Wednesday, February 26, 2014

Trading Week 24/02/14 EUR/USD

Wed 26th Feb (5.30 pm)
EUR/USD: I just read a comment noting that the E/U looks a bit weak and so I thought I'd look over the charts to see if I could see any signs of weakness. The E/U has struggled all week and chopped sideways and never too far from the weekly pivot. Most pairs have chopped sideways though and I am on the record as attributing much of this chop-fest to the 'triple top' deliberations of the S&P500. The E/U is also facing its own major resistance zone though and this would be adding to the choppy action we have been seeing. This resistance zone is best identified on the monthly charts.

E/U monthly chart: I have posted two views of this monthly chart; the latter being magnified compared to the former. Price action on the E/U is getting up quite close to an intersection of three major S/R zones. Two of these S/R zones can be seen on this more conventional chart and are near the 1.383 region:
  • The first zone is that of the bear trend line of the major triangle pattern. 
  • The second zone is that of the psychological barrier created by the 61.8% fib level of the 2011-2012 bear move:

E/U monthly chart

  • The third S/R zone can be identified on the monthly Ichimoku chart of the E/U. The E/U is trading above the Ichimoku Cloud on the 4hr, daily and weekly charts BUT is trading just in the bottom edge of the Cloud on the monthly chart. The margins of the Ichimoku Cloud, upper and lower, offer extra resistance and support to price action, compared to that of the Cloud itself. The E/U is currently trying to break up into the monthly Cloud but this particular stretch of Cloud, being relatively horizontal and narrow, may not be too difficult to navigate through. It is the top edge of the this Cloud band that has my main interest though.  The top edge of this monthly Cloud, at around 1.395, is not too far above the intersection of the triangle trend line and the 61.8% fib resistance zone that were discussed above! 

E/U monthly Cloud

E/U weekly Cloud

E/U daily Cloud

E/U 4 hr Cloud

This intersection of these three significant S/R zones will be a major hurdle for the E/U to overcome. This may prove too difficult a task for the E/U and might trigger a bearish reversal. Either way, bullish continuation or bearish reversal (and I don't claim to know which direction will evolve), I would expect price action to continue to be choppy whilst it navigates this problematic region.

I do not see any particular current price action, or technical pattern, suggesting imminent bearish or bullish movement. I do see the hold above the 1.37 as bullish though and will continue to watch price as it nears the upper trend line of the monthly triangle. 

I do consider that the fate of the S&P500 will continue to be significant for this pair, as well as others. Any continuing bullish sentiment on the S&P500 may flow over into general positive 'risk appetite' on other instruments. Conversely, any clear rejection of the S&P500 'triple top' region and bearish reversal may ultimately drag the E/U lower with it too.

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