Examining Uptrend and Breakout of the EUR/USD pair.

Following up last week's EUR/USD excercise.

We were curious to see whether the EUR/USD pair's upward trend would continue and if the pair was able to break its previous highs. Or, would the market fall and the market would enter a period of consolidation. 

The Pair Breaks the Previous High, then Consolidates.

The pair broke through the previous high, but this is not to declare the uptrend to be still intact. There are more false breakouts than real breakouts and one would like to see an indicitive sign that the uptrend is still in effect. 

After breaking through the past highs (market with our horizontal line) the market went into a bit of consolidation, and made several attempts to break the support that had been resistance.

Market Reacts to FOMC Meeting. 

The market was indecisive until the Federal Open Market Committee decision on interest rates on Tuesday, Sept. 18th. The Fed cut rates aggresively, by 50 basis points, and this was reflected with a wide ranging bar.

The strong break of former resistance is the type of signal to point to confirmation that the EUR/USD uptrend is still intact and continuing. The next significant resistance level is near 1.4000. Will the pair be able to break it in the near future?

We are currently seeing something like a divergence from technical indicators, but the market has not set a new high yet, so its too early to tell.

Entering on Retracements During Valid Uptrends 

With a valid uptrend it is prudent to buy on retracements, or when the pair is coming down of its high. It may not be the best idea to buy after the breakout bar, as a pair may retreat from that level. 

If the pair retraces to 1.38 or even 1.37, then it may be an opportunity for a valid buying point. What the strategy could be here is to enter the market after a pullback if a trader believes that the uptrend is intact and will continue.

By entering at the pullback it would give the trade the best chance of a low risk trade. If the market goes against the trader, they will lose a little on a stop loss, but if the uptrend does continue, there is a chance for profits. A trader is trying to take on a trade with the best probilities, as it is impossible to predict how any one trade will turn out. 

So until next time, lets see what kind of market action will develop.