Stalking the Choppy EUR/USD
- 4H: Yesterday’s video post mentioned that there may be bottoming action at the 1.3665 area (61.8% retracement). (Refer to Daily Video Technical Update 3.15.2010). The market dropped slightly below that but started to rally in the Asian session, had a quick correction when the European session started, and shot up again as that session went underway and the Asian session came to an end.
- Looking at the stochastic, the market looks neutral after the downswing to start the week. The rally in the Asian-European session is represented by a pause in momentum, and suggests possible continuation in the short-term.
- 1H: We can see that in the 1H chart, the market had 2 upswings to start the week. The current swing is more pronounced but is also the one running into resistance at 61.8% retracement, and a declining trendline. The 1.3730 area is also a previous support now tested as resistance.
- Line this up with the slight bearish implications in the 4H time-frame, and you should recognize that we should be monitoring the 1.37-1.3750 area. If the market breaks above 1.3750, a bullish continuation towards 1.42 with a little bit of resistance that the market may work on near 1.3850 and 1.40. These are the short-term resistance areas that should be monitored.
- Notes: Remember, we are in an established downtrend in the longer intermediate term, so all the bullish signals at the moment are short to shorter intermediate term.
- If the rally is choppy as the market has been since February, we can assume that the market is still undecided and that the longer it is undecided, the higher it will move as holding short positions represent opportunity cost, and a slow outflow can be shown on the chart as a slow correction.
- This brings us to the anticipation of a big move, that is combined with a weak correction. That will probably give us the new direction.
- Before that, the market may be choppying until 1.3850, then if it breaks above, the road to 1.42 may be sharper.
