My long from 1.3308 profit-stopped out at 1.3501 in the current dip down for +193 pips.
The pair currently appears to be looking for some support in the 1.34 area but with the drop below some key moving averages the pair is looking weak. However, I'd wait for it to drop below 1.3320 before shorting and even then, I'd watch price and momentum carefully. As I wrote last week, the entire 1.34 area is strong support for this week with fibo, confluence, and polarity (prices that have served as both support and resistance). In addition, the uptrend line on the weekly chart from the secondary low last year is coming in just above 1.3420. If it cleanly closes below that area, selling makes sense with the idea that it could drop back to prior lows and continue on to the original price targets of 1.29 to 1.30 or perhaps somewhat lower. However, it's not entirely clearr the pair is out of a more complex correction that could still result in moving above the 1.3692 high of last week. If you look at the weekly chart, you see a pair that's trying like crazy to base (look at all the dojis).
So is it worth a long? Yes, you could do this with a tight stop but be aware of the risk here. There's lots of downward pressure on this pair and the fact that volcanic ash is disrupting air travel in Europe isn't helping as it feeds into some generalized fear factors.
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.