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Kathleen Brooks on Forex: A simple approach to trading foreign exchange using fundamental and technical analysis by Kathleen Brooks

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Trading examples

Case Study 1: EURUSD

Background

It is July 2012 and EURUSD has started to look extremely oversold.

Action from the ECB looks like a credible attempt to reduce credit risk in the currency bloc’s peripheral nations. Since the euro is sensitive to changes in perceived credit risk in the peripheral member states, the ECB’s proactive efforts combined with oversold signals in EURUSD make me want to go long.

There is also a technical signal that makes me think maybe the downtrend is starting to fizzle out (see Figure 4.1). In the first week of July there is a bullish harami pattern – a small positive candle comes after a long down candle. This suggests that the market tried to push the euro lower, however the bullish sentiment ...

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