EURUSD—this dog can hunt

Good show, I’d say, in the Euro the last couple of days. I took some partial profits at +250 pips. Lot’s of braying all around about how the Euro is headed for the 1.30s after all the braying since the beginning of the year that the Euro was headed back to the 1.50s. Someday, maybe; not today.

The low this morning is 1.4044 so far (as of 5:00 AM EST). The last time it was this low was last August 17 when the low was 1.4046. This is a support level so let’s see where it goes from here. The break from the bear flag was significant for several reasons. It broke the bottom of the flag, of course but it also broke an uptrend line from March and the 200 SMA. In short (and I hope you are), things don’t look good for the Euro.

If you’re not short, what can you do? You can wait for a rally because there will be one at some point. It could bounce back to the bottom of the prior range at 1.4178/4215. I doubt very much we’re going to see a V-shaped bottom with a pogo-stick bounce back up to 1.50 without looking back so I’m looking to add to my position on some sort of bounce. These are the likely resistance levels:

1.4215
1.4150/70
1.4105


Likely support levels are:

1.4015
1.3982
1.3885
1.3802

How far could the pair drop? One price target is roughly the length of the flagpole from the breakout point. In this case, that means down to 1.35 or so. I have other targets that go down to a low of 1.3370. There is another uptrend line coming in from the lows of late 2008 that currently is at 1.2767. Gulp or Hooah depending on which side of the fence you stand.

Here’s the daily chart:


© Dianne Fecteau, 2010. 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.