Thursday, July 1, 2010

Euro's big move today may be flash in the pan according to these charts

The euro made a good move today and I tweeted on Twitter that it looked like a test of the 50-day moving average (MA). Looking more closely at my charts of $XEU in the daily and monthly time frames, I see additional points of resistance it's hitting. One is simply price, and I had previously pointed out that price resistance went up to the 124/125 areas (and could even go to 130's). Another is the daily chart's upper Bollinger Band. Another is on the monthly chart - the euro had broken under a big channel trendline (marked in light blue on my monthly chart, so you will have to look closely), so it's very possible that all that's happening now is an effort to retest that channel trendline from below. There is a little negative divergence on the daily chart, and the indicators on the monthly chart remain negative without showing any confirmation for a trend change on the monthly chart.

Might the euro recover? Sure, and it's interesting it did well today despite stocks and gold down, but then again the yen (which I measure as $XJY or FXY) is strong again above my long-term 111.49 pivot so the yen is the star right now. But I must say that the euro still hasn't proven that it won't fail over and down to 112. So let's keep a watch on it, and even see if it wants to get back up to that lower monthly channel trendline from below, and then see. Because it's quite possible that anytime, either from here or a bit higher, the euro may well roll over again. If it makes a new low under 119, then it should be deemed "toast" and heading down with the 112 Fibonacci retracement level a distinct possibility.

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