EUR/USD Forex Signal: Bearish Momentum

There is no question that short trades look much more likely to succeed than any long trades.

Last Tuesday’s EUR/USD signals produced a profitable long trade from the bullish outside candlestick which rejected the support level identified at 1.2129 early in the London session.

Today’s EUR/USD Signals

Risk 0.75%.

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

• Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 1.2106 or 1.2150.

• 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 20 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 time frame immediately upon the next touch of 1.2047, 1.2037, or 1.1994.

• 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

I wrote last Tuesday that due to the small bearish retracement the previous day following a new 50-day high, today was very likely to be an up day. This was a profitable and accurate call, and my identification of 1.2129 as the support level to watch was a good call.

The market environment has changed quite dramatically, with markets spooked by increasing fears of inflation and the long-term risk-on rally well overdue a correction. Yesterday saw U.S. inflation come in at an annualized rate of 3%, the highest in about 25 years. This has caused relatively strong selloffs in global stock markets and a flow of funds into safe-haven currencies such as the U.S. dollar, which has sent the price down firmly.

It is difficult to say how long this bearish environment will last because there is no long-term trend, and because there is an even balance of support and resistance levels. However, at the time of writing, there is no question that short trades look much more likely to succeed than any long trades, so I will be happy to take a short trade after a bearish reversal from either of the identified resistance levels above.

There will be a release of U.S. unemployment claims data at 1:30pm London time. There is nothing of high importance scheduled concerning the EUR.