Euro Dollar review – watch for its critical point!

Posted Thursday, May 10, 2012 by
Dave Green • 3 min read

Today I want to discuss with you one of the most traded currency pairs in the Forex world – The Euro- Dollar. There’s no denying the fact that this is the most traded pair, or that it’s the pair with the highest volatility. It’s no surprise then that it offers traders countless opportunities for major profits, while at the same time offering a relatively high risk investment. So how can we, as traders, best handle this sensitive pair? The answer is by closely following the charts, technical analysis and financial news from both Europe and the U.S. which relates to it. All these can help us spot long term trends: the kind that lasts for hundreds of pips, and can be worth thousands of dollars from just a single trade!

Why is now a good time to be talking about this pair? Mostly, because it’s currently located at a critical point in relation to any future developments. During the last few days this pair has ranged between a 1.3000 support and a 1.3060 resistance level, and it’s waiting for its next big move. As we are about to see, the 1.3000 price is a critical point, as it can lead to a major breakdown on the one hand, or a massive reversal on the other hand. The question is “Is the Euro about to lose it against its rival?”

euro dollar daily chart

Let's examine what’s happened over the past few weeks from the perspective of the daily euro-dollar chart. You should notice that the pair has tested its 1.3000 support level several times, without succeeding in breaking it. The pair has ranged in this area for a while, testing the market's sentiment, but every time it reaches the 1.3000 price it has reversed course. It seems like every time it tests the market reaction to its attempts to break down, the bulls keep pulling it back up.

This situation has created an important technical indicator called a Descending Triangle. The best way to deal with this type of triangle is to wait until the price reaches its right hand vertex, and then closely follow the price's behavior right afterwards. If it breaks below, traders might witness a massive downtrend, maybe even to the pair’s January low at 1.2700. But, if the triangle doesn’t break down, we might witness a strong correction, with a bullish run on the Euro.

The current few trading days are a critical time for the technical analysis on this pair due to the extremely sensitive political status in the Eurozone. Right now, the Euro is traded at very high risk. It is unstable, and there are serious concerns about its ability to survive in times of such risky political change in countries such as France and Greece, which are experiencing major changes in their political leadership. Added to this is the severe financial crisis in other European countries such as Italy, Spain and Portugal which are still showing no real signs of economic recovery.

The current feeling among the majority of the traders who I happen to know is that the market is about to witness the beginning of a long, powerful downtrend on this pair, unless something very unpredictable happens in the near future.

bulls fight euro dollar

Most Forex investors seem to be looking for a safety net, a strong, safe currency to trade, and usually, the Greenback (the US Dollar) is considered as this shelter.

So, guys, what do we do? How can we take advantage of this situation? Simple! Follow FX Market Leaders’ trading signals, the financial news, and the Euro Dollar charts, and wait for the right time to enter the market.

For those who still haven’t opened a trading account, do so now if you don’t want to miss out.

What do you think? Do you also believe that a major downtrend is about to emerge? Write us your thoughts. 

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