eurusd Trapped Between Support and Resistance

The most popular Forex pair eur/usd is currently trapped by intra day support and resistance levels. The pair has been moving down in waves for around two weeks. It is being supported by 200 sma and ema on 4 hour chart (acts as support) and is trapped by 200 sma and ema on hourly chart. This situation won’t last long and price will eventually explode through one of the technical levels up or down. Bearish picture is favored as price rallied to resistance of 1.1230 today and formed a reversal candle (bearish pin) on the hourly chart. 

Price sort of holds above 1.1175 level, which was resistance yesterday and may act as support today. You may remember that price broke the level upwards today after a bullish triangle pattern on 1 hour and 15 minutes formed. However, the breakout occurred during Asian session and these kind of breakouts do not usually last for a long time. If the above mentioned support is broken, next area comes at 1.1100-1.1080. That should hold at least for today, but not sure if it is still there by the end of the week. Euro is also falling against British Pound, so the pressure for eur/usd to go downwards increases dramatically. 

Price below key 1.5700 in gbpusd again

The awaited break of 1.5700 in gbp/usd happened, but it turned to be false again, at least at the time of writing and price is again below the level. As you may see from the chart price broke above yesterday’s high and then reversed falling back below key level. That is pretty usual price action in currency market. That also confirms the idea how much manipulated it is. You may not believe it, but how can you explain this kind of price action of breakouts and then reversals the next day. That’s banksters playing with traders’ money.

Anyway, if you chose to be in the game you have to know how to play it. Be sure to watch price action which happens right after a breakout occurs. False breaks are “smart money” tricks to get your money out of your pocket into their pockets. 

We have to continue watching price action to see what happens next. Will there be a continuation of a downtrend or price will rally upwards tomorrow? Anything can happen. Support comes at: 1.5680, 1.5650 and 1.5630. I tend to think a reversal may happen around 1.5650, but that will become clearer after Asian session tomorrow as we will head into European session. 

See you tomorrow with the updates. 

Below key level again

Euro falls against US dollar

Euro crashed against US dollar when London markets opened. The pair dipped below Thursday’s low (1.1080 level) and is now consolidating. We do expect a bounce at this point and possible move back to 1.1100 level before US session begins. 1.1080 level is now resistance (previous support becomes resistance). 1.1062 (current low) should act as support. 

Euro bulls should be looking for a reversal pattern near support to confirm a false breakout downwards and a possible return to 1.1140 level. With no major news from Europe or US we may assume that price will remain range bound and fluctuate between 1.1050-1.1130 levels. 

After high was reached on Thursday we may also assume that there is a slight bearish bias, but that has to be confirmed by moving further below 1.1050 level. 

US CPI (Consumer Price Index) that is to be released on Wednesday at 12:30 GMT should give more directional bias for eur/usd pair. Minutes from FOMC the same day at 18:00 GMT could make even bigger waves in Euro/Dollar exchange rate. Generally speaking, prices are range bound while the main trend still remains downwards. 1.1500 level has to be broken decisively in order for the sentiment to change. 

eur/usd 30 minute chart (possible false breakout below Thursday lows)

Pound ends week on bullish tone but at resistance

Everything British Pound lost the week before it did recover last week. This is the real nature of Forex market. Real trends are rare and currencies too often stay within ranges. Lots of ups and down happen before market goes anywhere without turning around next day or next week. 

Last week it ended touching 1.5660 level. This is the exact spot it started the week before. What can we expect this week?

gbp/usd 2 hour chart (market comes back where it left the week before)

1.5670-1.5700 is key resistance

It is obvious that we have strong resistance at 1.5660-1.5700 levels. The area has been rejected at least 7 times in 30 days. It does mean something. However, one day any resistance or support level is broken and price goes wherever it wants to go. 

Is false break possible?

False break above the high is really possible and will probably happen. However, you must remember that the more price plays with some level, the pressure is created and when finally the break occurs we can surely expect some momentum to continue and a trend or at least a short term swing to develop. 

I think there will be some more horizontal work this week and price will eventually break through key resistance. 

COT data implies that long British Pound positions are increasing and a move up is very likely any time now. 

Break higher is very likely

Pound false break above Asian highs

On the 13^th of August, 2015 gbp/usd made a false break above Asian session highs. We often see these false breaks. Most traders tend to trade Asian session breakouts placing buy stop orders above Asian session highs and sell stop orders below Asian session lows. This kind of trading strategy hardly ever works and you often see false breakouts that often reverse and price goes in the opposite direction. So, the best course of action is to trade against such breakouts. 

When price broke upwards right at the start of New York session you should have sold gbp/usd and gone short. You could take a short at 12:15 GMT when first bearish candle closed and placed your stop loss order above the highest point of the day, which at that time was at 1.5637. So, your stop would have been around 20 pips. Most traders have risk reward ratio 1:2. It means you should have gone for at least 40 pips. This you would have easily achieved as price moved as low as 1.5574. 

You would have entered your trade at 1.5620 level and exited at 1.5580. Spread would have been around 2-3 pips depending on your broker. Even if it was 4-5 you would still have reached your take profit target of 40 pips. 

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This is how you trade false breaks.