Morning everyone, lets get right to it today. As you have seen the EUR/USD reversed on Friday off the double bottom shown by the Green Line. Unfortunately as a technical analyst sometimes you develop tunnel vision and overlook other support areas once you become convinced that the price will reach a certain level. I was very confident that the EUR/USD would reach 1.1410 before the tradable bounce occured. While I knew it was very possible that the price could rebound off the double bottom I really didn't expect it. Thus the lesson here is to respect strong support and resistance levels and trade what you see and not what you think. As for now the EUR/USD is very strong and is running into some strong resistance at 1.1544, then at 1.1560 and finally at 1.1575. All 3 of these resistance levels are very strong and it is possible the price could reverse lower at any of these levels.
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| EUR/USD |
For the USD Futures we still have an inverse head and shoulders pattern and it is very common for this pattern that once it initially breaks its neckline for there to be a temporary pullback. The lower lines are the support levels and the red line is very important. If the price can stay above the line then a move higher is very likely. The price would need to break above the upper black line at 95.43 for me to consider this a reversal. My feeling is that the USD will move higher but until we have technical confirmation refrain from placing USD long trades.
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| USD Index futures |
Lets take a look at Gold....As you know Gold typically moves inversely to the USD. As you can see in the chart as the price has moved higher(upper red line) the RSI 3 has formed lower higher and the Red line heading lower. This is a big negative divergence and indicates Gold is about to head significantly lower. If Gold is about to head lower that infers the USD is about to head significantly higher.
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| Gold Chart |
Update on the GBP/USD, as you can see my prior analysis was correct and the GBP/USD has broke its trendline support. Now the price is headed to the support located at the lowest red line and Green line in the 1.2925-1.2930 area. Even though the GBP/USD is likely to go lower eventually I would close sell positions there since a bounce higher is likely.
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| GBP/USD chart |
Update on the EUR/USD....As you can see the
EUR/USD has also headed lower and is now between strong resistance at the daily high and the support line below. I think the EUR/USD still has downside here. Next support level is at 1.1475 and then 1.1420. Use trailing stops for all your positions to lock in your profits as the trade goes our way.
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| EUR/USD |
