Scalpers Prepare for the Next EURUSD Breakout

By Walker England, Forex Trading Instructor at Dailyfx

Talking Points:

  • The EURUSD has declined as much as 408 pips
  • Price is currently consolidating this week
  • Scalpers can begin looking for a breakout

Prior to this week’s consolidation, the EURUSD has been making steady declines toward a series of lower lows. With the pair declining as much as 408 pips over the last month, this week’s consolidation has many short term scalpers believing that a fresh breakout is on the horizon. One way to prepare for this scenario is through utilizing a series of momentum analysis technique while identifying key pricing levels

So is the EURUSD gearing up for its next breakout?

EURUSD Daily Trend

Scalpers Prepare for the Next EURUSD Breakout

(Created using FXCM’s Marketscope 2.0 charts)

After the development of a strong trend price tends to halt and consolidate before its next move. These periods are important to short term Forex scalpers that want to pick up on the next surge in price. In a strong downtrend, a break of support can signal a continuation and allow for new sell entries to be placed. If price breaks a point of resistance, it could be considered a turn in price where scalpers may wish to change their trading bias. To identify these key points on the chart, traders should investigate the last week of price action. Now let’s take a closer look at the EURUSD using pricing block analysis.

Below we can see the current EURUSD 30min chart, divided into two pricing blocks. Block One is formed from last Wednesday the 28th through Sunday the 2nd. During this period we can see the last surge of the prevailing downtrend as the pair moved to a new low at 1.3585. This advance was immediately followed by another lower high created in Block 2. The lower high stands as current resistance, and as a signal of consolidation, Block 2 has been painted yellow due to the absence of any new highs or lows. Now with these price levels in hand, we can begin preparing for the EURUSDs next breakout.

EURUSD Trading Blocks

Scalpers Prepare for the Next EURUSD Breakout

(Created using FXCM’s Marketscope 2.0 charts)

In the graph above it should be noted that the Block 2 high stands at 1.3647. In the event of a EURUSD reversal, price must breach this point on the chart. Entries orders can be set above this value to trigger in the event of a new high. In the absence of a new high, short term traders will look for a continuation of the trend with entries under 1.3585. A move towards lower lows in this instance would cue traders that the current uptrend still stands. This will allow short term traders continue a bias to sell the EURUSD.

Now that you are more familiar with identifying key pricing levels, you can practice a breakout strategy using a demo account. You can get started by registering for a Free Forex Demo with FXCM. This way you can develop your trading skills while continuing to track the market in real time.

—Written by Walker England, Trading Instructor

To contact Walker, email wengland@fxcm.com. Follow me on Twitter @WEnglandFX.

Original source

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