The beginning of last week saw EURUSD price action has consolidated in a tight 130-pip range. The up-trend had not been violated, so we advocated continuing to buy the pair, adding a cautionary note that the lack of a strong signal meant we will keep a close eye on price action and cut losses quickly. Our hesitation was warranted – EURUSD responded sharply to the marginally better ISM Manufacturing report, dropping out of the range to hit our stop for a loss of 100 pips.
Friday’s NFP report disappointed hopeful dollar bulls, showing losses 30k greater than expected and revising the previous month’s result to the downside. EURUSD has once again found itself at the familiar trend line stretching from 02/07. With last week’s event risk behind us, we continue to hold the view that EURUSD is poised to test the 1.6000 mark. A Hammer at the trend line confirmed by a bullish candle seen last week adds credence to the up-side bias.
EUR/USD Trading Strategy
1. Long EURUSD above trend line support at 1.5660.
2. Set stop near 1.5490, below the wick low of the Hammer candle.
3. Set profit target near 1.6000, risking 170 pips to gain 400.
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