On our last post regarding this FX pair, we mentioned that a pull back towards optimal 1.3040 was expected (http://trading2day.com/?p=364). EURUSD met this target and went even lower towards 1.30 (a bit higher than the 76,8% retracement) without breaking any bullish wave rule regarding our initial scenario. The decline was deep and the upward trend line was broken. The fact however, as mentioned through twitter, that prices bounced right away upwards from near the 76.8% retracement and did not collapse, is a good sign for bulls. Taking a look at the 4 hour chart below, we observe that EURUSD has broken the downward sloping red trend line and is moving back upwards, in our opinion resuming the uptrend that paused at 1.33. The rise from 1.30 must be impulsive (5 waves) in order for our scenario to be the dominant one. Prices traded late Friday around 1.3080-90 as a back test of the broken green support trend line. Bulls will need to push prices again above this support line and move decisively towards the double top of 1.33 where resistance is strong. Confirmation of the resumption of the uptrend will come with the break of 1.33, but if prices complete 5 waves up from 1.30, then a first positive sign will be given. For those betting that EURUSD will move towards 1.28, they should first see a breakdown of 1.30 and the December low at 1.2875. If those support levels are broken, bears will be in command of the trend again. A small delay however could be next for bears. The upward move that started on Friday from 1.30. could unfold towards 1.31. If this upward move is not strong enough to reach 1.33, prices could collapse again below 1.30 and 1.2875.
As always, thank you for taking the time to read my post. If you need help trading EURUSD, don’t hesitate to contact me.