EURUSD—weaker and weaker

My short in the Euro (1.4003) that I blogged about yesterday has behaved nicely. As of now, 7:57 AM EST and after the ECB announcement that they weren’t raising rates, it is 154 pips in profit. The remainder of my original short from 1.0474 is 225 pips in profit. I took some more profits from that trade at +205 pips. I can’t see that anyone thought ECB would raise rates but the pair may bounce around a bit during Trichet’s speech.

I was surprised the rally wasn’t stronger than it turned out to be—those Euro bulls usually don’t let their baby go down without a fight, after all. It only reached the 50% retracement level of the move down from the January 25 high of 1.4194 before falling again. However, the pair is weak. It has broken two daily uptrend lines from March 2009, the first one in December and the second one, less steeply drawn, earlier this month. I blogged several times about that second line—it formed the bottom of what I interpreted as a bear flag. The profit target from that bear flag is 133.35 although there are no guarantees it will reach that goal. Looking at the moves down, they look impulsive, in Elliott Wave speak and the correction has been shallow. In my most recent posts with my Elliott Wave count on this pair, I interpreted that we’re in a third wave. Third waves are moneymakers, broad and strong as Prechter and Frost write.

So far, this morning it has dipped to 1.3827 where it appears to be trying to base. This is close to the 1.3855 low it reached on Monday. Watch price action. If it fails here, it could drop sharply. Depending on how it bounces around during Trichet’s speech, I may add to my shorts on a rally.

Support:

1.3827 (today’s low)
1.3800/3833 (round number and July low)
1.3739 (top of EW 1 from March low and June ’09 low)
1.3684 (March ’09 prior resistance)

Resistance:

1.3855 (Monday’s low)
1.3975/4000/4026 (.382 retracement from 1/25 high, round number, and Wednesday high)
1.40655/65 (polarity and .618 retracement from 1/25 high)
1.4150/70/94 (prior resistance and Jan 25 high)

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.