Yesterday market emotions were aroused by decision (actually the lack of it) connected with changes in euro zone interest rates. It was clearly seen that investors were afraid of buying EUR, foreseeing the possibility of interest rate cuts. That did not happen and EU currency reacted with dynamic strengthening. But how long will it last? As usually, I want to invite you to Price Action Setups review:
In yesterday review, I wrote about a setup which created on this currency pair – you can find it here. However, it was denied and the position has not been opened. This shows the advantage of opening positions after confirmation, and not only the market price (it is much more effective). Currently, the resistance will start functioning as a support and you can look for buy signals.
Yesterday on D1 chart a pin bar formed, which is a buy signal. It is because the pin bar is consistent with the current trend and additionally was formed at support. You can choose here 3 paths of trading:
– buy stop above the pin bar with stop loss below
– boy stop above the pin bar with stop loss below 50% of the candle abolition
– buy limit at 50% of the candle abolition with stop loss below
Two first methods have the advantage, that it is the purchase after the demand confirmation on currency pair. The last two will have a more favorable risk-to-return ratio, but are less effective than the first one.
Yesterday ECB decision resulted in currency pair increases. However, they didn’t last long and now we see a slight correction. It takes place from 21 EMA which combined with the current downward momentum causes, that the increases are still questionable. The more than that, the next resistance is really close and opening longs on Eurodollar will be hardly profitable in the nearest future.
The buy signals from the daily chart are still binding. Pin bars at support are evidences of demand – however, the lack of a clear reflection can be worrying. The increases are still more likely than another wave of declines.