Forex Technical Update
The EUR/USD failed to follow through with a bounce from a support cluster in the 3/5 US trading session. Instead it slid sharply below the 1.3150-1.3160 support area during the 3/6 European trading session. This break opens up the 1.30. The 4H RSI is under 30 (as well as the 1H RSI), so a very short-term correction could be anticipated possibly with a re-test of the broken 1.3160 support as resistance. However, the outlook is that the market will fade a corrective a rally looking to test the 1.2970-1.30 low seen in the daily chart as a common support area.
A break below 1.2970 and 1.2950 should then open up the 2012 lows near 1.26.
Trade Setup and Reward to Risk: A stop could be placed above 1.3230 at 1.3245 (above which we should probably wait for further consolidation before reconsidering the bearish outlook from 1.33). Entry can be anticipated to be the 1.3160 level. That originally has 85 pip risk and is probably too high. So a scaling in method with anticipation of another entry near 1.32 if it gets there could be applied. That averages the entry at 1.3180 and has a risk of 65. This also makes the potential reward to 1.30, 180 pips. 180:65 = 2.77:1.
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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.