EUR/USD Bounces. Or Does It?
Good Afternoon,
I wanted to wait until after the end of trading today to see if the rally would stick. I was a little nervous this morning as futures were up a decent amount and then the actual opening came and we were off the highs from earlier in the morning. But, I guess we were in an oversold situation technically and the shorts had already covered on Friday or covered early today as the selling momentum came to a halt.
Let's get to the fundamentals first and then we will move back into technicals. As I said in my "preview" on Friday, this week's calendar is pretty light and we may see volume lighten up as we head towards the holiday weekend. But to review, keep an eye on claims on Thursday and any international news.
OK, back to the technicals. There seems to be support in the SPX at 1290/1295. Let's see how far we start to rally back up (use your Fibonacci's) and the more we rally, the better chance we have of holding 1290. If we can't rally above the 38-50 percent area, 1290/1295 may be retested and possibly broken. At this point, the rally is too miniscule to plot, so I won't post a chart of the SPX with that Fibo until we get a little bit higher. By the way, I have 38% at 1338 and 50% at 1351. I would be pleased if we climbed back up there (but really, really pleased if it took us about 3 weeks).
Instead, I will use the 2 day rally in the EUR/USD to prove that we haven't really rallied "that much". Two charts for you. First, Friday's and today's rally in the EUR/USD followed by the longer term downmove and what the recent 2 day rally looks like compared to that downmove:
Past performance is not indicative of future results
Past performance is not indicative of future results
You see, we have moved almost 200 pips off our lows, but on the longer term chart, we just breached a 23.6% retracement. If we don't move any higher, that could be a "dead cat bounce" and new lows are very realistic.
So the takeaway? What is your risk to reward to get long here, 200 pips higher than Friday?
I most likely will not post until the 29th, so have a great week of trading.
Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
