EURUSD Weekly Picture Up to 12-04-2007

We are writing this analysis because we think that the EURUSD is in the first stages of the long awaited reversal.

It is amazing how difficult it was to catch this price corrective phase when trading in a smaller time period, like the daily or intraday. Every time the price gave a hint for the beginning of the move, came along a re-action that took all the stop-losses positioned in accordance with a normal and logical thought process. Look at the 28-11-2007 for a good example.

The weekly picture is much clearer and gives more confidence to investors and traders that take medium and long term trend oriented bets. So, based on the attached weekly chart, it seems that the pair is finally trying to go down and correct some of the excesses of the last up trend. Why do we think so? Because of the following technical analysis events:

1. The last move up from 1.335 to nearly 1.50 was done in a 5 impulsive waves, while the last sub-wave 5 was an extended one which is a normal sign for a final stage of the latest part of the trend.
2. The price spiked out from the boundary of the ascending channel (blue line) and returned inside. In the same time it spiked out and returned inside the 5-weeks price channel (yellow). These fake outs are quite indicative about the exhaustion of this trade.
3. Although it was supported at the boundary of the steep secondary channel, the engulfing red candle is still valid until the price will not reach the highs near 1.49-50.
4. The price is very far from its 50 and 200 simple moving averages. This is normally a reason for returning to the mean and causing the averages to move by a gentler angle.
5. A normal correction of 50% will bring the EURUSD only to the 1.415 area which is near the low of sub-wave 4 (a normal point of reference). We can find there also a previous support combined by the historical price action and the rising wedge boundary (violet line) coming from March 2006 (blue arrow).
6. Finally, the weekly indicators are all in the overbought territory but showing signs of reversing: STOC crossed its MA and going down, RSI struggles to stay over the 70 area and the MACD diff showing lower values.

All in all, this is the picture of the first signs of a correction. Will the FED and its aggressive moves counter this TA showing? The NEAR future will tell.

Disclaimer

By no means do any part of this article recommends, advocates or urges the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author and his company express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this article. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. The content of this article was created with the best known data at the time. The writer and his company are not responsible for the accuracy or completeness of the mentioned data. The writer is not a registered consultant of any kind and so the reader should not see any single part or the whole analysis as an advice for any kind of action in the financial markets.
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About the Author

Moshe Shalom Head of Technical Analysis Department ForexManage Ltd Site: www.forexmanage.com Email: This email address is being protected from spam bots, you need Javascript enabled to view it