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The EURCHF is one cross I don’t talk about often. But the price action since August has painted a picture that’s worth mentioning.
Sloping flag patterns are different from bull and bear flags. The former slopes with the trend while the latter forms against it. That means one suggests a continuation of the prior trend while the other signals a potential reversal.
As you can see from the chart below, the EURCHF has carved an upward sloping flag. The formation points in the same direction as the uptrend that began in February which suggests buyers are tiring.
The closest comparison to an upward sloping flag would be a rising wedge. Although the two patterns have a slightly different appearance, the implications are the same.
Just like a rising wedge, a flag pattern like the one above often targets the bottom of the formation. In the case of the EURCHF, that would be the August lows at 1.1260, approximately 330 pips below the current price.
The trigger for a short entry would be a daily close (5 pm EST) below channel support. However, there is a trend line that extends from the October low that was just breached on a 4-hour closing basis.
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From here any retest of the 1.1620/30 area as new resistance will likely encounter an influx of selling pressure. Key support comes in at the channel bottom near 1.1510/20. A daily close below that could serve as an opportunity to add to an existing short position.
If we don’t get a retest of the 4-hour trend line below, I will wait for a close below support near 1.1510/20. Either way, the objective is the August low at 1.1260.
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Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.
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