The classic shape of a trend is a directional move followed by a period of consolidation. It’s a lot like we see here:
Euro daily with 100-dma (red), 200-dma (orange)
The range in EUR/USD since August 1 is 1.3333 to 1.3445 — 112 pips. All of that was in the first 4 trading days of the month.
If you think the euro is going lower the period of consolidation is good news, it shakes out the fast money and gives everyone a chance to take stock. But the direction doesn’t matter because what the pair needs next is a trigger to break the range, whether it’s Draghi with a fresh dovish comment on soft European growth or Yellen offering a new angle at Jackson Hall doesn’t necessarily matter. If/when the pair breaks, go with it. If it breaks higher, be quick to take a profit; if it’s lower, hang on for another ride lower.
