4Xlounge Round Table – The Next EUR Move
4Xlounge Round Table Trading Signals
The best trade ideas are typically the result of a number of technical indicators, sometimes unrelated but convey the same basic message. In this case we’re going to discuss one of the most commonly traded currency pairs; EUR/USD. Here we’ll start with the Bigger Picture Market Barometer, based on monthly charts, shows us the longest-term time frame and is designed to identify the very long-term trends. The Market Barometer illustrates the relative strength of each individual currency, which allows us to construct the best currency pair, by simply matching the strongest with the weakest. In this case we have isolated the EUR currency which has clearly fallen into a triangle consolidation pattern and at the moment is heading lower, with an approximate price target of 38 (you can also use the Daily Power Bars fib levels to determine your target on longer term trades).
If you turn off the other 7 currency lines, you get a better idea of what each individual currency is doing. This option is available via the Market Barometer Console Software.
Bigger Picture Market Barometer EUR
Next we’ll consider the general trend of the EUR/USD pair. A long-term channel has emerged where often times the down-trending resistance and support lines will occur in a parallel fashion. Drawing support by connecting the two significant lows, we can now approximate an (upper) resistance level, which projected a reversal almost exactly where the market did in fact reverse course. Furthermore, this chart conveys that the EUR/USD has the potential to revisit recent swing lows near the 1.3800 figure.
EURUSD Daily Price Chart
Taking a closer look the EUR/USD has now given us a further sign of confirmation as the current candlestick is the first of many to cross and close below its immediate up-trending support line. While it is important to anticipate a trade based on long-term charts, ultimately the market must eventually begin to agree with us. This chart shows the market has in fact begun to behave in the anticipated direction.
EURUSD Daily Price Chart
The best trade scenarios are typically the result of an idea based on long-term charts so we may take advantage of large macro-economic trends within the market place. However to better refine the entry and achieve the best risk-reward ratio, traders will then look to the shorter-term charts such as the following 4-hour charts which are the favorite time frame of medium-term ‘swing traders’. Here we can see histogram based on the Market Barometer technology shows a clear change in sentiment from positive to negative. Using the shorter-term charts to confirm longer-term trade ideas helps us isolate not only the best trade ideas, but also the best time to initiate the trade.
The Market Barometer Histograms are available via our Market Barometer Console Software (you can access the Barometer Console from Launch Pad or the Pro Toolbar)
Market Barometer 4 Hour Histogram
The following histogram allows us to view the relative strength of the Bigger Picture Market Barometer from a different point of view. As the market enjoys a trend to the upside, green bars tend to persist. However once these bars change from green to red, this tells us the market’s trend has shifted to the downside. The benefit of these particular histogram bars is that they are based on the Bigger Picture Barometer, so they tend to ignore minor market fluctuations and identify the longer-term trends.
Market Barometer Daily Histogram
Trend lines help explain the ratio of buyers vs sellers over a given period of time. As the buying pressure outweighs the selling an upward-trending line can be drawn by connecting significant lows, which should continue to trend higher over time. However once this trend line has been violated, the chart tells us the ratio of buyers vs sellers has changed, and a more significant reversal may be in the midst of emerging. The same holds true when analyzing the Bigger Picture Barometer currency lines. Here we can clearly see an extra degree of confirmation has now been achieved as the EUR line has now violated its up-trending support line for the first time in quite a while.
Big Picture Market Barometer
If you have any questions or if you need help, please post in our forum and we will be happy to assist you. We usually answer forum posts within the same hour.