EUR/USD view for week OCT/22/2007

I. Important news from the week:

1. Gold stands high.

2. HUI is 400+.

3. USD continue down to sinkhole, but lose momentum. Yet, EUR/USD hit ~1.43.20

4. Black Monday Anniversary - some video to remember it here

Kids looking at dollar sinkhole

II. As I wrote before:

FED blew it!!! They totally destroyed the dollar in long term. I think they will inflate now, and stock market will go higher and higher, but only in nominal terms.
For first-time readers, and those who do not know, the wedges are reversal patterns. This wedge is bullish for USD index, no matter what people say for US economy, debt bubble etc. I am sure that at the end of the year, the USD will be lower, but wedge suggest we will have one bounce before that.
Unfortunately, we had proof that our beloved wedge, is wedge no more.
It was transformed in parallel bearish channel.
Now, even if we see USD up, it will be not an uptrend, but just a correction.

III. The parallel uptrend (old wedge):

USD index weekly chart:
The wedge is transformed into a parallel channel. Then the price bounced back from the parallel channel support. Then price went to the resistance (formal support) - brown line and bounced back down.

We do NOT have double top (bottom), because second bottom is lower than first one.

However, now, we can see the price is back on the support. This is very important, since on EUR/USD situation is not like this. We may expect now a rally in USD up to 79+. If the resistance is broken, rally will continue to ~81.

EUR/USD 4 days chart:
On EUR/USD we see similar things, but the second high is not on the resistance, but lower. This happened before, so it may happen now too.

We also have bearish divergence on RSI, not shown on the chart, but is there. However we do not see the same divergence on USD index.

EUR/USD 4 hours chart:
Here is "speculative" chart. Mixed signals. Better wait and see what will happen...

IV. Summary:

Generally USD will rise now, EUR to fall, but play carefully.

Happy week and trade!!!

V. Carry trade with AUD/JPY:(As usual) Will not be updated this time, probably tomorrow.

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