Even though this pair is in a vicious, long-term downtrend, there's a potential buy on the daily chart as it nears the bottom of a wedge (85.57). Because wedge lines are often steep, it's difficult to maintain the angle. This hints there might be a rally of sorts as it bounces off the bottom line. It's sometimes said that the "safest" way to trade a wage is to wait for a break outside the boundary lines. I'm not completely in agreement with this but trading style and risk management are things each trader needs to ascertain for themselves. Sometimes after a break, prices tend to dither about before making a sustained move.
Note, too, the positive divergence on the daily chart. There's also positive divergence on the three- and one-hour charts. The low of November '09 was 84.82. The pair is currently offered at 85.82. If I go long I'd want to start taking partial profits fairly quickly and in any case by the time price reached 86.50 or so, perhaps even 86. There's additional resistance at 87.05, 87.45, and 87.70. That's a strong zone. If the pair breaks below the line, then support is at 85.50, 85.00, and 84.82 (Nov. '09 low). Below that is a 1995 low of 79.70 with no real interim support before it. Obviously one would want to be short.
Here's the daily 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.