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TwitterThe 14 period Stochastic had moved into it’s overbought level where it has remained ever since. The NextView RSI has reached its’ highest level in nine months.
On the way up the market has sliced through several natural price barriers, almost without a pause, including the five month old down sloping trend line, important Fibonacci levels, and previous highs and lows.
What next?
The hourly chart (not shown) reveals three stages of acceleration in the past week, with the present stage being almost parabolic. Normally, at or around this stage, the momentum cannot be sustained without some kind of correction.
At the same time there’s an important zone of resistance nearby (R1 on the chart), which is a natural attractor of price. That is between 1.4630-1.4867. The previous resistance level, now support (S1 on the chart) will most likely contain price until the market can mount a serious test on 1.4867.
On the high side, if price reaches to, or very near 1.4867, we can expect at least a few days of correction to follow.
As I write, the market is reacting slightly downwards from the down sloping 200 day moving average (200MA).
EUR/USD chart as at 18 December 2008 using NextVIEW Advisor. Click on chart for larger view.
TECHNICALS
Stochastic – overbought
NextView RSI – overbought
R1 – at the 200MA and the nearby technical zone between 1.4630-1.4867.
R2 (not shown) 1.6038 – almost certainly out of the market’s reach for this trading week.
S1 – support zone between 1.3880 – 1.3520.
S2 – 1.2802
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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.Upcoming Workshop from Don Schellenberg:
Trade and Prosper in FOREX by Don Schellenberg | 8 Jan 2009 (Kuala Lumpur) | 17 - 18 Jan 2009 (Kuala Lumpur)
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