FOREX: EUR/USD Analysis

There haven’t been any major surprises in the price movement of EURUSD since last weeks’ commentary, except that price has reached upside resistance sooner than I expected.

The Bearish Engulfing candle mentioned in last weeks’ column performed as expected – “…this does not mean that a major reversal is underway, but there is at least the possibility of a few days of sideways and corrective price movement”.

That did occur. Three days after the Bearish Engulfing signal, the market had broken below the upward sloping trend line but found strong support at 1.3422, almost exactly at last week’s S2 level on the chart. From there the market thrust upwards to reach the R2 level and achieving a two-month month high.

The market is reaching levels where fresh resistance can be expected, so at least some minor corrective price action can be expected to occur between the current price level (1.3806) and 1.3930.

In any case there is a strong possibility that the market will reach to around 1.4170-1.4200 within the next couple of weeks.


Daily EUR/USD chart as at 21 May 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS

SMA200 – this long term indicator is still sloping down, around 1.3190.
EMA20 – up, in support of current price movement.
MACD – up in positive territory, but with weakening relative momentum.
Stochastic – rising again within overbought levels.
R1 – immediate resistance at 1.3930.
R- 1.4200
S1 – 1.3670
S2 – 1.3570
S3 – 1.3422

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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.