The EUR/USD is about four months into a trading range. I suspect the recent range will continue throughout the summer before giving way to the next directional move.

During these periods of consolidation in the EUR/USD, which happen every year without fail, I like to use a swing trading approach to capture short-term moves. The EUR/USD is probably the single best pair to trade because of its small bid/ask spread. So, even though the EUR/USD isn't trending, it still can be used to generate some short-term trading profits.

Once a trading range is established, I simply look to buy near support and sell near resistance. This isn't much different than the approach I use in the Forex Point and Figure System.

In the EUR/USD, a trading range has been established over the last four months. Horizontal support is clearly at 1.5350, plus or minus 50 pips. Horizontal resistance is at 1.5800 and at 1.6000.

I like to wait at least 24 to 48 hours to enter a trade after the pair has reached its support or resistance. In other words, I want to see the EUR/USD pause at support or resistance before betting on a short-term reversal.

A simple oscillator, such as the Full Stochastics (5,3,3) can help you to spot reversals from support and resistance levels. The ideal set-ups are the following:

Longs -

1. EUR/USD is trading at or near horizontal support
2. Stochastics is at or below an oversold level (20); %K crosses above %D

Shorts -

1. EUR/USD is trading at or near horizontal resistance
2. Stochastics is at or above an overbought level (80); %K crosses below %D

If I'm long, I'll use the short entry point conditions to exit the trade. If I'm short, I'll use the long entry point conditions to exit the trade. I place stops on below support if going long and above resistance if going short. In this example, I'd use a 100 pip stop loss and target at least 250 to 300 pips in profit.

The point and figure charts aren't of much help during consolidations, other than to reinforce support and resistance levels.

On the EUR/USD chart below, you can see a few examples of long and short entry points based on horizontal support and resistance and Full Stochastics.

EUR/USD Daily Chart with Horizontal Support and Resistance, Point and Figure, and Stochastics