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During the previous week, we have watched the EUR/USD roll-over from a high of 1.3785 to a lower low of 1.3198. This move has taken out an important swing low near the 1.3445 area and has sustained prices below this level ever since. This price action confirms a change in the larger time-frame trend. From this point forward, we will look to identify swing high resistance levels and short this pair until the trend and/or momentum changes. Of course in order to reach resistances worth shorting, the EUR/USD will have to bounce. We will not attempt to buy these bounces. Experience has taught that it is much better to wait for a good resistance level and trade with the overall trend on larger time-frames. This week, the levels we will be watching for are the 1.3350 area resistance and the 1.3400 – 1.3430 area resistance. If price bounces beyond these levels with ease, then we will have to re-evaluate once again. Until that condition is met, we will remain bearish and anticipate price behavior changes at these predefined levels, measure our risk, and attempt to establish short positions.

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During the previous week, the EUR/USD pair broke an important support at 1.3600 to 1.3550 area and pushed to the 1.3450 area low. On the bigger picture, this can be the beginning of an overall trend change, from bullish to bearish. At the same time, we need to consider this new low area of 1.3450 is much higher than the previous significant lows at the 1.2550 area which were made in August of this year. So overall this pair can still be bullish unless of course the 1.3450 area gets broken to the bear side. This level is now the most recent swing low and can determine our overall outlook for this pair. If EUR/USD trades below and sustains these lower levels, we will consider swing trade shorts from resistance levels only. So while the over all trend is now in question, the current momentum as seen on smaller time-frames is bullish. Watch for support at the 1.3583 area. As long as price can hold above this area, look for EUR/USD to work its way back to 1.3750 – 1.3950 area this week. If it continues to make higher lows and pushes its way back up through the trading range, then it will be proving that the overall trend is still bullish and we will focus on buying any pullbacks to significant support levels.

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The previous week has seen the EUR/USD go from a break-out of new larger-time frame highs to a pullback below the overall range support levels. This is a noted increase in volatility. When observing a larger time-frame chart, you can see the appearance of a broadening formation. This is an uncommon classic chart pattern normally associated with market turning points. When you see something like this, do not immediately assume that this is the top of the EUR/USD. As a short-term trader it is important to always weigh new information and keep a very open mind as the market unfolds. So the broadening formation can be considered a “heads up” or a warning that this may be a major market turning point. We need to see if price breaks and sustains levels below 1.3550. If it can, then further weakness is implied and I would then consider shorting swing high resistances instead of buying swing low supports. On the other-hand, when considering long positions, price needs to hold above 1.3550 and prove that it is not going any lower. At the present time, price is holding this area and is showing signs of slowing bearish momentum. Consider 1.3590 – 1.3550 an area to measure your risk from in terms of swing trade longs. The reason behind going long is that the price is at the low of a 300 pip range and is having a hard time going significantly lower. A return to the middle of the range offers profit potential of at least 200 pips at this point. Also keep in mind that the “short only” scenario described earlier has not been confirmed by the price action and this means that overall range-bound conditions are still present in a market that is maintaining a bullish trend in the bigger picture.

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In the previous week, EUR/USD finally broke the 250 pip trading range to make a new high of 1.4282. This move confirms that the overall trend on the bigger picture is still bullish. As I have said in previous analyses, do not short resistances and expect large moves to the bear side. In these conditions resistances have a better chance of breaking. With this new move, we have new levels to anticipate and observe. 1.4282 is the overall resistance, and our new support is the 1.4100 to 1.4000 area. This area was a previous range resistance which has been touched multiple times. In this 100 pip area, you want to watch for signs of reversal. Let price spend time in this area and once the price proves that there is support, look to get long. This requires patience when waiting for the right signs. Candlesticks and pivot levels can be used here to anticipate where the price will find support. Once reached, observe the hesitation and the amount of time it is spending in the area. If price falls below the 1.4000 level and does not recover within a few candles on this time frame, then stay away from getting long and wait for it to settle at its new level. As far as shorts are concerned, avoid any swing trade shorts until it either makes a clear lower high which means it needs to retest the 1.4200 levels first, or it breaks below the 1.3690 range support. There will be plenty of minor support and resistance levels along the way, and many scalping opportunities, make sure you know how to separate the two strategies.

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