EURUSD—rally

In a move that has surprised some, Euro rallied strongly the last couple of days and has reached a high of 1.3109 today. Here it's running into resistance as there are several barriers to it moving higher. This does not mean it can't overcome them. What it means is that probability is on or moving to the side of new short positions but that tight stops are mandatory.

On the weekly chart below you can see it has pushed up to its downtrend line in what looks like a corrective three-wave move. The downtrend line is drawn from the January high of 1.4581. A .382 fib retracement of the move down from 1.5144 to 1.1892 comes in at 1.3134 so this offers resistance as well. An uptrend line from the early June low also comes in around this level so the pair could be retesting that line as resistance.

However, looking at the other side—the potential for more upside—one can see that 50% of the move down from that 1.4581 high is 1.3229. The prior high of 1.3335 is now under threat but it is also a potential resistance level (in fact it would be a very good one). You can also make a case for a wave count of this being wave C (the 1.3335 high being the end of wave A and the 1.2588 being the end of wave B. If that is a true interpretation then this C wave could carry as high 1.35. This interpretation needs a definitive close above 1.32.

Bottom line is that if one does short then one has to be ready to reverse or try again at the higher levels.

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.