Thursday 16 December 2010

€$ & USDX


Carrying on from yesterday i am posting this chart clearly showing the long term reaction line i first posted last week when price made a three touches on this line and bounced- very sharply directly off this reaction line on monday. This RL originates from an obvious Andrews fork in the weekly TF ( P0 26/12/04 1.3667?, P113/07/08 1.6074? & P2 13/11/05 1.1634?) and as such exerts a more powerful influence over price action in my opinion. Also price has oscillated around this upsloping RL since it first encountered it in May this year and for all i know it maybe responsible for the Euro reversal which started in May.
We now find price back on this RL and when it goes down through it which i expect it will soon, the fall could be brutal and sharp. However before then we could easily make one or more mountain/hill cycles upwards and back down. Remember the DX is stuck in a similar pattern ranging between good support at 79.00 and resistance at 80.80
So how sure am i that the DX will break through 80.75/81.00 and the €uro will fall below the 1.3200 level?
I am as sure as i have ever been and have presented a serious case for US$ reversal since early Sept BUT as with all markets i would not preempt price action but would consider a short Euro pos if we saw price rally for another 'loop' before it comes back to test this RL again. We have retraced 100% of this weeks rally and this is about the 5th serious attempt at penetrating this RL. If price action keeps coming back to test this RL (and also failed spectacularly at breaching 1.3500 on the upside) then the market is telling us something. Add to this the mauve/magenta CL failure in the daily €$ chart and then look at the fundamentals which are simply shocking.......conclusion? Lower Euro and a DX break above 81.50.

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