EURUSD Review (11 Dec 08)

Here's a short updated on my previous forecast.


Previously, I mentioned that EURUSD could be traded both ways, short around 1.32 or long around 1.26. Prices dipped to around 1.2560 and I took the opportunity to go Long. Prices have since made a beautiful run up to 1.3000 where there appears to be resistance.


My original profit level is around 1.32 level, which is around the level that I intended to short. Price has broken the resistance level of 1.300 and appears to stay above that level at the point of this entry. Staying above that level might mean further upside, but the rally appears to be losing some strength.

Looking at the 1 hour chart, the candlesticks appear to be forming long upper-wicks. Showing that some selling pressure is mounting. Prices are above 1.3 level which appears to be a fairly significant S&R level. But also take note that MACD is showing a divergence right now.

I've since exited my trades around 1.3, and am looking for shorting opportunities around 1.32 to 1.34 levels. If prices retrace first, there may be some opportunities to go long, but it depends on how prices unfold.

My main method is via price action using Elliott Waves and Fibonacci. From time to time though, I'll also look at other indicators. One of which is the COT or Committment of Traders Chart. You'll notice that I've added a widget at the bottom of the blog which provides some COT charts for those interested. For the purpose of this post, I've saved the screen-shot :

Basically there is a divergence on both EUR and the USD Index. For EUR, commercial traders are going long, and for USD they are going short. Expected net result is for EURUSD to rally. Prices have already risen somewhat, and its possible for them to rally further. But do take note that such divergence does not usually last for very long. Looking at the above charts, you can see that extreme position are not held for long, and can often swing to the other end. That being said, I'm not an expert on COT Charts, but would focus on price action more than such indicators.

That's it for now. Good luck for your trading!