Happy new year everyone, it’s back to the chart as usual hoping that you had a fulfilling year last year.
In December, price action wasn’t that strong and if the monthly chart is brought in to measure volatility, it will be observed that November’s lows of 0.844 was cleared but then price retraced back towards 0.8675 price tag and that by the way was half of November bear candle. In my view, I still retain that the Euro will continue to lose value and as we saw what the ECB said before the holidays about its monetary policy, growth and inflation projections, the euro has still got a long way to go and is overvalued with more QE on the way since March Expiry period was extended to December.
To the daily chart, November stochastics was oversold and that is why price retraced towards the resistance line at 0.8720 but after that a sell signal was printed with an overbought stochastics and this went hand in hand with the monthly chart stochastics which is also overbought and a sell signal printed. Of note is that inverted hammer which formed as the market closed on Friday. I recommend shorting at all highs in the 1 hour chart when there is an overbought stochastics and moving with the trend.
Not much fundamentals today other than Manufacturing PMI being released in France, Germany and Italy. Watch out for the manufacturing activity in Italy where there is a credit problem as one of its Banks is in liquidity crisis and requires capital injection. Other than these data, there is nothing much this week for the Euro. The Cable will likely move as there is data being released this week and therefore, this trading week look to buy the Pound as follows.
In the 1 hour chart when there is an overbought stochastics and a confirming bear candle, then trade as follows:
Sell Limit: 0.8545
Stop Loss: 0.8610
Take Profit: 1:3 Risk Reward ratio according to your time frame preference.
If you cannot risk setting a sell limit, then wait and manually enter when there is an overbought stochastics in the 1 hour chart as stated above and enter.
Have a good trading day.