The daily chart has quite a bit of interest.
First, there's a bull flag which I outlined in blue. The target for this flag is around 1.4282 depending on where it breaks out. This is in line with a monthly downtrend line which should give any Euro bear reason to pause and at least consider the possibility. Euro must settle above 1.38 for this to be realistic.
There's also a smaller bear flag that I outlined in dark grey. The top of this is about 1.3642. As I've blogged this week, this is also a 50% retracement of the move down. As I also blogged yesterday, I expected the pair to find significant resistance at 1.3617. Euro edged above that last evening to 1.3627. I'm not thrilled with it edging above—it was good resistance and it shows the bulls are in there. It did trigger my short sell order at 1.3619 which I've obviously set to breakeven.
The lower boundary of this bear flag is about 1.35. If that holds, then Euro will try another upward breakout. If it doesn't hold then shorts can expect a drop to around 1.3069 which is close to the psychological support of 1.30. However, price support of 1.3429 and some significant fibo support around 1.3368 is in the way of it getting there.
RSI is nudging its uptrend line and a drop below, along with a drop below the blue, price uptrend line will be bearish.
Bottom line here is that I'm obviously bearish but there's enough conflicting information to suggest that the price top might not be in. Keep stops tight if short. If you haven't entered, be careful when choosing an entry.
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.