It would have been a good morning to go holiday shopping. Nothing much is happening with currencies in general.
Looking at the daily Euro chart, I’d say there’s more probability of it breaking down than up although the latter isn’t impossible, of course. The first thing to notice is the broadening pattern at the top. Some traders believe that the more horizontal the tops (and these are), the more likely it is to see prices break downward. Notice, too, that the third peak didn’t quite reach the top line of the formation. This is also bearish, hinting that price will break downward. Before it does so, it could try one more run to the top of the pattern (1.5230).
Another thing to look at is RSI. Notice here that the level to which RSI has dropped is lower than it has done since April. I’ve drawn a red support line under RSI to illustrate this. In addition, buyer interest hasn’t pushed RSI above 63% since October. This is quite different from the forays into overbought readings that were taking place throughout the year.
Finally, Euro has broken and closed below the daily uptrend line from April.
From these hints on this daily chart, it looks as though the Euro is weakening. That said, though, there could be another bounce up as I mentioned above. If it’s going to drop further, I’d love to see a close below 1.4627, the November 3 swing low (I’ve placed a red arrow there). If it does rally, I’d short again near the top of the broadening pattern and/or on candle weakness. For a rally, note the potential double bottom that’s forming. It requires a close above 1.4860, to confirm this. A close above the prior high of 1.5144 would be super-encouraging to bulls.
Here’s the daily chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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