Analysis 06/20/2012
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 sellers orders in at that level and a break above this level would indicate that there is now enough buyers in the market to break above a level where there was once an abundance of sellers.
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.
Flag formation
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.
