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EUR/USD reminded about a slingshot strategy
2020-01-24 • Updated
Thursday, January 23, was the day of the ECB meeting. The European Central Bank launched a broad review of its policy in order to redefine its main goal and how to achieve it. ECB President Christine Lagarde held a press conference and market players considered her comments dovish, i.e. negative for the EUR.
Central bank meetings, and the ECB meetings in particular, offer a chance to trade on the news. Such trading can be done with the help of many different strategies. One of them is the so-called “slingshot strategy”. According to our observations, this strategy tends to work especially well during the ECB meeting days. When we described this strategy in our Guidebook, we took as an example the euro's price action on December 8, 2016. The moves of EUR/USD, which took place yesterday, resemble that case a great deal. The obvious conclusion is that this strategy may be very helpful during the next meetings of the European regulator.
So, what’s the slingshot strategy for trading on the news?
Step 1. Open the H1 or M30 chart about 30 minutes ahead of the event and locate the nearest support and resistance levels.
Step 2. If the price then pierces one of this lines (in our example, the resistance), don’t buy on the breakout. Wait for the pair to return below the resistance. If it forms a spike upwards and then slips below the support, it’s a sell signal.
The next events that will drive EUR/USD are the releases of the European PMIs. Technically, the fix below 1.1040 will open the way down to 1.1000. Resistance is now at 1.1065 (100-day MA).
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