It seems like the Euro or USD (the US Dollar) is a strong technical trading pair right now. Here are four reasons to get out of the Dollar as well as go ahead and trade it in Europe.
The EUR/USD closed above its long-term support level of $1.2534 USD. That level may have held in late February and early March. So, the short-term uptrend may have been driven by the short-term pullback as well as by the temporary lowering of the RSI.
The EUR/USD was able to push past the 25% Fibonacci retracement level of the last two sessions, and it also broke above the 80% Fibonacci retracement level of the last two sessions. The recent decline has been initiated by a move from a key resistance at $1.2386 to a key support at $1.2394. So, we may be seeing more of the usual trend reversal pattern if the EUR/USD continues this sideways momentum.
The US Dollar Index (DXY) is now below the key psychological level of $100 USD. The index has already fallen to the .90 level, which is the key support level of the downtrend. However, we will see whether this is an ‘all-time low’ or if it can still continue down. It is difficult to assess the levels and the trend lines at this stage because the price action is moving sideways and is looking ‘busy’ rather than solid.
We should continue to monitor the price action and wait for the signal that supports the downtrend, particularly if there is an upward trending price. This could be near the key level of the last two trends, which is about to cross over to the downside if the price action moves sideways.
It looks like the USD/EURO is trying to pull the USD down to the .85 resistance level after the move to a key support level of the previous two downtrends. However, the price may stall on this level if the EUR/USD trades sideways for a long period of time. So, the EUR/USD may easily continue the downward trend in the end, and we should be ready to watch for this on the hourly chart.
A breakout level that helps to confirm a reversal pattern is the .90 level, which is positioned on the triangle line. It may act as a support or resistance level.
If the EUR/USD is able to reach or cross above the horizontal line on the RSI chart, then this would be a good entry point into the uptrend. This would act as a short-term support level. The breakout above this level could continue the uptrend.
Once the market breaks out of the downside territory, there will be a higher stop loss level than before. So, there is a chance to close out the trade before the price drops to the floor.
The market has a relatively short-term downtrend, and therefore the targets and the stops should be adjusted to be able to react to short-term downtrends. The smaller number of days is positive as the risk of losing money is minimized, but it is less rewarding.
The bottom line is that we need to understand how the market works before we can trade it and avoid losses. The short-term downtrend should not be dismissed, but it is important to identify the right entry points and to stay away from the danger zone where the EUR/USD trade becomes risky.
To sum up, we need to be able to identify when the market is at a very vulnerable stage and take advantage of the profit potential in downtrends. This will give us the time to come back up to the upside in order to close out the trade at the best possible price.