Wednesday, February 16, 2011

EURUSD—potential revesal

Euro is bouncing around a bit but while there's short-term bullish behavior, there's evidence that a bearish downward move will take place between 1.3590 to 1.3650. The .382 retracement and confluence are together at 1.3594. In addition, as I wrote yesterday, the upper boundary of the channel (which is contracting) and the 50% of the retracement of the move down are found between 1.3641 and 1.3644.

Besides that evidence, the hourly chart (not shown) indicates a potential butterfly bearish pattern. X begins the pattern at 1.3558; A is at 1.3432; B at 1.3550; and C is 1.3477. Point D would complete the pattern and should be between 1.3595 and 1.3637. As a result, I'll look to short in that general area but only if there are bearish indicators such as divergence or bearish candles.

The reason I'll want additional evidence is that Euro could get higher, possibly to 1.3769. There's an AB=CD pattern (marked below) on the three hour chart where AB (1.3862 to 1.3509) and CD (1.3744 to 1.3429) are approximately equal at 353 and 315 pips respectively. This is a bullish pattern and the target for it is between 1.3697 and 1.3769. These coincide almost perfectly with the .618 and the .786 retracement points.

Since, we could be at the beginning of a third wave down on the daily chart, I'd try a short here as well.

As I noted yesterday, this channel could also be a daily flag so close attention needs to be paid at its upper boundaries because the target for this is 1.4282. This isn't a possibility until the pair settles above 1.38. At that point, the bears would have to go back to their cave.

Here's the three-hour 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.


  1. Good analysis! Thanks for sharing.

    Doesn't look like it is going to go that high before going down.

    I bought EUR early this morning and got 31 pips gain before it started to turn down. I sold EUR subsequently at 1.3532.

  2. Well, the day isn't over yet and NorAm is just getting wound up so let's see. But it may not, especially with general dollar strengthening this morning.