Trading the EUR/USD forex pair? The COT can help.

Market Pulse: Dec 12, 2011

We have seen a daily “love-hate” relationship develop over the past year between the markets and the European Union’s handling of its debt crisis. Just look back to this past Thursday, the market “hated” what was coming out of the most recent summit, and on Friday the market “loved” what was coming out of the summit. Guess what is happening today? If you said “hate,” you are correct.

In these times, how do you trade the largest traded Forex pair, the EUR/USD? Well, first have a look at the daily chart below and you will see that last week this pair opened at 1.34350 and closed the week at 1.33810. ADX is at 28 and rising showing low strength developing in the most recent move down. MACD is below the signal line with very little divergence, reflecting very little momentum, and Stochastics are mid-range and look close to getting into oversold territory. Current price action shows the market is now at the bottom of its price range of 1.32000. We will want to see consecutive closes below this. Short-term top of the range looks to be at 1.35000. The red line shows a technical trade signal and Trends in Futures did recommend shorting this pair that day.

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