The Euro has reached a high of 1.4266 so far this morning, thus clearly breaking above the Oct. 15th high of 1.4159 and my internal resistance line on my point and figure charts I've written about previously this week. The Fed is good to the Euro—"Hell yes, we'll dilute our dollar with more QE." But the important thing is that this move was strongly hinted at in the charts before the Fed announcement. See my Monday analysis.
I'm still long with two positions from 1.3883/85 and am close to closing the first one.
With the high of 1.4266, the Euro has entered into a general resistance zone outlined with the two horizontal blue lines on the daily chart below. Looking left, one can see an area of consolidation back in the late December to mid-January time frame. The top of that is the January high of 1.4579 of which I've previously written. The downtrend line on the monthly chart (not shown) comes in around 1.4500. 1.4450 is .618 of the entire move down from 2008. 1.4448 is the price target (minimum) for the triangle it broke above.
Once it gets beyond this zone—better stated as if it gets beyond this zone—I'll start looking at some higher targets such as the bat pattern I proposed in early October, or the extension of wave c to 1.618 that of a, or, how tantalizing, the possible bull flag it broke above. I have traced the bull flagpole and potential target on the chart below with a blue dotted line. All that, though, as of today, is pie in the sky. Let's not forget this currency is as crappy as any other—that is there is not strong fundamental strength to carry it over the long term although I imagine ECB is throwing money at it.
Should it begin to falter, look for support at 1.4214, 1.4159, 1.4080, 1.4048 and 1.3992 which would just about bring it back to a retest of the bull flag. If it then rallied from there I'd definitely add to longs. Is there a way to get in now if you're not already in? One could buy with a tight stop at 1.4200 or thereabouts with a potential eye on 1.45. However, it would need a very tight stop. Another possibility it to buy the breakout above 1.4266. Again, tight stops are mandatory.
Here's the daily chart. The only real negative sign is negative divergence with RSI.
© 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.
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