Despite positive divergence, Euro threatens "real test" of Fib levels a little lower

Well folks, my headline pretty much states the case: despite positive divergence in the daily RSI, the Euro still hasn't done a real test of the 50% Fibonacci level on my monthly chart (and it could still go lower to the 61.8% retracement around $112). This is funny but I cannot even read the Fib level on my old monthly chart here to see if that 50% retracement is at 121.40 or 121.10 - and yes, that difference of 0.30 can matter but honestly maybe not too much! Since as you can see there's also moving average and Bollinger Band support somewhat lower, which may provide the bottom-testing level that the Fib retracement test may actually touch.

Given today's afternoon nosedive, it's more believable now that the Euro will in fact really test that Fib retracement area. That's good because the test will have more meaning. HOWEVER - what traders will need to brace for, is what happens if the Euro doesn't reverse back upward after falling underneat either 121.40 or 121.10?! The smart thing is to let it make the test and then demonstrate whether it has the strength to trend reverse back up again. Given the positive divergence, it may happen ... we'll just have to let it "tell the story" with a reversal pattern accompanied by technical strength. (One way to tell will be raw volumes on the ETF, FXE which tracks $XEU - if buying volume picks up on a reversal move back upward, that will be a classic clue that also feeds into technical signals like stochastics and relative strength indicators.)

Oh by the way, if you don't know why you should care about the Euro - it's because, even if you aren't a currency trader, the Euro moving upward again should be precursor to (or accompanied by) a move back up again in stock markets!