Yesterday's price action resulted in a lower high (1.0135) and lower low (1.0009) than Friday. That was disappointing after four days of higher highs and higher lows. The low this morning was .9985.
Even with last week's bullish behavior, the pair still can't get above the 1.0257 high everyone keeps waiting for. Each time the pair approaches a high (1.0183, 1.0257, and 1.0200), there's a bearish candle pattern on the weekly chart (not shown). This pair continues to hit a low below parity each week even though it has managed to close above parity for each of the last three weeks.
A few characteristics stand out on the daily chart. First is the symmetrical triangle formation where point E has taken place. From the perspective of EW, this is bullish since triangles resolve in the same direction from which they were entered. In classical technical analysis, symmetrical triangles can be either a continuation or a reversal pattern. Whatever it is, they graphically show the struggle between buyers and sellers which becomes more intense over time. This increasing intensity causes the narrowing of the triangle and it represents doubt, uncertainty, and stalling. The time for it to resolve one way or the other is certainly approaching. 1.0180 is the upper boundary. There needs to be a sustained close above that for the resolution to be complete. Or a sustained close below the lower boundary of 1.0004 although below parity would be better.
Something else that stands out on the chart is the possibility of an ABC correction. There's also a potential topping pattern. As I've mentioned several times, these need a confirmation, first below .9804 and then .9537.
Finally, there's a confirmed uptrend in place. Much of the current price movement is in keeping with consolidation behavior and one can assume that uptrend will resume.
Still, there's negative short-term behavior so scalping is possible. The pair is below the weekly pivot price and on shorter-term charts there is some bearish behavior. However, the best approach for inexperienced traders is to stay out for now.
Resistance is at 1.0158/80 (last week's high, trend line), 1.0257, and 1.0300.
Support is at .9985, .9944, .9916, and .9896/88.
Here's the daily chart:
© Dianne Fecteau, 2011. 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.