Fundamentals, Technical Analyses EUR USD July 25th – 29th 2011
Monthly
Monthly trend is bullish and as we’ve said in previous research recent price action is not match to market that turns in reversal. It’s more common for continuation market. Price has hit monthly overbought, 0.88 Fib resistance, and after all it just has reached nearest Fib support at 1.4140. Second, although it seems was broken, market still has not reached Confluence support and now it looks more like W&R of previous lows. This is not very typical for situations when market really intends to move lower. It looks like the downward power is not so great, at least currently. Also take a look at price action during the recent couple of months – two hammers. Sellers try to press down, but buyers return all right back, hence EUR purchases even from nearest retracement levels are significant. So, overall small signs, if we will take them together, tell that up move continuation is very probable. Furthermore, recent price action looks like bullish pennant pattern, so I suggest that it looks like bullish wedge on weekly time frame, we’ll see…
Nearest target stands at 1.5081 – just above the previous highs – this is 0.618 extension from most recent AB-CD pattern. Next area to watch is 1.5272, but potentially it could turn to butterfly “Sell” pattern. The target of this pattern is 1.27 extension at 1.6027. Also it almost coincides with 1.27 target of bullish AB-CD at 1.5925 and with 1.0 Fib extension of most recent smaller AB-CD. By the way, from classical standpoint upward move should be equal to the mast of the pennant – that is 1.5866 area.
Still, from another point of view, if you draw trend line and link lows at 1.1874 and 1.2870, then you will be able to see that this trend line nicely holds upward move. From that perspective retracement in July to 1.37 Confluence support will be normal, since it precisely will reach this trend line.
The crucial area for bullish perspectives is 1.3650 – down break of pennant and Confluence support will tell us that probably we can’t count on upward move in nearest time.
Although we’ve spoken also about 3-Drive “Sell” pattern in previous researches, here I do not mention it, since I hope that you remember it. Besides, it has almost the same potential reversal point as AB-CD pattern – 1.5250 area.
