EUR/USD is consolidating with resistance above and support below.  The prevailing trend on the daily chart is up, but the medium term trend on the 4 hour chart is down, so I'm looking for a breakout in either direction and am straddling the pair with a buy order above the current price and a sell order below.

Check out the daily and 4 hour charts below...

Daily Chart:

4 Hour Chart:

Breakout Possibilities

We've got a down trendline on the 4 hour chart that has been tested several times in the past few days and held.  A break above this line would mean a resumption of the prevailing trend on the daily chart.

However, we've also got an area of support around 1.3830 that has been tested several times in the past.  Note that this is more of an area of support, rather than a specific level, as we've seen the pair react multiple times to each of the three horizontal dotted lines.  A break below this area would mean a continuation of the medium term trend.

I think a move that breaks in either direction could have some legs.

• Long Entry:  1.3996
• Initial Stoploss:  1.3799

• Short Entry:  1.3799
• Initial Stoploss:  1.3938

Update 1/5/09 6:33 AM:  The Euro broke down strongly through support overnight, so I'm currently short.  Since it's moved 1R in my direction, I've closed half of my position and move my stop on the other half to breakeven.  It's nice to start of the New Year with a win!