Eur/Usd Analysis

The Eur/Usd has been bullish lately but that might change soon. We've already seen a big drop today and the gap on the 4 hour chart has almost been filled as the pair now begins to enter oversold levels. Here's a 4 hour chart:To put all of this into proper context, we should look at the daily chart to see if there are any signs of this move being significant. From my chart, I can see 3 reasons to short the pair if there is a follow through with today's move. Here's the daily chart:The 3 signs: 1) sell on trender line, 2) fisher transform is forming a bearish crossing (although it has not crossed yet), and 3) bb width stopped making new highs and is now heading lower.

These signs tell me that we might see a sharp reversal if, and this is an important if, we see follow through with the selling into the close today. All of the above reasons will be null and void if the selling doesn't continue. So what's the game plan? If bearish conditions are still present going into the close, I'll put on 1/4 of my position before today's close with a wide stop up around the 1.3750 level and look to add to the position on Monday.

This trade will be a bit of a process, which will consist of slowly adding to the position and tightening stops if selling conditions continue to improve. The good thing about building a position like this is that you don't get caught with your pants down if the trade turns against you right away...I've only put on 1/4 of my trade initially and my stops will be quickly tightened if the trade turns against me later, so there can't be too much damage done if the trade doesn't work out. One key is to use proper position sizing...only risk 2-4% of total capital on any given trade and ideally you risk even less. We'll see how it turns out. Have a good weekend.

TLT