From Graeme Kennerley at Trade with Precision:
The market was taken by surprise last Thursday, 4th September when the Euro Zone interest rate of 0.05% was announced. The interest rate had been at 0.15% for some time and, not surprisingly, most of the EUR FX pairs reacted.
The EURUSD moved around 235 pips in one session, as shown in the chart below. These news driven events usually drive the trend more in the direction of the underlying trend and, consequently, provide trading opportunities off the back of the move.
As price gets near its old levels, previous support of around 1.4250 could become resistance as this pair continues its established downtrend. Notice how the 10, 20, 50 & 200 moving averages are aligned on the top side and are in the correct order, open and fanning with price currently sitting in the sell zone. The MACD and RSI indicators are also convergent to the short side.
There is a confluence of technical reasons for me to place an order in the market short;
a) An existing downtrend, b) a retracement to the ‘sell’ zone near the 10 moving average, c) a small bearish candle, d) old support becomes new resistance, e) a robust position for stop above recent swing high, f) a clear profit window to first target ahead of the old lows and key level of 1.4000, and g) trade offers greater than 1:1 Risk to Reward. If today’s candle remains small and bearish I will place a stop entry order at the break of the low of this candle with first target ahead of 1.4000.
However, should this level be broken then there is a trading window to much lower levels on the EURCAD.