The EURUSD has corrected sharply after Cyprus has reignited Eurozone woes. This currency pair now formed a double bottom as visible in this D1 chart and the most recent candlestick has opened above its support level which is enforced by its 200 DMA and a close above this level will be bullish. We believe the EURUSD will launch a relief rally into its 50 DMA after the Cyprus vote on the bailout.
MACD has stabilized at the bottom and formed a positive divergence which supports our call for a rally from current levels. RSI is trading in oversold territory and also formed a positive divergence. A breakout from oversold territory should add to the rally.
We recommend taking a long position at 1.2935 with a potential second entry level below 1.2835. We also advise traders to place a stop sell order at 1.2850.
Traders who wish to exit this trade at a loss are advised to place their stop loss level at 1.2885. We do not use stop loss levels and will execute this trade as recommended. Place your take profit level at 1.3000.
Here are the reasons why we believe this pair will rally into its 50 DMA
- Price action formed a double bottom
- Currency pair trades at support which is enforced by its 200 DMA
- Most recent candlestick pattern opened above support
- MACD formed a positive divergence
- RSI trades in overbought territory
- RSI formed a positive divergence
- Short covering rally