By: Colin Jessup
I've been thinking for the last 2 weeks that the Euro was due for either a retracement or a reversal...so it was no surprise that last Friday when I looked at the daily chart for the Euro and noticed a really nice reversal set-up of a support zone.
The pattern presented itself as a potential bullish reversal built on a strong weekly support zone at 1.2909. The next couple of days were very slow in the markets due to the holiday season around the world, and then today price action made a strong push off of this zone and travelled 145 pips from bottom to top. Now we find ourselves in a zone that price hung on last week at the 1.3040 level before falling to the aforementioned support zone. Now the question is whether or not price will continue its bullish climb tomorrow, (with price currently falling slightly during the Asian session), up to the previous zone of 1.3170?
Price will need to break above 1.3076 and then 1.3131 before hitting a weekly resistance zone at 1.3170. We are in what I like to refer to as 'traffic' with price teetering back and forth in this area since December 14, more or less. We saw price fall from 1.3546 prior to December 13, and then went sideways for 2 weeks before testing the zone below at 1.2900 and ending up where we are now.
If price follows through with the bullish reversal, I will be looking for 1.3170, then 1.3280 and 1.3400 if we are lucky. Should price reverse and continue the bearish trend established recently, we will be looking for support at 1.2970, then strong support at 1.2900 and possibly 1.2700 or even 1.2500 beyond that.
In the short term I am thinking bullish, but as the overall trend is bearish and we are well below the daily moving average at 1.3368, I am bearish overall on this pair.
Happy Trading!
