I wrote yesterday that I shorted at 132.90 and, just waking up and getting on the computer (why did I sleep late?) I found it hit my profit target for +244 pips. Had I been awake I might have moved the target lower because the pair is clearly weak and it has been in a broad range over the last year of 126.89 to 139.22.
There’s no clear evidence it will drop to the bottom of that range but it would be lovely, wouldn’t it? At least it would if you’re not long in the pair. At a low this morning of 130.30, it has a ways to go. Support is here at 130.50 so I wouldn’t be surprised to see a bounce but there’s no evidence right now it’s going to do so. It’s oversold on both the hourly and three-hour chart.
A case could be made for a head and shoulder pattern on the three-hour chart. I’ve traced it out. If that’s true, the target is 128.66.
If you’re not already short this pair, don’t try to catch a falling knife as they say. Wait, instead for a bounce and short the rally with a tight stop or look for a definitive close beneath 130.50 on at least the hourly chart. If you do the latter, make sure RSI isn’t climbing up from oversold as this could indicate a bounce.
Here’s the three-hour chart:
© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.