EURUSD—new high

Euro has touched 1.4421 this morning. On the way, it broke the downtrend line on the weekly chart.

This move up has triggered many stops. This covering of short positions helps price rise. Now that price has topped 1.44, a big psychological number, there should be some reaction.

Were there price targets in this range? Yes. As I pointed out in my comment on the daily chart earlier this week, I had targets up to 1.4366. Given that Euro closed at 1.4392 yesterday, one has to look at weekly targets. One of the closest is 1.4432. This is where the current C wave on the weekly chart would be equal to A. 1.4451 is .618 of the move from 1.6041 down to 1.1876. As a result, 1.4450/4500 should top before a reaction. Profit taking will also fuel a reaction. I wouldn't necessarily short the reaction except in very small time frames. With the current signals, higher probability trades are those that buy dips. It is very possible that Euro is heading towards the top of the upward sloping rectangle, around 1.5150.

What about my Elliott count on the weekly chart below that implies this is wave 2 of (3)? Am I daffy? I hope not.  While I take it seriously when a pair breaks a major trend line, it's not my only piece of evidence. I don't have good reason yet to change my count. That count is a result of price activity from July 2008 to the present, almost 33 months. The current upward push from 1.1876 took place over the last nine months, about 28% of the total time.

I would like to see the pair retest the trend line, perhaps dip slightly below, and then reverse upward again to gain confidence in buying a large position.

Support for a pullback is at 1.4389, 1.4350/20, 1.4280/43, 1.4152 (strong) and 1.4000.

Here's the weekly 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.