4:44a GMT - Before we get to today's forex signal, have you heard that expression before, circle the wagons? As far as I know it is an early American expression from a few hundred years ago when the early US settlers were moving west across the Great Plains of the country. They didn't get along so well with the Native Americans and when they would attack the settlers would circle their wagons in a defensive position to help fight off the attack. We saw a similiar defensive move yesterday as bears attempted and succeeded in consolidating their gains below former trend support which signals a short trade on the day.
Though the EUR/USD is giving us some short directional signals, fundamentally I believe this USD rally will be relatively short-lived as long as Bernanke signals no action on raising USD interest rates. He again talked about USD strength yesterday but so far that is all he has done - talk. His actions have supported a weak dollar and as long as risk appetite is in the market that signals further dollar weakness against the higher-yielding Euro.
Daily Outlook: That being said, I'm primarily a technical trader and the short-term trend is down. We had a huge 200+ pip drop on Friday, the break of rising trend support that has held for the bulk of the year and bears were able to hold and consolidate some of those gains yesterday. With that in mind I will be looking for a signal to sell near resistance around 1.4900.
Trading Idea: Shorts preferred in resistance zone of 1.4900 with candlestick confirmation. Tight stops, targets at 1.4865, 1.4830 and 1.4780.