This morning the Eurozone released their Markit Composite and Services PMI’s which both came out positive. Comparing the latest release to the previous month’s data, we can see that there was a moderate growth in activity with Germany proving to be the best performing country during August.
Looking at this pair on the daily time frame above, we can see that there was a reversal off of the 78.6 printing a morning star pattern which went on to create a higher high and also took price just shy of the first take profit area. Following the new high created, there’s been a pullback into the perfect area for long positions. As we can see, the take profit areas line up nicely with the key level of 128.000.
On the 4-hour time frame, we can see how the highlighted region has acted as a strong support for price where we’ve just seen price wick into followed by the current candle engulfing the previous candle which looks like a reversal on the off of the 78.6 as well.
On the hourly chart, I would either wait for price to pull back to the highlighted region for the best possible entry but if price goes on to break the structure on this time frame and create a new high, it would create the opportunity to scale in an entry which is shown above with the fib and the arrows drawn. I would expect price to find some resistance around the psychological round number of 126.000 and if we have a pull back into the 125.600 region, we’d see price create an inverse head and shoulder as well as a potential reversal off of the 61.8.
Remember to always follow your trading plan and always use the correct risk management when entering trades. Subscribe below to receive these blogs sent directly to your e-mail.