1.35 Support Play: Fade the EUR/USD

November 4, 2013

Fade the EUR/USD.

Three Looks at the EUR/USD: Multiple Time Frames Can Mean Multiple Strategies (VIDEO)

If the Friday rally in the greenback was one big “they may taper sooner than we thought” short squeeze, then we’ve seen the bottom in the U.S. Dollar Index and it’s at 79.06. But just because the buyers have found a floor to defend, does the momentum have enough for an uptrend?

11-4-2013 4-56-03 PMThe U.S. Dollar Index could not find bullish momentum through the 81.00 level and this bodes well for an exhaustion fade off this resistance at the range extreme.

Traders will willing to rally through 80.00 but the all-out assault has thus far fell short of a convincing trend reversal and that mean not only th 81.00 major psychological level but also the 50DMA in front of it.

The U.S. Dollar Index could not find bullish momentum through the 81.00 level and this bodes well for an exhaustion fade off this resistance at the range extreme. Traders will willing to rally through 80.00 but the all-out assault has thus far fell short of a convincing trend reversal and that mean not only the 81.00 major psychological level but also the 50DMA in front of it.

On the flip side – the forex side – of this conversation is the support in the EUR/USD after a test of the 1.3450 level (1.3441 low) and a rebound above the 1.35 handle. Although the current move has yet to show the strength to test 1.3520, the market is still within the “doldrums” of the trading day as the Asian session has yet to get underway. Remember that the Japanese market will be opening for the week with this session.

11-4-2013 4-41-12 PMThere are two ways to play a weaker USD and stronger EUR/USD.

The first would be the fade off of today’s today or more aggressively off the 1.35 level.

But the more aggro entry would still leave a sizeable stop loss just below today’s low but this range would easily be within the EUR/USD daily expected pip movement range (see graph)

Alternatively, a Wave Reversal entry long can be taken with a 1.3520 breakout with at least a +100 reading on the CCI (20 period). This would be a more nimble intraday trigger with a stop loss at 1.3490. The fade relies on buyers supporting the major psychological level while the Wave Reversal relies on momentum north of 1.35 and through the 1.3520 minor psychological level.

11-4-2013 5-24-21 PM

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