EURUSD: Potential Gap Fill (March 25, 2013)

There’s a falling trend line connecting the highs on EUR/USD’s 1-hour time frame and a test might be in the works for today. In addition, the gap from the previous weekend might get filled as it is close to the 1.3050 minor psychological resistance.

Lawmakers in Cyprus are hopeful that a bailout deal will be reached within the week even though Russia declined their request for additional liquidity. However, the lack of a concrete proposal could put EUR/USD back in selloff mode.

Stochastic is almost in the overbought territory, suggesting that euro bulls are about to run out of steam. On top of that, a potential bearish divergence is forming as the pair made lower highs while stochastic is making higher highs.

Shorting at 1.3050 with a stop above 1.3100 and a target at the previous lows near 1.2850 could yield at least a 2:1 reward-to-risk ratio.

By Kate Curtis from Trader’s Way