EURUSD finally breaks 1.0700

There's a reason why we let the price do the talking. We can no more push a price in a direction than stop the clouds in the sky. EURUSD had been holding above 1.0700 for many sessions. Sellers tried and tried but couldn't get the price to stick below

I was all ready to go into my TipTv appearance with a chart from yesterday afternoon showing the level holding. I had to knock up a new chart this morning just before heading out as we broke it late in Europe yesterday

The break has been textbook and ticked all the boxes so, what were the key moments?

  1. We broke below 1.0700 and then broke the area around 1.0690/85 that had marked the bottom of those breaks
  2. We held below that area as the sellers protected the 1.0700 level

EURUSD M15 chart

This time the price action said "We're going below, and staying below". It made the trade decision for us

So what happens next?

Who knows? We don't know where the price is going now. It's got just as much chance of going up as it has down so we need to let the price make the decision for us again. If we stay below 1.0690/1.0700 then the path should be lower. If we get back above then the short trade is in doubt

Now we need to ask the next questions. Do we test the years lows, or do we go back up?

EURUSD daily chart

Those two questions define our trade. If we go lower and test the April lows first then a decision has to be made. Bounce and we may need to take some profit. Break and we can bring our stop right down. Ultimately shorts would want to see 2015 low broken (that in itself could be a trade). Fail to do so and another decision has to be made.

As much as break trades can often be the start of a sustained move, it's never 100% certain that it will happen. In this case, if you're short then you let the market decide and plan your profit, and more importantly, your stop level. Throw out the challenge to the price and let it make a decision. Whatever happens you've set the boundaries and are in control of your trade

This trade looks good now but it could evaporate in a heartbeat. That's why we define our risk and set our targets so that the indecision in our minds is removed. Let the market worry about where the price goes, so you don't have to