In yesterday’s post, I was talking about trading with high Risk Reward Ratio. The core of this strategy was to look for trading levels which made sense as swing trades as well as intraday trades.
Today’s article is going to be related to yesterday’s post, so if you missed it, then you may want to check it out here:
Support on EUR/USD got breached
Let’s first start with looking at a Daily chart of EUR/USD. There has been a pretty significant development!
Significant support (from Daily time frame) got breached and now it seems that lower prices (below this support) are being accepted. This would mean that this support will become a resistance.
Currently, it is still a bit fresh, but if EUR/USD really closes this week below this support (which it already breached), then it will be a strong signal that a new resistance got formed and that strong sellers are taking over.
Check out the picture below to see what I have in mind. It is a Daily EUR/USD chart:
As you can see from the picture above, there were many strong rejections of this support in the past. I marked them in the chart.
Yesterday, the Daily candle closed below all those rejections and today’s current development gives a chance that today’s daily candle will close even lower, confirming that the support became a resistance.
BTW if you would like to learn more about this setup, you can do so here:
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Let’s have a look at a lower time frame
It seems that we have a strong resistance zone, but where EXACTLY to enter a short trade?
In situation like this I often switch to lower time frames, preferably a 30 Minute time frame.
Then I use the Volume Profile and I look for significant volume area to go short from.
In this particular case, the zoomed-in situation around the new daily resistance looks like this (30 minute chart, EUR/USD):
Bingo! Now we have an exact level (1.0999) from which we can go short from! We can go short with an intraday quick trade as well as with more long-term swing trade!
How to manage trading from such a level? Well, if you read my yesterday’s post, then you already know 😉
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Later today, there is going to be a strong macro news concerning the USD. It is the NFP news (Non-Farm Employment Change) and Unemployment rate.
This is after the FOMC the strongest (standard) US macro news.
It would be extremely risky to enter any intraday trade during the news. So, if this resistance gets hit during the news or immediately after in the post-macro volatility, then I will skip it. Anything can happen during a macro news and even a nice level like this is not worth the risk.
So take care!
Have a FANTASTIC weekend guys, and I will be looking forward to seeing you on Monday with a new Weekly Trading Ideas video!