Evening one and all,
I have a chart of EURUSD for today.
In September, EURUSD broke up convincingly from a long-term downward parallel channel. At the same time, most other risky-on assets surged up. EURUSD covered 400 pips in less two weeks. Resistance came in at the 1.3150 region, and the EUR/USD pair dropped back to the 200-day MA. Taking a high in 2011 to the low in July of this year, the fibonacci retracement levels 23.6% and 38.2% are in play. 1.2800 is a strong support zone for now because the 23.6% retracment level and the 200-day MA are there.
Looking at how EURUSD is well out of the long-term downtrend channel, I am leaning on the bullish side in the months ahead. The V-shaped price action (in purple lines) looks like a bottoming pattern for now. In hindsight, we can safely say the huge run-up in risky assets in September had to result in a retracement - which we are seeing now. Looking at the last two sentences, it should sound like a bullish pattern that we know – a cup and handle pattern. I am strict in defining those sort of patterns, and I do not see the EURUSD as having one. But, I see a possible breakout set-up on EURUSD’s chart. EURUSD has been rangebound between 1.2800 and 1.3200. Bollinger bands I have on the chart have been pierced by price. I will prefer to wait for slightly more upside before considering a long position. The current resistance gives me a good place to cut potential losses, while no clear resistance overhead means a good risk:reward tradeoff.
One important event to notice is the golden cross on EURUSD’s chart. While my experience tells me that there is a high chance of downside right after a golden cross, this is a basic – and strong – bullish technical signal. Take note also of the EURUSD finding good support at the 200-day MA. The last time EURUSD stayed above the 200-day MA was back in the former half of 2011.
Time to build up a mid-term trend trade?
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