Forex: EUR/USD expected to test resistance level

The sideways price action that appeared to be a triangle pattern failed to have the downward follow through that would be expected of a genuine, typical triangle.

The price pattern has now developed into more of a rectangle up to this moment in time. Viewed on a weekly chart, the trend is still down, based on short term moving averages and chart patterns.

The 200 week moving average was rising until recently but has now flattened out around 1.3369 (on the weekly chart) and is clearly down on the daily chart.

For anticipated price action for this week, the resistance and support zones are quite clear. The upper level of the corrective range is an area of strong resistance (from 1.3295 – 1.3325). It will not be unusual for an area of resistance to act as a price magnet to attract and then repel the market.

A close above this resistance area would run into additional resistance between 135.70-136.25, and very formidable resistance at 1.3900.


EUR/USD chart as at 27 November 2008 using NextVIEW Advisor

TECHNICALS

Bollinger Bands – so far these bands have capped the upside move.
NextView RSI – in positive territory, above 50.

R1 – 1.3295
R2 – 1.2570
R3 – 1.3900

Support begins very near current price action, at 1.2770. Additional support appears at 1.3619 at the down sloping trend line. A drop below this level would probably indicate a continuation of the down trend.
S1 – 1.2800
S2 – 1.2326
S3 – 1.2070

***
Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.