Europe was hit a ton of bad news last week. PMI reports came in weak, and the International Monetary Fund suggested that the European Central Bank cut interest rates to below zero, citing deflationary fears. All of this bad news knocked the euro off of its perch, but it bounced as it has done so many times recently. The euro remains resilient, and this is the type of behavior traders seek, whether in stocks, commodities, or currencies. Here’s the main difference between analysts and traders. Analysts see bad data, and assume that the euro will fall. Traders pay attention to the market reaction to the data, and understand that something important is occurring beneath the surface that trumps the current climate of negativity. I’m buying euro here and adding to the position on a break above 1.3830. The EURUSD currency pair has formed a large ascending triangle (blue). Despite the overwhelming negativity surrounding the currency, the resistance line at 1.3830 is the only thing standing between the euro and a new two-year high. I’m placing a stop beneath the ascending blue line, at approximately 1.3550, and will trail stops higher if the breakout occurs. -
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