EURUSD has continued to climb, reaching a high of 1.3848 so far this morning. Eyes are on the the February 1st high of 1.3862. It's too close to not get there so let's look at some resistance levels.
1.3881 is the first one. It's .618 of the entire move from 1.5144 down to 1.1892 and also the target of the daily flagpole that formed between the 10th and 16th of January. It's also the location of a speedline from from the 1.2874 low and obviously close to the prior high but just enough beyond it to lure in long breakout buyers.
The second possible resistance is a zone between 1.3993 and 1.4042. This is comprised of an uptrend line from the 10th of January and the downtrend line from November 2009. There's also a speed line coming in here from the 1.1902 low.
Finally, if you assume an upward march the next few weeks, Euro will hit the downtrend line from the 1.6041, 2008 high around 1.4317. If you further assume that the price action on the weekly chart is an ABC wave with the C wave currently in progress, then .618 of the A wave would bring price to 1.4347.
So that's three resistance levels, all of which will probably engender some selling so bulls can get in on a retracement and bears can suspect it's the beginning of a wave five down on the weekly chart. An interesting point if it is wave five is that it cannot be longer than 3,276 pips because if it was it would exceed the length of wave three. Since wave one was 3,712 pips and the Elliott hard and fast rule is that wave three cannot be the shortest, you can do some interesting calculations with the golden section to gather probabilities of where the current weekly wave four is going to end. I'll let you do them if you're interested rather than just provide them.
By the way, if it doesn't make it past 1.3862/81 and significant selling comes in, it's bearish. The pair stalled below 1.3862 last week and didn't manage to close over 1.38 which the bulls would have preferred to see. This would most likely result in a failure swing for RSI on the hourly chart.
Support is at 1.3705, 1.3685 (fib confluence), 1.3640, 1.3594, 1.3524, and 1.3429, the low for February.
© 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.
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