EURUSD—correcting for now

My short still stands from 1.4325 although there’s a bit of a correction going on.

Euro has climbed as high as 1.4194 so far this morning so it made it through the 1.4550/70 resistance area. Next resistance levels are 1.4215/20, 1.4217 (the low of the daily bear flag and near a Fib correction), and then on up to 1.4285/90, and 1.4325/40. 1.4325 is the current bottom of the upward sloping bear flag and 1.4334 and 1.4340 were June 2009 highs so resistance there would be fierce. If the Euro managed to break through that, then Euro bulls would be making like Pamplona. One could make a case for an alternative daily Elliott Wave count that would have the move down from 1.5141 to the low of 1.4029 be a zigzag correction but I do not think that makes sense given the overall counts on several time frames. A close above 1.5141 would cause me to change my belief.

More likely, it seems to me, is that it will head down again because price objectives are still unmet from the daily bear flag and because of overall weakness. If it does so, then likely targets are 1.3833 and 1.3748. A close below the 1.4029 would support that argument.

What do you do if you have no position right now? The most conservative action would be to take no action and let the pair sort itself out over the next few hours into late morning EST. It will become clearer. You could also short at any of the resistance levels with very tight stops if you’re tending towards the bearish as I am. Looking at the 5-minute chart, Euro is tracing out what could be a Head and Shoulders formation. A break below 1.4177 would validate it and I may add to my short there. Remember, though, this is only a five-minute 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.