Is the EURUSD breaking out to the upside?
Using some basic technical indicators, let’s take a look at the EURUSD on the daily chart. I’ll share some thoughts on the interpretation of the technical indicators, before looking at the prices on the charts.
Technical Indicator Analysis
- The ADX has broken out above 20, which indicates that trend strength is picking up. This means that the EURUSD is possibly starting out on a new trend.
- The 50 and 200 EMAs are bullish. By this, I refer to the 50 EMA being above the 200 EMA, and in general they are both pointing upwards.
- The MACD is also bullish and pointing upwards, and shows a nice separation between the two moving averages.
Support and Resistance Levels
Although the 3 sets of trending indicators show that the EURUSD is in a bullish trend, it also pays to note potential support and resistance levels on the chart.
Looking at previous highs where prices found selling pressure, the potential resistance level is indicated by the horizontal red line marked “Resistance Level”. So while the technical indicators show a bullish trend starting to develop, price levels indicate that we might face selling resistance just overhead.
Check out the attached chart below. Click on it, and it should float up on your screen.
So What The Heck Does That Mean?
If you’re not already in a trade, then it might be better to have patience to see if the EURUSD might breakout above the resistance levels before considering a buy.
If you are already in a bullish trade, you might want to take note that the EURUSD might face selling pressure at just slightly higher prices.
This goes to show that even though technical indicators might tell you something, you do still want to consider actual prices on the chart. This is a strong reason why in trading, you do need a strong robust trading system that determines your entry, exit and trade management rules.
Otherwise, what will you do when the EURUSD meets selling pressure at resistance? What will you do when the EURUSD breaks above resistance levels? How many lots will you buy? Where will you place your initial stops?
To succeed in trading, you do require to have the answers to all these questions and more.