Stalking EURUSD Short
There are a few key themes in the Forex market that continue to lead the way in 2015 and that is US Dollar strength and Euro weakness. When you get one strong currency and pair it with a weak currency you get a really nice trending market. That is what we continue to see on the EURUSD forex pair.
If we can join a move lower from the levels we are currently at and grab a piece of the pie on the way down then that will be a job well done for us as traders. We don’t need to look back at EURUSD and wish we had been short for the whole move down, we want to focus on the now and try to grab a quick profit from the next potential move lower.
If we take a look at EURUSD on the daily chart below we can see that it’s been moving lower in a really nice downtrend making lower highs and lower lows all the way down. In the last couple of days buyers have stepped back in and pulled price back towards the sell zone (area between the 10 and 20 period moving averages). This may have been traders profit taking after being short earlier or perhaps it was traders trading mean reversion strategies that look to profit from price being overextended with the intention of trading price back to the mean. Now that we have had a pullback and are no longer overextended we can start to look for clues of when the sellers may start to jump back in and take EURUSD shorter. If we time it right we too can profit from the move lower and be a part of the sellers shorting EURUSD.
One of our strategies here at Trade with Precision looks for a bearish candle to close in the sell zone within a downtrend. So what we have done is drilled down timeframes until we find price sitting nicely in the sell zone. The 480 minute chart below illustrates this situation the best. We have price in a strong downtrend, it has pulled back into the sell zone and so far a bearish candle is forming. To back this trade up even more we drew a Fibonacci retracement on the chart and price has pulled back to the 50% which also clusters with the round number of 1.4000. We are now starting to build a picture for price to potentially find resistance here and move lower. We will be keeping a close eye on how the current 480 minute candle closes as it may alert us to an entry short.
There are many other factors than the ones I have mentioned above that we need to tick off before we have a valid trade setup short. What we try to do here at Trade with Precision is combine multiple ingredients to give us high probability trading strategies. If you are interested in learning more about our strategies then join us on this week’s live webinar by registering below:
The Five Pillars of Trading Strategy
Happy Trading!
Regards,
The TWP Team
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