Because of contradictory signals in the shorter time frame, I decided to pull back again to the monthly chart.
February's low so far of 1.3429 is significantly higher than January's low of 1.2874. The high of 1.3862 this month (which occurred the first of the month) is higher than January's high of 1.3759. Higher high and higher low has the month on track to be up from last month which says, clearly, that the bulls have control.
This does not make the monthly chart bullish. It is not a trend change from down to up because there have been two lower highs that touched and confirmed the downtrend line (1.6041 and 1.5144) and two lower lows (1.2329 and 1.1892). The monthly chart is bearish no matter how you look at it. Unless you're a died-in-the-wool Euro bull who sees this as a temporary correction off the high of 1.6041. Good luck with that.
What's not clear on the monthly chart is whether the third high is really in yet. 1.4282 didn't quite make it to the downtrend line which is bearish. However, with the bullish activity so far this month, it's possible the pair could continue up and this would reinstate earlier projections I had for the pair at the end of last year that reached into the 1.43 area. This would be consistent with both the longer-term downtrend line from July '08 and the shorter monthly bear flag up. It's too soon to spend time dwelling on this—there are significant resistance points along the way—but it's something to stay cognizant of, especially with all the bearish sentiment floating about. Bottom line: keep stops on short positions tight.
Obviously, on any chart, the near-term resistance to overcome is 1.3862. On much shorter-term charts, the resistance is 1.3627 which it tapped last evening.
Here's the monthly 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.
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