EURUSD—breaking below trend lines

You can see on the daily chart how Euro has broken two uptrend lines. It needs to hold on to this one. Dropping below 1.3830 will tarnish the bullish case. In Elliott Wave terms, a drop below 1.3775 (a prior 4th wave) would also communicate that things are no longer going well. Potential targets below that include 1.3750, 1.3630, 1.3500, and 1.3335. At that point, buyers will probably pile in unless the longer term downtrend has taken off in seriousness.

The weekly chart (not shown) had a spinning top last week which at best represents indecision and may be the signal the downtrend is resuming. That said, this correction is necessary. The pair may well make another push up. But it couldn't continue to do so at this steep angle of ascent and with the seriously overbought condition. Working its way lower would be a plus to the bulls as it would let it build energy for another upward push. My bias is still short but the fact is that the trend up has been strong. I will probably short if it breaks 1.3830/1.3775.

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.