[fxbaja]

After a tight range through Asia, and wading past German and Euro Zone PMI, pair broke below the Asian Low of 1.2681 on 14:45.

Breakout candle was large/fast. Dip also seemed contrary to European data released at 14:00 (improved EU Consumer Confidence). One commentary was that EUR/USD is following the sagging U.S. stocks. Alternatively, we understand there was U.S. testimony scheduled for 14:30 (but rated as low-impact).

We'll leave speculation to fundamental traders.

A = 14:05 high 1.2714
B = 14:25 low 1.2675
C = 14:35 high 1.2690 (38.2% retrace of A-B)

Asian Low = 1.2681

FE 100 = 1.2650
FE 127 = 1.2639
FE 161.8 = 1.2626 (target)

Extension bounced off FE 100 to FE 61.8 as approaching Europe closing at this moment.

Entry SELL: 14:50 5-min candle opening price 1.2656. Reward potential = 26 pips after spread and cushion.

Stop-Loss Options:

- Just above Asian Low 1.2681 + spread and cushion = 1.2684. Risk = 28 pips

- Just above Point B 1.2675 + spread and cushion = 1.2679. Risk = 23 pips

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Due to fast breakout and loss of those pips, we could not place the stop-loss just above Point C, which was our preference.

Alternatively, some traders will have a worst-tolerance price to keep risk/reward to 1:1, and execute order prior to close of breakout candle. Edit: ...in order to place stop-loss just above Point C.