I spotted a promising trading opportunity in the Foreign Exchange market, and I would like to share it with you today as the setup is ready.
Before that, I would like to give you some insight about the global map for the pair of the single currency against the king currency (EUR/USD) to let you know where other opportunities could emerge as time goes by.
Chart 1. EUR/USD Monthly: Make It Or Break It
Chart courtesy of tradingview.com
On the chart above, we can see the magic power of trends highlighted in blue for the upmove and in red for the current long-lasting correction. The former already took 115 months to unfold exceeding the period of the preceding upmove (93 months) significantly. This is what we always should bear in mind about the nature of corrections – they last longer than the moves they retrace.
The pair bounced up from the downside of the red channel in 2015 to start the current upmove, which consist of two parts. The initial stage was short in distance and was fully retraced by the start of 2017. The second part is highlighted with converging black trendlines, and it is still underway as EUR/USD took off robustly streaming to hit the other side of the red downtrend.
As the price is approaching the long-term resistance there is a big question arising – will it make it or break it? If we see the breakout, then there is no strong barrier ahead of the $1.4000 level. In case of reversal, there are several levels to watch joined into one area and highlighted with the red box. The first substantial support is offered by the recent trough at the $1.0340 mark. The next is the long-term Fibonacci retracement level located at the $0.9900. The last one is the downside of the channel at the $0.9000 level.
So, again corrections are tricky, and we can go both ways quickly, and you could catch either opportunity. One conclusion is promising – after the completion of the current long-term correction, there is a chance to see another long-term upmove.
Now let’s get down to the short-term trading idea.
Chart 2. EUR/USD 4-Hour Long Setup: Buy On Dips
Chart courtesy of tradingview.com
The idea is based on the assumption that the short-term consolidation (red lines) in the EUR/USD has been finished on the 1st of March and we have the first small upmove and the following correction in place. The latter could dip one more time below $1.2300 although it already retraced deeply below 50% Fibonacci retracement level.
The expected dip could offer a buying opportunity. I calculated the target using the Fibonacci levels measured from the preceding upmove (the first blue up arrow). I added those levels in the chart above and highlighted with the blue box, which starts from the $1.2647 (50%) and finishes at the $1.3139 (100%) with two levels in between. This target box perfectly fits with the blue uptrend channel, thus could be reliable.
Limit your risk at least below the threshold of the new upmove started in the $1.2150 area. The risk/reward ratio stands at the 1:2.3 when the minimum target will be reached.
Intelligent trades!
Aibek Burabayev
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
Good Analysis by Aibek.