FOREX: EURO/USD analysis

This currency pair has been caught in a wide trading range for the past three weeks, in between the high of May 6th at 1.3581 and the low of May 22nd at 1.2885.

From March 19th to May 30th this market moved down and sideways within channel lines. Many traders see this as a flag pattern formation. In my view the formation is certainly not ideal since the internal waves are not quite normal for a flag. Generally, with an ideal flag, the break out would be in the direction of the so-called flag pole, which in this case would be up, but so far the break out above the upper channel line has been less than enthusiastic.

It seems that the best thing to do is identify levels of resistance and support with probable near term targets if on or the other level is exceeded.

One are of support that should prove significant is around 1.3100. A close below this level could seriously damage the potential for near term bullish action.


Daily EUR/USD chart as at 7 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
Stochastic – declining from it’s overbought level.
MACD – in positive territory but flattening out.
R1 – 1.3400
R2- 1.3740
R3 – 1.4180
S1- 1.3100
S2 – 1.2920

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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.