The EURUSD found support after the US Fed took a lot of momentum out of the US Dollar which was expected. This currency pair sold off deep into oversold territory and one big disappointment in the quote currency, in this case the US Dollar, or one big surprise in the base currency, in this case the Euro, was enough to result in a powerful rally which we witnessed on Wednesday. While Thursday saw a reversal of plenty of the gains it did shift the paradigm for this currency pair and series of higher lows may invite more upside.
The Bollinger Band has not stabilized yet, but it is a lagging indicator and expected to encircle the support are which is visible in light blue. The EURUSD may develop a sideways trend inside of this support area until the Bollinger Band indicator will stabilize as well. The risk remains to the upside in this currency pair and next week could see more buy orders replacing short positions. This could result in a renewed short-covering rally and push the EURUSD above its support area from where it can further advance.
The EURUSD is trading towards breakout territory and forex traders are advised to seek out long positions at 1.0790 and below in order to capitalize from a potential continuation of positive momentum in this currency pair. A take profit target of 1.2400 is recommended for a potential trading profit of 1,610 pips on the D1 Chart. A breakout above the support area is expected to fuel the short-covering rally.
Forex traders should protect this trade with a stop loss level at 1.0490 for a potential trading loss of 300 pips which will result in a Risk-Reward (RR) ratio of 5.37.
Long @ 1.0790
TP @ 1.2400
SL @ 1.0490
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