EUR/USD is inside another consolidation pattern on its 1-hour time frame and, based on previous price action, this could mean another upside break.
Take note though that stochastic is already in the overbought region, which means that euro bulls are running out of buying power. However, the oscillator hasn’t quite crossed down from the 80.00 level yet, so there could be further upside potential.
The key level to break is the 1.3800 major psychological resistance. A break above that level might mean more rallies, possibly until the next major psychological resistance at 1.3900.
On the other hand, a downside break below 1.3750 might mean a move back to the former support around 1.3600. A straddle setup might be the best way to play this scenario with a 50-pip stop and a 100-pip target for a 2:1 return on risk.
By Kate Curtis from Trader’s Way