Lets go over the euro dollar chart and let the chart tell us the story.I will usually start from the bigger time frames and then go down to the smaller time frames.
Below is the daily time frame for the euro dollar.
euro dollar daily time frame
On the daily time frame, the trend is down. The price is bounded by the 2 red lines that I have drawn. The price hit a low of 1.2288 before correcting to the upside and hit a high of 1.274, a move up of about 512 pips, enough to squeeze the shorts out of their short trades. The price bounced off the EMA50 and coincides with a sub trend channel that I have marked in orange. Price fell below EMA50 and the market is looking a bit sluggish at the moment, the market is still contemplating on whether there is strength to push it above the orange channel and hit the 23.6% fib level taken from the high of 1.494 and the low of 1.2361 and which stands at 1.297.
Although the trend is till down, we shall look at the possibility of this pair retracing to these levels:
ON THE UPSIDE
1.297 to 1.305 (23.6% fib level. Also a support area between February to April. We are looking at this level to act as a good resistance level and will be looking to see the bears coming in around those levels.)
The price need to see a break above 1.274 in order for the above levels to be reached.
ON THE DOWNSIDE
If the pair were to break below the 1.247 level (Support area), we can see the pair going further down to test its lows at around the 1.23 levels.
Lets now look at the 4hour time frame of the euro dollar.
Going in closer to the 4 hour time frame of the euro dollar, we see that the price have broken below its up trend channel. However, it is being supported by the red down trend channel that I have drawn. There is a possibility that if this channel holds and the price trades above the red channel, we can see the price going up to test higher levels and as suggested in the daily time frame, the 23.6% Fib level at 1.297.
Below that channel, I would expect the price to look for another support level and as suggested in the daily time frame, that would be the 1.2484 level.
I have not taken any trades at the moment.
EURO DOLLAR TRADING STRATEGY
Since the trend is still down, I am going to take trades that follow the trend which means that I will try to look for short trades.
SWING TRADE IDEA: If the pair breaks higher my strategy is to short the pair at the 1.297 level. Target is at 1.28 (Gain of 170 pips) and Stop loss at 1.31 (Loss of 130 pips).
SCALP TRADE IDEA: If the pair reaches the orange trend line in the daily time frame at 1.274 level, I will look to scalp for a quick 20 pips gain and my Stop loss will be just as tight at 20 pips also.
I hope you guys benefit from my analysis and I wish you all the best in your trading.
Ardy is a Professional Forex Trader specializing in the Forex market. He trades using both Technical and Fundamental Analysis and mentors other traders how to trade the Forex market using proprietary trading strategies which he has developed over the years. He started investing in equities in 1999 and trading Forex in 2008. He is the founder and lead currency strategist @ Forexachievers.com