Daily Outlook: We managed to squeeze about 30 pips out of our short last Friday from 3590. The total downward move was about 45 pips to 3545 before the pair reversed, hit our tightened stop at first target and then blasted off to the lower 3700s - about where we are at right now:
The pair has shown remarkable bullish strength but technically we need a 4h close above 1.3750 (Feb 9th high) to show that a more medium-term bull rally is in place - otherwise we view this as just another correction/consolidation period before the eventual move downward. This is a Monday so we expect volume and activity to be a bit light as usual, but there are a few setups we will be watching:
Trading Idea: First up there is a bullish 1h rising trend support, currently around 1.3600, that is providing a confluence of support zones between 1.3600-1.3630 and we will look for longs in this area to re-challenge the 1.3750 resistance area for 120-150 pips (primary trade).
Second up, and this is the more aggressive trade, is a short in the current price area (~1.3700 right now) on a strong CP signal with targets down to 1.3630 and 1.3600. The technical reasons for this trade are double: 1) 1.3750 offers a good area to high a stop-loss and 2) If you connect the Feb 2 highs to the current highs of today then you end up with a nice falling trend line to complete the channel with the falling trend support shown as a black line at the bottom of today's chart (connect Jan 31st low and Feb 7th low)
All and all the charts for EU look pretty mixed today, and we view any setup as more aggressive than regular due to the lack of a clear trend.