Euro Dollar Update 11/02/2021

*Updated analysis on the EURUSD long term trade play and current price action*

Welcome back to the blog. In todays post I am going to share with you an update on the long term EURUSD trade set up that I have been monitoring since Q3 last year. This update is quite interesting because I now actually have a position open on EURUSD and I believe that the pattern is looking more likely than ever to play out as predicted.

Before I continue, if you have haven’t been following the EURUSD analysis since last year then you can read my previous blog posts via the links below. These older posts go in to detail about both the technical and fundamental analysis that is driving this trade and why it should work out over the next few weeks and months.

Let’s start by looking at the daily timeframe price chart as at today.

EURUSD Daily timeframe price chart.

Since my last update on EURUSD, price continued to retrace down towards the 1.20 price level as expected. This was after the 1.20 resistance zone was broken back in December 2020 before forming new multi year highs at just below 1.23500.

You will now see that I have a long position open on this currency pair from 1.20 which is a textbook example of a price resistance zone being broken and therefore becoming a new support for price on its bullish trend. You will see there was a strong bounce on the 1.20 level with a large bullish engulfing daily candle closure and then 3 consecutive bullish days since. I am hoping that EURUSD now continues upwards to 1.25 and my final price target.

Support and resistance zone trading.

Support and resistance is a topic I have covered many times on this blog over the years and it still features heavily in a lot of technical analysis and trading. The reason for this is because it works!

The image below is one I have used before and it perfectly shows how these price zones work.

Although this chart is a simplified version of how it works, when combined with other points of analysis I believe the support/resistance theory can produce consistent trade entries. However, you will notice I ALWAYS refer to them as support and resistance ZONES and this is important. Do not try to trade them as single pip levels because in the real world, price action will very rarely be that accurate.

If you search through my old blog post you will find many that reference support and resistance zone trading across multiple timeframes. A good blog post from last year can be found by clicking here.

Now let’s get back to the Euro Dollar currency pair and look at a bigger picture chart.

EURUSD Weekly timeframe price chart.

The chart above is the weekly chart price looking back 5 years. Firstly, you will see that the current bounce off of the 1.20 support zone seems to be strong with this weeks candle closure looking likely to be a bullish engulfing candle. The other reason for showing you this longer term view, as I have done in the previous EURUSD blog posts, is because the premise behind this long trade is pattern repetition.

Pattern repetition is a key part of technical analysis and trading. You are finding patterns, trade set ups and strategies that take advantage of things that happen over and over again. Predictability = profitability.

In the case of EURUSD, I am trading what looks to be like a repeat of the price action that occurred almost exactly 3 years ago in 2017 – 2018. The levels I have marked on the chart show how, just like in 2017/18, price has climbed up to 1.20, rejected the resistance zone, retraced to 1.16, rejected the support zone and then breaks above the 1.20 resistance zone. From there, price went on to reach 1.25 back in 2018 and this is what I am hoping to happen again.

With a price target of 1.25 in the next 3 months, this would net exactly 500 pips for the long position I now have open.

BBDXY 5 year chart.

This final chart shows the Bloomberg Dollar Spot Index (BBDXY) which is a good measure of the US dollar currency against a weighted basket of other major currencies. Although I don’t use this chart much in my technical analysis because it is a lagging indicator (price is fed from currencies and doesn’t necessarily influence currencies), it does show that there is potential for the dollar to fall more.

The BBDXY is trading around the 1120.00 mark and is struggling to reverse and climb higher. You will notice this is almost the exact same level that the BBDXY was recording back in 2018 when the EURUSD price went on to reach 1.25. Can it do it again?

If you are interested in learning my personal trading strategies, please consider my Mastering The Markets – Retail Trading Course. Head over to my Financial Analysis Education page to check out all of my education packages and the deals available.

Useful Links:

All my technical analysis is done using the TradingView platform. You can get access via the link below.

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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.

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