They say "don't pick tops and bottoms" and "follow the trend" and all that other good stuff. It's good advice, but it's still fun to try and determine when a trend might end. If you get it right, you'll be in on the very beginning of a new trend! Of course if you get it wrong, then all the people with orders following the trend will thank you very much for your money.
First of all, are we in a trend? It depends what time frame you look at. If you look at this chart below, then you could safely say "yes". Price is well above the 100 period high & low moving averages.
4 hour EURUSD chart
But look at that trend - so step! Surely it's over extended and due to come down, right? And you know what they say - the bigger they are, the harder they fall. Or something like that.
So lets look for evidence that the trend is about to end, so we can possibly get a nice trade set up.
First we have the 4 hour EURUSD chart, same as above, but this time with a yellow box. See the long wick of the candle in the yellow box? And the following candles have not yet penetrated this high. Also, if you look at previous candles, none have a wick quite so long. This could mean buying is exhausted for the time being. However it could also mean that traders booked their profits on Friday and went home early, so let's see what other evidence we have.
4 hour EURUSD chart
Dropping down to the 1 hour time frame, we can get a little better idea of what might be happening. We can now draw a bearish trend line, and wait to see it price will touch it a third time. Also, note the RSI indicator is also showing lack of bullish momentum. If we were feeling brave, we could possibly place a trade below this recent price action at 1.3100 and hope it drops to the bullish trend line. However the trend is strong, so it's risky.
1 hour EURUSD chart
For a bit of confirmation on what might be happening, let's look at the AUDUSD, which is often (but not always) correlated with EURUSD. Here we can see price hit a major resistance level, made two big wicks, and how now dropped to the bullish trend line. How exciting!
4 hour AUDUSD chart
Below is the daily USDCAD chart. Usually (but not always) this pair will be inversely correlated to EURUSD and often also AUDUSD, depending if resources are rallying or if markets in general are feeling frisky. We can see a nice long wick on the daily candle here, and price has started moving back up. Things are moving uniformly together across the pairs, at least.
Daily USDCAD chart
Lastly, here's a cherry picked 15 minute EURUSD chart with Ichimoku Kinko Hyo plotted. Price has broken through the cloud to the downside. Sell! Right? Maybe. Look at the size of the candles though - not very big. It shows there isn't much momentum going on yet.
15 minute EURUSD chart
So, if we felt adventerous we could place a small bearish EURUSD trade with a stoploss above Fridays high. But personally, I'd wait to see what these other pairs are doing, and wait for momentum to pick up. If AUDUSD broke through it's bullish trend line, I'd be more willing to place my EURUSD bearish trade. Otherwise I'd be looking to go long if price either moved above Fridays high or made it all the way back down to it's bullish trend line.
If we take fundamentals into account as well, selling EURUSD at this time probably isn't recommended, except perhaps on the smaller time frames.
