EURUSD—what's next?

Did I not write early yesterday morning that buying the bounce was the right thing to do? That's why I went long at 1.3496 and booked +60 pips. Now the question, as always, is "what's next?"

Overall, the pair is still weak and there may be further declines. For now, though the picture isn't that clear. Support seems to be holding in the 1.3435/50 area. On the daily chart there is bullish divergence. On the other hand, there is a broadening formation on the hourly chart. These tend to deadly after a climb. In addition, it's at stiff resistance from an overhead long-term speed line and from the prior high. Finally, I don't like the way it's nibbling at its very short-term uptrend line.

For now, as of 7:41AM EST, I want to see if it can rally if it drops to the bottom of the broadening pattern. I may buy there (currently at 1.3586). A break above the pattern might be a buy as well but with very tight stops. If it drops out of the pattern, a short might be in the cards but with very tight stops.

Resistance is at 1.3681/92, 1.3726, 1.3788, 1.3839, and 1.4026. Support is at 1.3593/85, 1.3434/51, 1.3405*, 1.3300 and 1.3247.

Here's the hourly 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.