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Contributors The Euro Bottomed at 1.20
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Sentiment is still horrible for the euro. Most traders still seem to think the name of the game is to short every rally. After all, that’s been working for almost two years now, so why should that change?

A savvy trader, however, doesn’t get sucked into a view that something will never change. They trade the trend at hand, but are always watching for signs that things may be changing.

The signs I’m seeing tell me the euro bottomed around 1.20 in late July, and that the trend is changing.

How can I say that? Let’s take a look.

Any Way You Slice it, The Euro Trend Has Changed

See larger image

For signs of a change, many traders look for a pair to rise above its medium-term, 50-day simple moving average (blue line above). More cautious traders will wait for the pair to trade above its long-term moving average (the red, 200-day simple moving average line). Well, the euro has done both of these things!

And if that doesn’t convince you, there are other metrics that can be used to determine when a trend is changing. One of those is to simply draw a trend line connecting the highs of the downtrend. Once it’s broken, the trend is likely changing. As the black downtrend line above shows, the euro has broken through that, as well.

So really, any way you slice it, the euro’s trend has now changed, and pullbacks should be bought.

Have a nice day!

Sean Hyman
Editor, Currency Cross Trader

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