On Friday, there was relief that there will be a Spanish Bailout package of something like $124 Billion by the European Union. There was a short rally in EUR/USD in the afternoon on Friday on the news of the Spanish Bailout Package. On Monday we saw a gap of more than 100 pips in EUR/USD when the markets opened again. The debt situation in Euro Zone is complex, so most analyst see this rally to be short lived which infact it was. When the markets opened on Monday with a gap of more than 100 pips, the first thing that EUR/USD did was close that gap. According to Christopher Lewis the analyst at DailyForex.com, the rally will be short lived lasting for at most a few days. The market will not like to be net long over the weekend due to the upcoming Greek Elections. So once again the EUR/USD selling will start. In nustshell this is what is expected. There will be a EUR/USD rally during the week which will come to an end by Thursday or Friday at the most. You can watch this EUR/USD weekly analysis video below that explains the EUR/USD complex situation.
One observation that you shouldn’t miss making is that EUR/USD is heading pretty close to the 200 SMA. 200 SMA is considered to be the long term trend in the market. When a strong candlestick reversal pattern is formed close to the 200 SMA , it is always a signal for a strong trend which can be up or down depending on the reversal pattern. So how do you trade EUR/USD during this week? It will be a good idea to take a look at the H4 timeframe and then use either H1 or M30 timeframe when the rally starts. One way is to use the EMA 8 and EMA 34 cross confirmed with a candlestick reversal pattern on M30 or H1 timeframe. First check the direction of the main trend on the H4 timeframe using using this same system. Once the uptrend is confirmed on the H4 timeframe switch to the lower timeframe of H1 or M30 and make an entry when a strong candlestick pattern is formed right on the EMA 8. Trading these short term rallies can be a profitable proposition.
This is how it is going to happen. First the EMAs will cross on the M30. Then the EMAs will cross on H1 timeframe and finally the EMAs will cross on M4 timeframe. When the cross takes place on H4, switch to H1 or M30 and look for a retracement into the EMA 8 and a strong candlestick pattern forming right on the EMA for your entry. Exit when the EMAs cross back again on either of these three timeframes.