There's much of interest on the daily chart.
First, a long-term consolidation period within a symmetrical triangle began late last summer. There are various ways to define the touching points but one way is with A ending at .8335 (606 pips), B ending at .8649 (314 pips) and C ending at .8356. This is somewhat speculative but because there's a nice 1,2,3 off of B, I like it.
Another feature of interest is the potential inverted head and shoulders pattern. This won't be confirmed until a break above .8672. If it is confirmed, the price target is .9059. This is in line with a target I have on my daily point and figure chart of .9100. The high this past October was .8941. Just beneath here is a confluence zone.
Finally, of course, there is this morning's push over the recent .8593 high. So far, the price high has only been at the round number of .8600 so this is resistance. It's also just above the daily downtrend line.
The monthly chart (not shown) shows the pair in a triangle with the C leg potentially in progress and a possible target of .8271. The upside of the monthly triangle is .8723. The pair went into this consolidation triangle during an uptrend so, from an Elliott Wave perspective, ultimately one would expect it to break upward.
Bottom line is that there is bullishness in this pair, especially longer term. However, there is short-term pressure. If the pair can cleanly close above the daily triangle today, above .8600, then the short-term bias changes to bullish as well. So how would I trade it? I'd wait for a retracement, possibly back to retest the triangle around .8560. However, because this .8600 is resistance, a stop and reverse would be appropriate if the pair closes below the triangle and better, below .8462.
Support is at .8462, .8356, .8265 and .8068. Resistance is at .8672 for now. I'll update it for next week if the weekly close is above .8600.
Since each pip of this pair is worth 1.63 USD, one might want to establish a smaller position than normal.
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.