Transcript of Video
Hello everyone, this is today’s video analysis for February 7, 2019. Today we’re looking at the Euro versus the US Dollar [EURUSD] for today’s trade analysis.
Looking here at the daily timeframe, we could see the currency pair has been in a freefall for the past few days. Over the past six days really, we’ve seen the market falling from all the way up here into the 1.1500-level, 1.1480, top of the pink-shaded area here, all the way now down into the 1.1330-level, the green zone at the bottom.
As you could see, I’ve put this black box here on the chart. We’ve been looking at this range or area for the past several weeks in the live Trade Room. Resistance at the pink zone. We’ve had one instance where we got above the pink zone. But for the most part, over the past several months, going all the way back to October, we have found resistance there into the upper-1.1400s towards the 1.1500-level.
During that same time period, we’ve seen support down here towards the green zone. A couple of times of course reaching just underneath there down to the orange-shaded area, 1.1280, 1.1255. But a majority of the support seen right around 1.1330, 1.1310, the green-shaded area. And guess what. Today’s no different. Even though we’ve been falling strongly for the past five or six days, we’re now finding support once again at this green-shaded area.
So, as it approaches the green zone, 1.1330, which we’re only 15 pips above it right now, it’s a difficult place to go short. I know it’s been going down for six days and you think well, let’s get into a short. Let’s get into a sell. But as it approaches the green zone, that doesn’t make logical sense for the past several months because it’s found support and turned around and went back higher again.
So, when do you go short? That’s probably the big question. If it’s going to go down, if the USD is gaining strength against the EUR, which it has been, then when do you go short? Well, my expectation is that I would be looking for it to rally back to resistance, which is now the blue zone, 1.1375, 1.1405. If I’m looking to go short, I want to do it underneath resistance because my risk is smaller.
What’s the risk right now? My risk is it turns around and goes back up if you were to sell it. So, your stop loss would be just above the blue zone if you were going to go short. So, if you go short now, your risk is high. Your profit target is small. If you wait for it to go back to the blue zone, your risk is smaller and your profit target is larger. And so, that gives us a better opportunity to go short, is if the market makes it back to the blue zone, 1.1375, 1.1405 before we look to go short. Not close to the green zone.
Does that mean it will go back up there? Not necessarily. It may just turn and go down from here, but that would at least give us a better risk-reward profile for any shorts. And really I can point out other areas where that would’ve been true as well. Let’s just take a look at this larger blue circle I’m drawing here on the chart. Look at this period right here. During this timeframe, you could see if you were going to go short during this period, it was best to do it at the blue zone because it improved your chances of it having a profit target back down to the green zone.
Now, the other side of this. If you’re looking maybe to go long, maybe you think that the USD has had enough fun and it’s come to an end of its freefall here or a rally for the USD, then you’re looking to do that closer to the green zone, because then your risk-reward is better for going long. If you get down here towards the green zone, you don’t want it to get under the green zone.
So, right now current price right around the mid-1.1340s, 1.1345 or so. 1.1350 is halfway between the blue and the green zone. So, at least at this point, for the day today, let’s let it dip to the green zone or rally to the blue zone before we make our next trading decision on the EURUSD.
From Forex Traders Daily, this has been your daily analysis with Ross. If you would like to get Ross’ analysis on all the currency pairs he’s watching and all the trades he takes today, join him in his live Trade Room by clicking on the link below. Please leave any comments you have about today’s video in the comment section below.