Both a horizontal support line and a trend line from October 2008 provided support for this pair at its low of .8857. The bounce since then, though, has been less than robust at only 56 pips, less than the daily average true range (ATR). Wells Wilder developed the ATR based on an average of something he called true range over time. You can use it as a measure of volatility—i.e. it rises with high volatility. This pair can be sluggish and I usually avoid it for that reason. However, especially at key support or resistance points you can sometimes get off a nice trade.
On my Point and Figure (P&F) chart, I’m still projecting a rise to at least 9500 so it would appear to have been a good buy at support. I use P&F charts to get rid of some of the noise that normal charts display. They use only price and not time. A close much below .8820/50 on the daily and/or the three-hour chart would hint at more weakness. Above that, however, there’s still a chance that price could appreciate.
Here’s the daily candle chart:
© Dianne Fecteau, 2010. 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.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.