Each week Longleaftrading.com will be providing us a chart of the week as analyzed by a member of their team. We hope that you enjoy and learn from this new feature.
Since the start of 2012, the June Euro Currency has traded in a range between 126.35 and 1.3496. Most of the time, the price was narrowed into a range that was finally broken last week on Friday after the United States non-farm payroll disappointed. The lackluster report was combined with anticipatory selling ahead of elections in France. The drop in futures prices continued on Sunday night after France elected a member of the Socialist party into office for the first time in over twenty years. Surprisingly, the initial drop on Sunday night was short lived and technical trading took over. The chart below clearly shows the targets that the trade had in its sights.
Arrow 1.) points out Fridays close below the support trendline that has underpinned the market since the beginning of the year. Traders read this as a bearish signal for the next day’s trade. On Sunday night, sellers in the Euro Currency blew straight through the Fibonacci 50% retracement and found support on the next level down. This came in near the 61.80% Fibonacci and a price of 1.2957.
Market bears were obviously disappointed in today’s recovery back to the 50% retracement, but it will give technicians something to think about this week as we see how the Euro performs after a convincing finish last week.
I will be advising my customers to be on the lookout this week for two things. First, the bear camp will want to see closes below 1.2957 to confirm a substantial leg lower. Conversely, market bulls will hope for today’s low to hold, but would really like to see the Euro close above the resistance trendline that prices slightly above 1.3200. Any price action between would overall be considered range trading.
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