As usually, I like to post whenever I find anything on my charts that might raise my eyebrow. Well, there’s something on EUR/USD that I have been following for a few days, I took some notes on my Forex notepad and I figured I could share them with you all.
Please take a look at the EUR/USD monthly chart here below. As we all know, this pair has plummeted through the floor since mid-July, all the way from 1.60 to 1.38 where it’s recently bottomed few days ago. It seems like that 1.38 area is quite a key-level from a technical point of view because we have three elements of support stacking up together: a long-term trendline, the 50% Fibonacci retracement and the previous major swing high. So, all in all, we have a bunch of elements of support around that area that might hold price above.
But what’s truly interesting is that price is indeed reacting to that heavy support already. In fact, EUR/USD has already bounced 500 pips and it’s currently sitting at 1.44. Moreover, the monthly candle for September is shaping up as a massive bullish hammer which is usually regarded by traders as a bullish reversal signal.
So, what am I getting down to? well, I believe that EUR/USD has reached a decision-taking junction in the long-term charts that might dictate this pair’s overall behavior for the following months: if by the end of September the monthly candle does finally close as a bullish hammer, many traders will be in the mood to begin searching for long positions and EUR/USD might begin to climb to new heights. In the other hand, if EUR/USD fails to respect that 1.38 support area and dives through it, I am sure many stoploss orders will get triggered and it’s free fall from there until the next support area at 1.33.
A word of caution though ==> I am sure you folks are aware of the current tumultuous times we’re going through in the global financial markets right now: Lehman Brothers going belly up, AIG being rescued by Uncle Sam in the last minute, England’s Halifax bank running for the hills, Madonna releasing a new album, etc… Quite frankly, no-one knows what’s going on right now and no-one knows whether the whole financial status will blow up in our noses. Be VERY careful if you’re actively trading because it’s getting very ugly out there!
-HECTOR-
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From HectorTrader: EUR/US...High-Probability Forex Trade (Aug 12, 2008)
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