May, 2011


8
May 11

EUR/USD: Support Is Near

EUR/USD: Major Support Area Near

This pair finally had the correction that was overdue. This kind of correction makes for a great deal of confusion. Keep in mind, the price is still trading above 1.4250 and 1.4000 which are very significant support levels. There are some bullish arguments left in this pair: Price has penetrated a significant bullish trend line on the 4 hour time framew which it has not completely cleared yet, The 4 Hour CCI is showing a clear higher low which means bearish momentum is declining, and price is hesitating around the 1.4350 area which was a previous support. At the same time, there are some new bearish arguments now that this correction has appeared. Most notably is the weekly candle that has closed as a bearish engulfing candle. We have not seen one of these on that time frame in a long time. So at this point, I am leaning more toward the long side, but I want to see clear stability before taking any kind of swing trade position., A higher low, a break of a previous swing high, a bullish engulfing candle on the 4 hour time frame would be some confirmations of stability. Without these signs, I cannot define risk or any specific levels to trade on the larger time frames. The key here is to wait. If price continues to sell off and breaks the key support levels mentioned earlier, then I simply step aside and reevaluate.

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1
May 11

EUR/USD: Next Significant Resistance 1.50

The previous week was pretty impressive in terms of EUR/USD strength. Retracements have been small and short in duration which is typical in a bullish environment. Logically, this pair is overdue for a significant retracement, but until there is any evidence of this in the price action, I will continue to look for long opportunities. For the upcoming week, I will be watching for a retracement back into the 1.4650-1.4700 area for a long entry with a stop placed at 1.4580. Entering the position will require bullish price confirmation. I will not enter the position simply because price happens to be in the area of interest. If price falls through this area, I step aside and re-evaluate. My profit target is 1.4980 which puts my reward/risk minimum around 2:1 which is acceptable . Overall, watch significant lows on larger time frames, as long as they are maintained, the bullish trend is still intact.

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