EURUSD—interesting recovery

The drop down to 1.3698 from the 1.4159 is looking suspiciously like a three-wave correction. We won't really know until it moves briskly above the channel I've drawn on the three-hour chart below. That probably wouldn't happen today—the move today has been If so, I'd expect 1.3619/1.3587 to hold in another downside move which would keep it roughly within the downward channel. If you look at this channel on a daily chart, it looks suspiciously like a bull flag. Hmm. Where did that come from? Am I to resurrect my bat projections from over a week ago? Is 1.45 to 1.47 or so in the cards? Interesting and tantalizing questions. And not out of the realm of possibility.

More likely near term is that there will be a momentum failure in the 1.40 to 1.4159 price range and a move down. As I wrote above, if that move stays above 1.3587, so much the better for any upside movement. The next level of support would be 1.3500 and that one will have to hold for bullish hopes to continue. For now, I'll keep an eye on momentum on the shorter-term charts to see if a short is presenting itself. What you'd want to see is a close in RSI below 70 on the hourly chart and then some downward price action to follow closely on its heels—real downward action, none of this 50 pips down and hover business.

If it does break below the 1.3587—the bears will come out and they will be eyeing 1.2588. That's not today's price action.

Here's the three-hour 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.