This is the kind of setup that is hard not to take.
– Long term bearish pressure (declining 200sma)
– A key level combining a) a well defined trendline (rising blue line) b) a just as well defined support turned resistance at 16.70 (fixed red line) c) several moving averages but especially the 100sma
– Declining MACD confirming downward momentum
– RSI is below 50 while ADX is ticking up (albeit still relatively low)
– Obvious price action : a) breakdown, b) retest from below, failed to close above (agressive traders might have entered there), c) confirmation the next day with a small inside bearish bar.
– Target is reasonable, based on price action back to late 2014.
Now, what is against this trade?
– First of all the SL is not ideal. I have a very small account and i couldn’t go further without getting out of my risk management. I wanted to enter at market after the close of the NY session and was thus limited. Still, it’s a decent SL placement i believe. If we go retest this resistance it means the downward pressure was not strong enough.
– The risk reward is not ideal. Entering a day earlier (after the failed retest) might have been better. Still, we are in a choppy market and i wanted confirmation.
– News event. US (Core) Retail Sales and PPI figures are expected later today. This will probably make or break the trade.
I manually closed the position at the news for a small profit because the figures were below expectations, indicating suspicion towards a rate hike in june and thus USD weakness. Should have i hold? I don’t know. The paire ended up rejecting the 16.20 support. Here is what the chart looks like after the NY close :