Previous Price Breakout
I have posted a few trading updates about the EUR/USD pair just recently, and as you may recall, I pointed out that it was worth watching out for a possible breakout when the price was trading in a very narrow channel.
Well the price did in fact drop below this channel and although it did pull back a little, it did subsequently drop around 280 points from the closing price of the initial breakout candle.
Since then the price of the EUR/USD pair has rallied somewhat and is now back to where it was before this downwards breakout. So where does the price go from here?
Resistance at 1.1700
Well if we keep the same trendlines on the chart from last time, it is clear that there is strong resistance at these levels.
First of all, the upward and downward trendline from the previous channel act as resistance, but you will also notice that the EMA (100) is sitting just above this trendline at around 1.1700.
So when you also consider that these round numbers often act as strong support and resistance levels, it is clear that it is going to be hard for the price to break through this level in the coming days.
Trading Opportunities
At the time of writing, the price of the EUR/USD has reached a high of just over 1.1650 at the start of the overnight trading session (check out the last blog post to read about a trader who has managed to develop a highly profitable overnight trading strategy for the EUR/USD pair), but has subsequently dropped back to 1.1600. So it has already been sold off after approaching this resistance level.
Therefore if the price moves above 1.1650 towards the critical 1.1700 level once again, a short position might be a high probability trading opportunity that is worth taking because the price is unlikely to have the momentum to break through this level.
Alternatively, it might be worth watching just to see how the price reacts and then opening a position accordingly.
For example, if the price is sold off once again, you might want to think about opening a short position between 1.1600 and 1.1650, but if the price does actually break strongly upwards through the 1.1700 level, it might be worth opening a long position and trading a possible upward breakout because this is quite a strong level of resistance.
Disclaimer: These are just my own personal thoughts and doesn’t in any way represent financial advice. You should always do your own research and make your own decisions when trading forex.
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