EUR/USD Forex Signal: Bearish Consolidation Below $1.0586

The pair remains vulnerable to a breakdown below $1.0500.

My previous EUR/USD signal on 25^th April produced a losing long trade from the support level I had identified at $1.0710, although I did say this trade should be scalped which might have at least made it a break-even trade if approached that way, as it gave a bit more than 10 pips of profit.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered before 5pm London time today.

• Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.0586, $1.0615, or $1.0650.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 50 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.0710 or $1.0639.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

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EUR/USD Analysis

I wrote on 25^th April that the dominant direction likely to provide the best trading opportunities was downwards, and I was right about that as after rising a bit from the support at $1.0710, the price began to fall again, and has been trending downwards ever since. However, I also thought that trading this pair short on breakdowns was inadvisable as the bearish trend was simply moving too slowly, and I was wrong about that – there have been a couple of breakdown short entry opportunities in recent days.

The US Dollar Index has been making a consolidation over the past few days at the top of its long-term price range, and the action here in this currency pair is following that very closely. The Euro is weak, and the Dollar retains its long-term strength. The market is just waiting now to see what the Federal Reserve does later concerning whether it hikes by anything between 0.25% and 0.75% (a hike of 0.50% is widely expected), and what its outlook for the economy is and how further hikes it signals for the near term.

What the FOMC does and says later is very likely to determine what the price of this currency pair does next.

The price has been finding a great deal of support at the big round number of $1.0500. The FOMC release later today may well be the catalyst that sees that level finally break down decisively or produces a bullish reversal from that area.

I am interested in any good opportunities to enter a short trade here, so I am seeking a bearish reversal at any of the resistance levels identified above.

Concerning the USD, there will be a release of the FOMC Statement and Federal Funds Rate at 7pm London time, followed half an hour later by the usual press conference. There is nothing of high importance due today regarding the EUR.