In the long term the price has been consolidating since the high of 2008 at 1.60472 with no real indication of a strong prominent long term trend. In the weekly chart you can clearly see that there has been lower highs at 1.60472, 1.51465, and 1.49319. And there has been a lower low at 1.18797. This gives this consolidation a bearish bias.
In the medium term there’s a breakout to the downside at 1.26192 major support level and is now acting as resistance.
To the downside I’m looking for a break below 1.18797
This is a major long term low which makes it a major psychological support level. It has stalled the currency in the long term and changed the trend in the medium term. This shows that a lot of market participants are putting buy orders in at that level and a break below this level would indicate that there is now enough sellers in the market to break below a level where there was once an abundance of buyers.
This will break the long term consolidation pattern and make way too new lows. I expect a lot of support at this area and a rejection is highly likely.
The bearish bias is evident due to the medium term swing point lower lows and lower highs (red arrows). Which indicates the bears winning the battle since there isn’t enough buying pressure in the medium term to make a new medium term high.
It’s in line with the bearish bias of the consolidation pattern as described in the first paragraph of this post.
It’s in line with the medium term bearish trend which started at 1.49319.
All the momentum will be to the downside. The MACD and moving averages will all be nicely pointing down.
Should pave the way to 1.08036.
Strong flag formation as shown by the blue channel.
Flag formations are continuation patterns by nature and since the previous medium term trend is down, this could set us up for a down trade.
The high of the flag formation has found resistance at a level that was once support. This shows how there isn’t enough buying pressure to push past this level.
The last bar is an inside bar, which is a bearish short term trend reversal pattern. Since the previous short term move was up, this shows a reversal to the downside in the short term.
MA, and MACD are to the downside which shows momentum is more bias to the downside.
A breakout to the downside of the support line will be an entry point.
Flag formations need an increase in volume upon breakout. This will be my entry point.
Last edited by DanielFxTradingCircle; 06-25-2012 at 05:00 PM.
Daniel I agree Euro looks like it should go down once it broke bottom trend, however on the weekly larger picture euro may try for the overall top trendline. The weekly bearish candle is a huge deterrent for a rise, but todays daily candle was a kicker - hard to say which way.
I thought after the Fed got out of the way last week, the trend for the Euro/$ down would continue. I'll be just a tad cautious though because traders were heavily Short and there was a lot of covering. The Eur/$ is notorious for waffling around, especially during the summer and after the big break out a few weeks ago. . I've been Short since the mid 1.26's but will not go all in until the floor of the 1.2400's gets taken out.