EUR/USD Daily Price Forecast – 8th January 2025

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Trade Summary:

EURUSD
Buy Stop @ 1.03575
TP @ 1.03946
SL @ 1.03087

Technical Analysis of EUR/USD (H4 Chart)

Overview

The chart represents a 4-hour timeframe for the EUR/USD currency pair, with a clear setup for a potential long trade. The analysis is based on momentum indicators, candlestick patterns, and key moving averages. The trade setup includes a Buy Stop at 1.03575, a Take Profit (TP) at 1.03946, and a Stop Loss (SL) at 1.03087.

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Key Observations

• Trend Analysis:

  • The price is currently trading below the 200-period Moving Average (blue line), indicating a broader bearish trend.

  • However, the price is attempting to break above the 50-period Moving Average (red line) and the 20-period Moving Average (green line), signaling a potential short-term bullish momentum.

• Support and Resistance Levels:

  • Support: The price has found support near the 1.03087 level, which aligns with the Stop Loss placement.

  • Resistance: The Take Profit level at 1.03946 corresponds to a previous resistance zone, making it a logical target for the trade.

• Momentum Confirmation:

  • The chart notes that momentum is confirming the trade, with the price nearing a round level (1.03600). This suggests that the market is gaining strength for a potential upward move.

  • The candlestick confirmation further validates the bullish sentiment.

• Candlestick Patterns:

  • The recent candlesticks show a rejection of lower prices, with wicks forming near the support level. This indicates buying pressure and supports the bullish trade setup.

• Trade Setup:

  • Buy Stop at 1.03575: This entry point is slightly above the current price, ensuring confirmation of upward momentum before entering the trade.

  • Take Profit at 1.03946: The target is set just below a key resistance level, allowing for a realistic profit-taking zone.

  • Stop Loss at 1.03087: The SL is placed below the recent support level, providing a safe buffer against potential downside risks.

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Risk-Reward Ratio

• The distance between the entry (1.03575) and the TP (1.03946) is 37.1 pips, while the distance between the entry and the SL (1.03087) is 48.8 pips.

• This results in a risk-reward ratio of approximately 1:0.76, which is slightly unfavorable. However, the trade relies on strong momentum and candlestick confirmation to justify the risk.

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Conclusion

The EUR/USD pair is showing signs of a potential short-term bullish reversal within a broader bearish trend. The trade setup is well-aligned with technical indicators, momentum, and candlestick patterns. However, traders should monitor the price action closely, especially near the 1.03600 level, to ensure the breakout is sustained.

Recommendation: Proceed with the trade setup but consider adjusting the Stop Loss or Take Profit levels to improve the risk-reward ratio if market conditions change.

Recommended Lot Size

Trading is all about statistics.

While we can experience winning streaks, we can also suffer from losing streaks.

As such, we should always size each trade to withstand losing streaks (if any).

It's widely recommended that you should not risk more than 2% of your capital for each trade.

We believe it's easier to control your lot size by limiting your lot sizing to 0.01 for every $500 in your account.

So if you have $5000, then risk no more than 0.10 lot size per trade.

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If you spot a mistake especially when it comes to the price, please use common sense and check the chart.

We wish you good luck and good profit for this trade idea.

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