June 5, 2008 21:11

Technical Analysis – EUR/USD Back to the downside

Posted In: Free Forex Signals
By:

6-5-08

21:12 GMT – EUR/USD rallied strong on comments from the ECB that they may raise interest rates later this month, after dropping sharply on 6/3 from comments that the USD may raise interest rates by the end of the year. It is more or less a draw but with an edge to the EURO because they are looking at raising rates sooner, their current interest rates are better and because their economy is generally stronger at the moment. Below 1.5630 I expect the pair to either continue its slow downslide or to enter a range trade between 1.56 and 1.54 while we wait for some better direction.

Pair is currently in bearish channel and will be unless 1.5630 is broken.

Trading Idea: Under 1.5630 I favor shorts as the RSI is heavily overbought and the pair is still making lower lows and lower highs (bear channel). Look for short targets at 1.5540 and 1.5450. If resistance is broken look for a challenge of 1.5660 and 1.5700.

UPDATE – 00:20 GMT – pair is sitting right under resistance and has been for 5 hours now. No bearish candlestick yet so I am still out of this one. Best trades are when a single or multiple long wicks just touch resistance and then retreat and I haven’t see that with this one. Resistance is currently holding though.

UPDATE – 05:08 GMT – pair continues to consolidate in a tight 10-20 pip channel below the trend line. It speaks well for the resistance trend line as buyers are respecting it but makes it also me nervous as sellers do not yet have the volume to actually push the pair back down substantially.

UPDATE – 05:51a GMT – pair has broken resistance without a clear bearish signal so a good no trade. It may be a false breakout by the look of it but only time will tell.

Result: 0 pips

Analysis: Good no trade. Best trades are when a long wick reaches out and touches resistance or support and then retreats quickly, giving a clear signal that there is plenty of buying/selling power to change the direction. On this pair it looks more like the bulls just stopped buying at that level to see if the uptrend could continue. Even with the slackened buying though the bears were only able to push the pair down slowly along the resistance line. Long wicks, quick retreats are best signals :).

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