Thursday, 18 February 2016

Is the EURUSD Ready For Downward Correction on 2016.02.12?

Is the EURUSD Ready For Downward Correction?

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The Euro has had 2 strong rallying weeks, and is up about 700 pips from it’s low mid-December, but the overal general trend over the last 2 years remains downward, with the currency still arguably under pressure, down as low as 3,500 pips from its 2014 highs.
The pair has just started a move to the downside with our indicators showing that this is the potential start of a new trend downward. Given that the pair is inherently weak, with a continuing dovish stance by the ECB, the current conditions could prove to weigh heavily on the pair.
The risk-reward ratio seems strong at around 1:5 with a stop of around 80 pips, just above the 21 Moving Average, while the ultimate target at 1.0800 offers over 400 pips. Hence the reward is around 5 times greater.
Naturally, stops should be adjusted to lock in pips during the trade.
The US dollar is still the strongest currency in the basket, and the Euro is still poised for further weakness with ECB quantititative easing, therefore looking for opportunities that provide good short positions on the pair seems like a reasonable trade.
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