Daily Outlook: It's hard to argue with the bullish short-term charts at this point as the pair has climbed over 460 pips since last week's low of 1.1875. We have two rising trend supports (bottom blue lines) that I will look to hide stop-losses behind as I look for longs on the day, and their is a falling trend resistance (top blue line) from the daily charts that I will look to take profits before reaching it. I will also look for potential shorts near that falling trend resistance.
Only two concerns with long trades on the day - 1) Long-term trend is still strongly negative and I'm watching closely for the resumption of the downtrend as are many other analysts. 2) We had a bearish candlestick on Monday's daily chart and then a long bull bear today. In the past in such a setup I've frequently seen a strong bear bar the following day (today).
Quite a few news events coming out tomorrow including inflation numbers for the US and Eurozone. Inflation is expected to decrease slightly in the US and remain constant in Europe, but I don't expect any major surprises with these releases. See the forex calendar for more details and all the news events.
Trading Idea: Primary trade will be a long near initial rising trend support, currently at 1.2215. Long targets from this level at 1.2240, 1.2270, 1.2300 and 1.2330 for 115 pips profit. On this trade I expect 1.2165 to cap any bearish moves, and a bearish break of 1.2165 opens up 1.2050.
Secondary trade will be a long on a sustained break of 1.2350 on the 60m charts, with long targets up to 1.2450 for 100 pips profit.
A much more aggressive trade will be the primary trade from yesterday: short on a failure of 1.2350 with short targets down to 1.2215 (where we could look for the primary trade of today).
Happy pipping and don't forget to utilize the candlestick alert system to help your entry points!