Wednesday, May 19, 2010

EURUSD—rap stars and supermodels don’t want Euros now

Less than two years ago the rap stars and the supermodels were bleating that they wanted to be paid in Euros. Let’s hope they got their wish. Yesterday’s rally was another good short as I blogged and the pair made a new low at 1.2144. This is almost on the 50% retracement of the all-time low of .8225 in 10/2000 to the all-time high of 1.6041 in 7/2008. This is if you look at the Euro alone and don’t go back to the German DM (which Euro obviously still is with help from the Vichy French—notice how anxious they were to help fellow members of the Eurozone which should be a minimum level of support for a shared currency. Just because USA states and counties hover on bankruptcy doesn’t mean we don’t bail them out. Or our banks for that matter—all for one and one for naught and all that, haha. But I digress). I’m back to having only one short in play from 1.2996. This is a small position as I’ve been taking profits.

Looking at the weekly chart (as opposed to the daily) suggests we’re in a wave three. If so, the Euro will fall below 1.1432. This is true because wave three can’t be the shortest wave. Wave one was from 1.6041 to the 1.2329 low for 3,712 pips. Wave two ended at the November high of 1.5144. Therefore, 1.5144 minus 3,712 pips is 1.1432 and it would go beyond that point. Of course, this is only viable if you believe in the Elliott Wave approach and it’s far from proven. Still, it’s one way of looking at it.

While shorting rallies continues to make sense, be careful, really careful. This is a volatile time and wide swings are possible. Also, I doubt very much the Euro will go straight down to 1.14. There will be a rally somewhere along the way. Everyone but everyone has jumped on this bandwagon so who is left to sell? There is positive divergence on the shorter-term charts.

Support is at 1.2144, 1.2127, 1.1826 (the Feb. ’06 low) and 1.1641. After that would be the 1.1432 mentioned above and lower. Who doesn’t believe parity is at least possible? Resistance is at 1.2229, 1.2373, 1.2444, 1.2536, 1.2574, 1.2739/60, 1.2803, 1.2880, 1.2963 (Fib confluence), 1.3038 and 1.3094 (Monday's high). Right. I don’t think we’ll see that level today and sellers will be coming out on rallies.

Here's the weekly chart (my trade doesn’t show because I use a different charting package for weekly and monthly charts):

© 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.

No comments:

Post a Comment