The Euro broke its down trendline last week and established a higher high.  The safest way to play a trendline breakout to wait for a pullback, and that's exactly what I'm doing.  The pair has pulled back nicely, and if I see a bullish candle or two in the near future, I think I'll jump on board and see what happens.  But for now, I'm just watching and waiting.  Hopefully, it won't decide to take off while I'm asleep tonight.

Below's the 4 hour chart of EUR/USD.

EUR/USD made it clear today, in no uncertain terms, that its downtrend is over.  Observers more astute than myself may have stuck a fork in the Euro downtrend several days prior to today, but I've been waiting for a key piece of evidence - a trendline break.

The pair broke the down trendline starting with the high on 7/15/08 and retested on 9/22/08 with vigor today, as it soared through it by almost 300 pips.  This, coupled with the fact that the pair has made a higher high and a higher low, leaves me with no reason to maintain a short bias any longer.

So what does this mean for my EUR/USD trading?  Well, I'll be waiting for a pullback and looking for long opportunities, as long as there remains evidence that we are now in an uptrend (i.e., higher highs and higher lows).  Of course, there's always a possibility that the market will move sideways for awhile.

It's been a quiet trading week for me, as most of the currency pairs I watch have been retracing back in the opposite direction of their predominant trends.  I welcome times like these, though, because even though I don't have any trades on, a pullback in a trend means that a good opportunity may be just around the corner.

EUR/USD may be presenting one such opportunity in the near future.  The overall trend on the daily chart is still down, so I've got a short bias, and we've had a few strong up days, with today finishing strongly down.

Zoom in to the 4 hour chart and see that after reaching its high for today around 1.3080, the Euro has fallen and tested an area of support around 1.2800 that was tested about a day earlier.  In fact, we could be seeing a head and shoulders pattern forming on the 4 hour chart.  We should know tomorrow whether the right shoulder will form and complete the pattern.

I'm going to enter a sell order at 1.2790.  If the Euro drops to this area and my sell order is filled, price will have broken through the neckline of the head and shoulders pattern, broken the support around 1.2800, and will be moving in my direction.  Hopefully if this happens, it will continue moving south and give me a win.  Of course, I could be wrong - we'll see what happens.

• Short Entry: 1.2790
• Initial Stoploss: 1.2930

AUD/USD has been trending strongly down on the daily chart.  The pair has been moving down quickly, but today we got a pullback.  Since the daily is showing a pullback, I'm looking at the 4 hour chart for a good entry.  We're approaching a trendline on the 4 hour chart, and the current candle has made a new low, so I'm going to look to enter if the low is broken.  My stoploss will be a few pips above the last candle's high.  I'll move my stop to break-even as soon as the trade moves 1R in my favor, and after that, I'll trail my stop above swing highs.

The important thing to remember is that I'm trading in the direction of the prevailing trend on the daily chart, so the odds are with me.  Also, if I should get stopped out before my trade moves into profit, I'll employ the Jacko's Anti-Hedge method (see prior post), to get back in the trade if the trend resumes.

• Sell Stop Entry - 0.6377
• Initial Stop Loss - 0.6535 (158 pips)