Bulls fought back against bears yesterday, rallying the pair to 1.24310 and giving it a close just outside its bearish channel, a bullish signal. The pair was supported by news out of Europe that the ECB was prepared to defend the Euro. They walk a tight rope as on one hand a weak Euro could aid exports but could drive up inflation.
Daily Outlook: Technically the pair has been responding well to candlesticks on the 4h GMT charts, with dojis, shooting stars, etc leading the way for most of the major moves thus far. There are a few things that give me doubts about the Euro's ability to follow through on this latest bull rush: 1) on the daily GMT the pair failed to complete a bullish engulfing pattern as it closed under Tuesday's opening price; 2) It failed to clear 1.2444 and establish a new high, 3) a shooting star (nearly a gravestone doji) is hanging bearish on the 4h charts at 20:00 GMT.
So in the purest sense of a trend the pair still is making lower lows and lower highs. To truly be short-term bullish on the pair the we need to sustain a break above 1.2450.
Trading Idea: I'm watching a few different levels today, but my primary trade will be a short on a sustained break of 1.2315 with targets at 1.2290, 1.2260, 1.2230, and 1.2190 for 125 pips profit. I will also be looking for the more aggressive long on a sustained break of 1.2440 if the risk/reward ratio is right, with targets up to 1.2520
There is also an aggressive opportunity to short a failure of 1.2400 with targets down to 2260.
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