Out of resistance comes strengthSince we last covered Euro Dollar in our Timing is everything! piece, the pair has traded lower, playing out exactly to our assessment and hitting both of our price targets.
However, things have changed quite a bit ever since. Inflation has skyrocketed in the EU and the ECB seems ready to start playing catch-up on rate hikes.
Looking at the charts, the Euro Dollar pair has been trading in a triangle pattern with prices bouncing off the support multiple times but failing to breakthrough. The 1.0400 level seems to mark the longer-term resistance, which has been tested multiple times but held strong. We see these as confirmation of a strong resistance.
With prices close to the resistance now, we favor the long side in the short term and expect the pair to make its way to the top of the triangle.
Entry at 1.04880, stops at 1.03575. Target at 1.0630.
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The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
