eurusd
The EURUSD pair is on a tear higher as Georgia’s run-off ended with the Democrats winning the U.S. Senate. As such, the USD took another dive, with the EURUSD pair tripping stops above the 1.23 level.
Truth be said, the pair struggled at the 1.23 for quite some time. Whenever that happens, it shows a market that builds energy to break higher, typically in a triangular pattern. The lower USD is still the dominant theme on the FX dashboard, and the EURUSD, as the most liquid pair of all, reflects the dollar weakness too.
However, one cannot ignore the rising wedge that formed in the past weeks.
A rising wedge formation shows a top. Traders have two options ahead – one aggressive and one conservative.
Aggressive bears always try to sell when the price breaks the upper trendline. Such piercing happens almost always, but the risk here is that the market will not reverse. Moreover, there is difficult to find a place for the stop-loss order.
Conservative traders wait for the price to come back inside the wedge formation. Next, they place a pending sell stop order below the lower edge of the pattern. Finally, they place a stop loss at the top and a take profit that respects the 1:2 risk-reward ratio typical when trading currencies.
