There are not a lot of clues on longer-term or shorter-term charts as to which way it will break but it is worth keeping in mind that the pair is in a long-term uptrend, not only from the lows of 2008 but from 2001 and that momentum, as measured by RSI on longer-term charts, is positive (over 50 for the most part). One can make a case for a bull flag forming on the monthly chart and a move up from that flag (currently the upper flag boundary is .9208 which is where the pair is) would be huge, blowing past parity with the USD. However, that move would take time, most likely unfolding over the next year. For short term traders it's of little use unless you want to make sure that all trades you take are in the direction of the underlying trend. That's not a bad idea but the pair is definitely in a corrective, sideways period so it needs to stay above .8578 for the prevailing trend to be seen as up. If the pair cleanly drops from its narrow range, the bottom of the possible flag at .8384 is not out of the question and that would muddy the picture somewhat. Before that, however, it would need to drop below .8917, the weekly uptrend line from .8578.
The best approach right now seems to be to wait until it cleanly breaks .9219 or falters.
Here's the weekly 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.
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