EUR/USD is in the midst of a strong rebound and partial recovery after a major collapse that prompted the pair to tumble to a 12-year low. After six consecutive bullish trading days, the currency pair has tentatively formed a bearish Gartley pattern on the 240-minute chart. Point D of the reversal pattern was targeted by both the 141.4% Fibonacci expansion level of the B to C leg and the 70.7% Fibonacci retracement of the X to A move.
Earlier in London, the rise from 1.1080 to the session high of 1.1248 also appeared to be a short squeeze. If this last surge did trigger many stop losses, we could see price be ready to resume its longer-term bearish bias. Critical resistance will come from both the 100-day SMA and the 1.13 handle.
Immediate downside targets include the 1.10 handle followed by the 50-day SMA which is currently trading at 1.0878.
The trade: Sell EUR/USD 1.1180, with a stop loss at 1.1330 and take profit at 1.0880. The risk/reward ratio is 1:2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading