This morning’s short EUR target was 1.1141, bottom 1.1114. Price reversed at 1.1146 between reported 1.1145 and 1.1152. To continue to 1.1114 Bottom, 1.1141 had to break. It didn’t. Targets serve the same purpose as a reversal point. They deserve caution and special attention. I always warn a move higher or hold of 1.1141 and overall short target means price goes higher to first target the long point. This morning was 1.1169. Break of 1.1169 was signal to go long and monitor levels for targets to hit as well as reversal points. Target points are very special because they deliver price messages to where price will head next. The target above was 1.1227 and price broke to 1.1247. The top point of the target was 1.1240 yet violated by 7 pips. Normally that means price is heading higher but its also Monday and the world isn’t yet in sync to prices. Note price price price, its the least understood aspect to currency trading the world over, analyst or pseudo analyst. Was the 1.1140’s a place to short knowing target at 1.1141 was close and Bottom at 1.1114. No, unless 1.1141 broke then a short is plausible but a quick short as a scalp. Consider bottom breaks in the past 300 trades, they don’t break often and when they do break, the value of the short earns maybe another 20 pips maximum. Bottom are solid, its why breaks only see 20 pips max. Bottom breaks are a Non farm Payroll type event, China Devaluation, Greece in disaster, Yellen falls.
EUR/USD price is best described as balanced, not overbought, not oversold. Volatility is actually very low which means EUR is not ready to see a big price move in one fell swoop. I know we saw a 100 pip jump this morning but 100 pips in currency price trading doesn’t move the needle in the overall picture. Instead slow price grinds should be the way. EUR price extremes above are located at 1.1492, 1.1465 and 1.1323. Below extremes are found at 1.1065, 1.1003 and 1.0964. EUR/USD is playing around at the 20 day average at 1.1234. Normally that means volatility is here but its the ranges surrounding the 20 day that is containing EUR prices. Price containment is what is suppressing volatility and stopping bigger moves. The 5 day average 1.1194, 10 1.1228, 20 1.1234, 50 day 1.1216. Two big points very important 1.1140 ( 100 day) and 1.1164. The ECB overall is working to bring the EUR price lower as the long section of the curve is finally moving lower from its long stasis positions. I have use of two separate models and its the daily model that will continue.
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EUR/USD. Bottom. 1.1171. Range break above 1.1246, 1.1259, Below 1.1220, 1.1207. Overbought sell point 1.1287, Failure point 1.1271, top of channel 1.1304. Strategy. Longs above 1.1233, target 1.1287 then reverse short to 1.1260. Points on the way up, 1.1241, 1.1256, 1.1253, 1.1271, 1.1287.
Shorts below 1.1233, Target 1.1205. Watch 1.1205 for reversal higher. Break 1.1205 then price continues lower. Points on the way down, 1.1232, 1.1224, 1.1220, 1.1216, 1.1209, 1.1193, 1.1177 Bottom. Point 1.1205 must cross or hold to see higher prices.
Brian Twomey, Inside the Currency Market, btwomey.com