4:37a GMT - Bears come through exactly on queue yesterday, nearly playing out yesterday's primary signal (false breakout then short a return at 1.3760 down to 1.3660) perfectly. It was 100 pips on most of my position and then I let my last lot run for more. To further confirm yesterday's trade we had a great bearish extinction doji on the 8:00 GMT candle that preceded the large drop. A few people asked why I called a bearish trade even though the pair was showing bullish on the hourlies so let me answer that here. Reason 1) Look at the 4-hour chart. It goes from the top left to bottom right - we are clearly in a downtrend. Reason 2) I connected the highs of 1/25 and 2/3 and saw we were sitting right there on that trend resistance.
Daily Outlook: Overall the pair dropped close to 200 pips yesterday, giving up all the gains that were made on Monday. The pair failed on a challenge of 1.3800 and the 4-hour and daily charts still show a clear downtrend. 1.3535 is the toughest support level still in our way, but I will target this level when I fade a rally into the resistance zones at 1.3650-1.3680. 1.3650 is also the 38.2% retracement of yesterday's big drop.
Trading Idea: Looking to short in the 1.3650-1.3680 resistance zone with targets (from 1.3650) at 1.3615, 1.3585 and 1.3550. Secondary trade: I will look to short a sustained break of 1.3535.