I'm still short from Friday's .8509 and the high since then is .8514. Last week was the third week in a row with lower highs and lower lows and the week ended with a long bearish candle. On the monthly chart with the bearish November to date, there may be an evening star forming off the high of .8941. It's bearish potential is strengthened by this high being almost right on the 50% resistance line of the move from 9805 to 8067. Currently, the pair is retesting the downward channel from which it fell below. There's a confirmed head and shoulders pattern on the daily chart with a price target of .8363 (See last week's blog chart). An additional price target of .8190 comes from a shorter-term point and figure chart.
Offsetting all this is that the decline has found support at .8450, almost spot on the .628 retracement of 8143/8941 and a price support. On the monthly chart below, despite the potential evening start, one can make the case for a three-wave corrective structure which would mean another move up at some point, possibly to parity. However, I think a deeper pullback is more likely before that would happen based on the shorter-term signals.
Here's the monthly chart. My trade doesn't show because I use a different charting package for long term 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.