One issue with using the pivots with the EUR/USD is the 24 hour trading time frame. With FXE, the ETF proxy for the EURO, the daily pivots are based on the 6.5 hours of the US equities market. With the EUR/USD pivots can be based on daily bars of either 8 or 24 hour duration, delivering radically different ranges used to calculate R1-S1 and producing significantly different trading targets.
The $64 question is, of course, which pivot format is the best forecaster of short term EURO momentum and which provides the most reliable trading target support and resistance levels. The answer is . . It Depends. Using the pivots to trade without confirmation signals is risky business at best and folly at the worst. Later in the week we’ll explore a few confirming indicators from our trading toolbox that can consistently provide a quantifiable edge.
As an example, note today’s EUR/USD 15 minute scalp 18:30 – 18:45 as price bounced up off the PP pivot at 1.3301 with the LR14 heading 45 degree upslope and price riding the 8/8 hi/lo upper band, both very bullish signals. Our exit was a 2 pip trailing stop, tight but effective if you follow the chart and see what happened subsequently.
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