Also I want to point out that if even as we were looking for shorts last week with our conservative trades we still managed to make a profit or avoid trading altogether almost all week. No need to jump into a trade if the setup isn't there. Patience pays.
Daily Outlook: As we come into the week the signals are as mixed as ever, which is a reflection of the various analysts and smart money managers out there. From my informal analysis I'd say about 2/3 of smart money managers are still very bearish on the pair, and the other 1/3 are only bullish because they see hyperinflation coming to the States in the coming years. I've also read a few COT reports that show speculative shorts have picked up to record highs again. In summary, I think the potential for bad news hanging over Europe at the moment 1.16 is more likely to be hit in the coming weeks than 1.2600 is but I will continue to trade what the charts present me with.
Technically the pair has been bouncing along a rising trend support line (bottom blue line on charts) and had a sustained break at least one falling resistance line, giving it a bullish tint in the short-term. We might see some further stop-loss hunting (see short squeeze) before we continue our trek downwards again, but I expect 1.2350 will cap any bullish rallies tomorrow.
Soft news today. Check the forex calendar for full details.
Trading Idea: Signals are mixed but my overall strategy will be to buy dips to rising trend support and to fade very large rallies. Primary trade is a long on a dip to 1.2070 with long targets at 1.2095, 1.2120, 1.2145, 1.2175 for 105 pips profit. Another trade setup would be a short on a rally to the 1.2300 vicinity with confirmation and targets down to 1.2100. Don't forget to watch the candlestick alerts for more trade setups.