EURUSD—give me a break

Dancing about the critical 1.40 level, Euro has dipped its toe to 1.3934 overnight and snatched it back, where it managed a climb to 1.4052 before pulling back to its current 1.4004 (6:50 AM EST). Is it going to be one of those up/down fifty-pip days? Give me a break, preferably to 1.3888.

I have two short positions on the table. (My positions are represented by those little orange triangles on the chart—inverted if it’s a sell and upright if it’s a buy. This is where I’m different than most bloggers. I trade my money in a real account and show you the trade as I write about it). My first short is from 1.4325 (329 pips profit currently) and the second, from yesterday, was taken at 1.4074 (78 pips profit currently). I’ve taken some profits along the way on the first one—obviously both are profit-stopped.

The move below the 50% retracement level I wrote about yesterday (1.4013 found by taking the distance from the four consecutive lows in April 2009 to the November top), as well as the piercing of the 1.40 psychological level, were b-e-a-r-i-s-h. The three-hour chart shows a hammer candle in that dip and if the pair goes below that 1.3934 low, it might indeed touch 1.3888 today. Since I strongly doubt we’ll see the plunge to 1.35 that I think is possible, the next supports are at:

1.3934 (overnight low)
1.3914/19 (polarity)
1.3888
1.3800 (round number and support)

Targets continue past there down to 129.00 but let’s not think about those this minute.

Could it recover? Oh sure, and you could begin to argue that case with the bullish divergence that you see on the three-hour chart. It’s important to remember that pairs don’t fall straight down without rallies along the way, but if this is the wave three I’ve been blogging about, the fall will be steep and the rallies will be weak. Resistance is at:

1.4052 (today’s high so far)
1.4085/87
1.4150/70/94
1.4211

Here’s the three-hour 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.