a "dark cloud cover" at 1.3660 I will go short with a stop above resistance at 1.3742 and a limit order at near term support of 1.3520. That leaves me with a risk to reward ratio of 1:1.7, which does not seem too bad considering the kind of price action we saw last week. If the market hits my entry order on the way down and reaches today's open at 1.3630 I will move my stop down and start to trail it at that point. [B](Please vote for this story by clicking on the link on the left. - Thanks!)[/B] [IMG]http://www.pfxglobal.com/images/john/eurusd7302007.png[/IMG] EUR/USD Source: MetaStockProFX