“Your present circumstances don’t determine where you can go; they merely determine where you start.” – Nido Qubein
Let’s start today analyzing the price movement on the euro using those guidelines I’ve been talking about in prior articles. The first thing to realize is even with gold’s recent decline, we are still basically in a bull market. In bull markets, corrections are healthy. We haven’t had a decent correction in equities since November last year.
We should also be cautious however. The S&P 500 (SPX) is flirting with all time highs so we should probably watch for a solid break, or fall off this level. A break will likely lift other risk assets, and a fall will… well you get the idea. That’s why I like trading technically.
EURO ACTION
Technically, the euro entered a daily consolidation on the 10th of this month. Of course, we didn’t know on the 10th that was happening. This pattern topped out on April 16 and the 50% retracement of the prior daily swing move from 1.370 to 1.273 was rejected pretty harshly. Since then we’ve been bouncing around.
KEY LEVELS
This current consolidation has retraced just over .382 of the minor swing move higher from 1.273 to 1.320. This means that I’m comfortable putting a regression trend channel up there and use this as a guideline to trade from. From there, price action on a four-hour hourly chart may be easier to read. Regardless, we are sitting right on the bottom line of the trend channel. This level is also on prior minor support from 1.300 to about 1.302. If this level breaks, look for fib retracements of this move higher for additional support.
LIGHT LIQUIDITY
On the other hand, liquidity is generally fairly light on Mondays. This level will likely hold for the day. I would favor short-term long trades around the 1.300 level targeting Fibonacci retracements of the move from 1.32 down to where we are now.
Later this week, if price breaks long from the 1.31 level, we will likely see a resumption of the long trend.
