EUR/USD is still working off the excesses of a bearish butterfly with resistance just below 1.3000. EUR/USD traded to a 1.2480 low after failing at pattern resistance, and has since moved back higher to a 1.2860 area resistance, which happens to be the .786 retracement. The .786 retracement is so powerful because it's not only the deepest retracement, but it's also right next to .618 retracement. And traders who were short the market will likely place their stops just on the other side of .618, which winds up around .786 retracement. When enough stops have been taken out is usually when price reverses trend to move lower, just  as the stopped traders expected. So if this move accomplished its purpose of running stops just above .618 at 1.2785, then we could be headed for EUR/USD selling.

The one problem is we could be in the early stages o f 1.2700-1.2860 range. So let's wait for 1.2700 to break targeting the 1.272 Fib extension at 1.2660 on a third of our position, and the other two thirds at 1.2606, or 1.618 Fib Ext. The ultimate target is setting up for a 100-point winner so the intial stop risk cannot be more than 50 points.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.