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Euro To Bounce Back Against The Greenback?

May 10, 2011 9:44 PM ET
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lytman02's Blog
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Seeking Alpha Analyst Since 2010

Ron Acoba is the co-founder and managing partner of LaidTrades.com. He has been involved in the financial market since 2002. Technical analysis is his main tool in forecasting price action of equities and forex but he is also versed in fundamentals and financial analysis. He has an MBA degree from the University of the Philippines. Presently, he is also pursuing a CFA and a CMT charter.

eurusd, eur, usd, euro, us dollar, fiber, hidden bullish divergence, ron acoba, daily forex picks, forex, forex trading, forex market

The euro got hammered by the us dollar during the last 4 days when it slipped sharply from 1.4940 last May 4 to a low of 1.4254 yesterday. However, it appears that the euro bulls will be looking to rebound from its recent losses shortly.

The EURUSD’s current price set-up is one of my favorites to execute. Like I said, the fiber fell to 1.4254 a couple of days after reaching a high of 1.4940 ( a slide of almost 900 pips!). However, if you look at its daily chart, the euro’s sell-off looks to be over extended already. Notice that the fiber’s fall was halted by its previous high at 1.4282. Moreover, the appearance of a hidden bullish divergence, where the price registers higher lows and the stochastics mark lower lows, suggest of a possible turnaround to back north.

Playing a hidden divergence set-up like this works well in my case since it is a continuation signal. As you know, the trend is your friend and riding one is relatively safer than catching a reversal. In this instance, the possibility of this trade panning out right for me gets higher because of the significant support at its previous high. So as for me, I would want to place a long order at EURUSD’s present level down to 1.4200, place my stop loss trigger below 1.4200 and my target price at around 1.4800.

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