On the three-hour chart, the pair dropped out of another correction on Monday. This bear flag is very much in line with the larger flag that formed on the daily chart. It’s a repetitive drop and rest pattern. If you’re into Elliott Wave (EW) theory, you know a flag is a correction before the next move in the trend direction.
I’m surprised that there hasn’t been a better bounce. Maybe later, in anticipation of what I believe is a non-event but the market doesn’t—the FOMC decision. If the pair closes below the doji’s low (1.4022) on the three-hour chart, things look grim indeed. The pair is also hovering above a 50% retracement from April lows to the November high. The reason I believe April lows are significant is because of the four consecutive days where lows bottomed at 1.2885/99. A break below this 50% level (1.4013), along with the flag targets and confluence zones, could result in seeing 138/139 rather quickly.
Support is at:
1.0422 (today’s low)
1.4013 (50% retracement from April ’09 lows)
1.3973
1.3888
1.3500 (pass the champagne for those with short positions)
Resistance is at:
1.4085/97
1.4111 (yesterday’s high)
1.4150/70
1.4211
1.4315 (daily bear flag line)
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.
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