November 21, 2008 05:48

Technical Analysis – EUR/USD Bearish Trend Continues

By:

11-21-08

3:26a GMT – I feel like I could have copied and pasted the analysis for the past week – “EUR/USD is bearish around 1.2590″ – but that is a good thing generally because it means we have a strong and easily identifiable trend. This continues today but to mix it up a little I’m analysing the daily chart below (normally we look at the 4 hour charts).

As you can see the downtrend for the EUR/USD on the daily chart is extremely easy to see, dropping over 3500 pips in the past 4 months! The pair has definitely found some support recently around 1.2300 and 1.2400 but you can see why we are looking to sell on rallies instead of buying against the trend – the pair has been much more likely to return to the downside than it has to rise up.

Key to the pair tomorrow will be the US stocks – which are almost sure to rest on the shoulders of the potential auto bailout. In short, I think if consumer sentiment is positive about a potential buyout we will see stocks rise or hover just above opening price and then we will see the dollar give up some gains. If the bailout sentiment is bad with some other bad news about the economy look for the stocks to lose gains and the dollar to gain as traders convert to USD positions.

Trading Idea: currently we are looking to sell rallies around resistance at 1.2595. Shorts preferred with targets at 1.2425 and eventually a challenge of 1.2350.

(click to enlarge)
 

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