Forex Technical Update

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There is a double top in EUR/USD and a bear run has so far materialized. In the 3/1 US trading session, the EUR/USD was trading at about 1.3278 with a bullish divergence with the 1H RSI. There is a bit of a near-term corrective rally outlook, but the short-term mode is still bearish, so we can look for a very short-term fade of a rally toward 1.34.

1) If entry is at 1.3380, and stop is at 1.3420, risk is 40 pips. Target is the 1.3165 (61.8% retracement, a rising trendline seen in the 4H chart). This gives 215 pips reward, giving a reward to risk ratio that is slightly better than 5:1.

2) With a more conservative target of 1.32. This is still a 180:40, or slightly better than 4:1 R/R trade.

3)Entry at 1.3360 with stop at 1.3420, and target at 1.32 can offer a reward to risk of 160:60 , about 2.5:1, so entry can be planned starting from 1.32 and still give decent R/R.

The 1H RSI is resolving the bullish divergence, and when it in the 50-60 area, the timing would be better for the short-term bearish outlook.

Invalidation: A break above 1.34 could mean the end of the bear run. It should be noted that the bullish outlook is still intact in the medium term. And, although there is still some short-term downside risk, we might have to switch to the bullish mode quickly. As far as reward to risk, an attractive price to buy from a support cluster in the 1.3150-1.3170 area, which includes the 4H chart is the 200 SMA, a rising trendline, and 61.8% retracement of the latest upswing.

Join us in the 3.2.2012 Market Intelligence Briefing, as we follow up with this trade plan to sell, as well as discuss trade plans of the EUR/USD and other pairs going forward.


Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist of FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.


Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.