Week ago, I thought the current raise will be for 2-3 weeks or more, but it happen for just 3-4 days. I expected gains, but never expected that much gains for just one week. We did about 75% profit from the beginning of the week. We will see if we will be able to keep this profit till end of the month.
I. Wedge in USD and EUR index.
The wedge is reversal pattern. In our case is bullish for USD index and USD as a currency, and bearish for EUR index and EUR as a currency. However, the wedge in our case, is more than year and half long (from JAN.2006).
The USD index wedge is completed. Even more - support is broken. The break is also because of raise of the Japan currency - JPY. I believe this is false break, because as we will see later, the wedge is not completed in EUR index, and in EUR/USD.
This is 15 min chart of USD index. We have a downtrend channel now, and index could go eight er up or down to the channel. I believe (e.g. not estimated), that the upper boundary correspond to about EUR/USD = 1.37.60.II. EUR (XEU) watch.
Now, is very important to see EUR index. Here, as usual, we have corresponding wedge, but it is not completed. Note the orange mark around JAN.2007. I believe, is important, because, there the index did not fell to the support level, the price bounced little bit above the support.
To make even more clear picture, let see EUR index/USD index.Here we may speculate if the wedge is broken or not. Everything depends how we draw the trend line. I will consider, that the resistance line is not broken, but price is on the line.
III. Triangle and wedge watch in EUR/USD.
EUR/USD 4 days chart:
The chart is similar to 1 week chart.[o]. triangle.
The triangle from last week is broken now. There is really nothing else to say about it.
[o]. wedge.
Here we can see the wedge. The wedge NOT COMPLETED. What we have in Friday, was max of 1.38.12, then market close negative, with small loss for a day. Friend of mine said - "So what happend today? Nothing happend!". I do not know If I should agree or not... Here some observations.
With orange color, is marked how twice the price did not go to the support level.
[o]. candlestick patterns
I never use candlestick patterns, but now, we have one, which may be is important - the small doji candle, is something from following:
- bear star.
- bear harami.
- evening star forming - we will know this tomorrow after market close (e.g. Thursday morning)
So if we have bear star, this is warning pattern, which means that market has no momentum left. Then usually, but not always a decline coming.
If is harami, which I do not think so, means decline will come.
In case is evening star - decline will come, but before it, we need to have confirmation. We will have such Thursday morning.
[o]. Indicators such RSI and MACD
they are bearish, I think. There are bearish divergence in RSI and MACD (not shown).
[o]. 4 hours chart.
OK, we have parallel rising channel in blue.The triangle bottom, as well the long term support is @ ~1.33.95 (from now one, I will refer it as 1.34).
We also have a channel inside the channel - pink.
IV. Summary or ... What now?
What now? - this is what I am asking myself since friday, when I sold my last large possition, and price hit 1.38.12.
Lets sumarize.
- In the wedge of USD index and EUR/USD, we saw several occasions, when the price do not go to the support level. This means, that this time, it could not go to 1.38.50.
- There are lot of short positions on EUR right now. In the broker house which I use, currently I am the person with maximum profit for the month. This is strange, since we have always traders who do 100-200% each month. But not now.
- When we go to the support of long time USD index wedge, we need to go to the resistance again. The wedge exists from JAN.2006, so is prooven support.
- One weak argument - EUR can not go that high :) . It could do throwover, but nothing else.
[o]. Should we need to enter the market and to use those final 40 pips to 1.38.50?
On 4 hours chart, we have short term channel in pink. I believe the price will go there, at least Monday. In case you like risk, you may enter 1.37.60, but with small ammound of money, and try to play 1.38.50, but you defenetly must use protective stop (floating stop is the best).
If the price fall to 1.36.90, this doesnt mean fall of euro, because we are still in upper channel (blue).
I believe the risk now is too big for this. As I wrote - a lottary.
[o]. When we will be able to short EUR?
I always said - do not short euro. Well this time, I think we should, but we need to be sure it will go down. This confirmation we will have when we had "eveningstar" candlestick pattern, or if the price fell to 1.36.80, and broke down from blue channel.
I will monitor this closely and will post in my blog when/if this happen.
V. Summary of the summery :)
Watch levels 1.37.60 and 1.36.80
Happy week, and Happy trading :)
AUD/JPY will be posted in different post
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