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TECHNICAL ANALYSIS

Shorting The EURUSD Using Technical Analysis

Shorting The EURUSD Using Technical Analysis

The EURUSD is not one trend traders have focused on since the start of 2013, despite it being the most heavily traded currency pair. The reason for this is simple; it has been void of sustained trends. Other currency pairs during this time have trended very well, handing out excellent profit. These have included the AUDNZD, the CADCHF and the GBPCAD amongst others. This is why it is essential for any serious trader to have an extensive portfolio and not one limited to a single pair or even a handful of pairs such as the majors. Trends can be in play for weeks to months. They move between pairs and also between markets and so for that reason, a good trader also does not limit himself to a single market but moves from market to market as trends come to an end in one and start in another.

However, in the last month, the EURUSD has been setting up for a long awaited trading opportunity. Below is the weekly chart of the EURUSD. Price had a bull run from the 2012 low at 1.2000 to the weekly 200MA at the start of 2013 which was where trend traders had lasted taken any profit from this pair. Since then, trends have been short lived with price ranging between the high of 1.4000 and the low of 1.2800.

 

Shorting The EURUSD Using Technical Analysis EURUSD weekly

 

The weekly 200MA acts as a major area of support and resistance. Looking at recent price action, it had broken through the weekly 200MA in the last month but a clutter of indecision candles was suggesting that price was unsure whether to continue its descent or confirm a fake break out and give momentum back to the bulls.

As expected by trend traders, momentum has continued with the bears this week. Looking at the daily chart below, we can see that the odds have been with the bears since June, when price broke through the daily 200MA. The daily 200MA is used to give trend traders a bias in price action, taking long opportunities when price is trending above the daily 200MA and short opportunities below. The fact that price had been trending below the daily 200MA since June of this year suggested that there was a strong indication that momentum would continue with the bears once price had also broken through the weekly 200MA.

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