24 September, 2010

Single Currency Redux: What the EUR/USD Has Done

Well heigh-ho and whadya know? Posted here is a snapshot of our September 15 analysis and the updated composite chart from this week's close. Take it in...
Chart from September 15, 2009.
Our current weekly close and the result.

I've included a new page on the site with Market Profile background and some additional materials for the benefit of your Forex Market Profile trading.

An astute commenter has pointed out the gist of what has occurred on our rather violent move up from the 1.27-1.29 value area. As the earlier analysis noted the goal was to buy moves back down to that area (as rare and fleeting as they were) for a test of the line in the sand at 1.3110-1.3265 (level tweaked slightly after we traded through here). We ended up getting one red daily candle as we tested the bottom of the 1.3184 CHVN and monthly resistance 1 at 1.3160 which is between those line in the sand levels.

The dip that we got was happily bought into and the next test of the line had no chance as shorts covered en-masse. Why has the move been so swift? It is likely a reaction to the swift down move we had during the depths of the Greek crisis and Flash Crash. The up move from the 1.18s was equally steady and showed that buyers were willing to take the Euro all the way up to test the bottom side of the 1.36 value area. But that was only the signal that our downtrend may be over. We still had to pull back and maneuver around the middle of that move, as shown by the white square outlines, for a base to continue higher.

We know what it has done, what is it likely to do now?
Updated COT data showing a net long speculative positioning.
The updated COT report shows we've finally crossed into net long positioning from large speculative traders. We don't know how the bias will change next week but when we get there, we are looking for additional longs to have added on and the green line to move higher. It should move higher after a pullback where buyers will get an opportunity to buy low.

The numbers floating around for the Single Currency's topside are 1.35-1.3512 which is a Fibonacci retracement. Funny thing is we might get enough people shorting it there to fuel a pop even higher (markets are sadistic aren't they?), but that's not a trading plan to go by. If you've been following our trading room and my Twitter stream, you've noticed I've been buying any chances for higher continuation. We're getting there. But the weekly close looks like a very deliberate close on the highs.

Long positions left from the 29s and 30s can begin peeling off in the 1.35s all the way up to 1.3612. Short term traders can begin establishing range levels as we quiet down after the storm. Price action from February through April provide plenty of ranges to take advantage of. We can begin planning for a retracement but stay tuned for weekly updates on expected economic data and developments

Taking one step at a time is important so you don't get too ahead of the markets.

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