Today is shaping up to be a strong positive day for US equities. News of international bailouts and strong earnings reports has boosted the morale of the market. However, the markets have yet to break through their two month long downtrend.
Looking specifically at EURUSD, the pair has yet to even break out of the downtrend that began in the middle of January. What does this mean for traders? Depending on your perspective you could be looking at two different short to medium term trades, or just one.
They are both longs, the first would be to follow the current upward momentum, taking profit when the pair reached the current down trending tops. This would be worth close to 100 pips; however there is not a good stop loss for at least 200 pips, making the risk to reward ration less than appetizing. Conversely, a break of the down trending tops can be traded, looking to make a return to the higher down trending tops. This trade offers a much stronger risk to reward ratio, using the lower resistance as new support. Both of these trades are counter trend, looking to play technical corrections, as the sentiment of the market ebbs and flows.
However, you can also look to trade both of these by going long EURUSD at market and simply move your stop loss to break even or a small profit, and then play out the other trade.
EURUSD currently sits at 1.3780
