Our last analysis one week ago contained the following relevant forecasts:
1. The uptrend remains intact.
2. There is strong resistance from 1.0470 to 1.0500.
3. There is support that may prove to be quite strong at 1.0400.
4. A bearish trend line can be drawn off swing highs in June and August; in a few days the line will reach the 1.0500 and continue to descend and could act as additional resistance.
5. Short touch trade recommended off 1.0500 during the London and NY sessions if this is reached before 1.0400 is retested.
Let's look at the 1 hour chart since then to see how things turned out:
The prediction worked out perfectly, and produced a profitable short touch trade as well as good guidance for any longs held:
1. The uptrend has continued.
2. The area from 1.0470 to 1.0500 did hold as resistance.
3. The support at 1.0400 has not been tested.
4. The bearish trend line was reached yesterday and breached by only 3 pips, before falling within 3 hours by 30 pips.
5. The short touch trade recommended was triggered at the marked (1) on the chart during the London/NY sessions overlap on 8th November. Again, there was a maximum drawdown on this trade of only 3 pips, and it ran for a maximum profit of approximately 35 pips.
Turning to the future, let's start by taking a look at the weekly chart:
Last week printed a bullish reversal bar, closing near its high. This is a bullish sign, but there is of course the long-term bearish triangular trend line converging with the psychologically key number of 1.0500 blocking the way, and this has held as resistance so far. However the bullish reversal bar, the high of which has been broken, is in itself a bullish sign.
We can see more by taking a close look at the daily chart:
Last Wednesday, the day of the prediction, printed an outside bullish reversal bar marked at (1) in the chart above, closing in the top quarter of its range. This led to a breakout of the resistance level established over the past three days at approximately 1.0460. The following day, the price ran up to 1.0500 before falling fairly quickly. This week we can see that the former resistance level at 1.0460 has turned into support, which is a bullish sign, suggesting we will get a breakout above 1.0500. Yesterday printed a bullish reversal bar, but the price rejected the trend line yesterday, and the high has not been retested yet.
The fact that resistance has turned into support so close to 1.0500 makes things interesting. What will be crucial will be whether we get next a break of the bearish trend line to the upside (bullish bias), or a break of the support at 1.0462 to the down side (bearish bias).
Our summary and forecasts therefore are as follows:
1. The long-term uptrend remains intact but is called into some doubt if we cannot break above 1.0500 soon.
2. If the bearish trend line holds for a few days, we will get a break below 1.0462 and the price will head down towards 1.0400.
3. Partial profits should be taken on any existing longs from 1.0400.
4. Risk should have been taken off any existing short trades from the trend line by now.
5. If the price makes a sustained break and closes above 1.0500 and the upper triangle trend line, this would be a very bullish sign, and the price should then move towards 1.0565. A good place to go long would be on a pull back to the 1.0500 level after the breakout, or the broken bearish trend line.