TECHNICAL ANALYSIS EUR/USD
EUR/USD reached an all-time high of 1.6039 in July 2008, with losses from there having left a double bottom at 1.2329 / 1.2459 in October 2008 / March 2009, from where a prolonged recovery phase was enjoyed. However, this eventually left a lower double top at 1.5062 / 1.5144 in October / November 2009, just shy of the 76.4% Fibonacci retracement of the previous 1.6039-1.2329 decline. Initial losses from there to 1.4218 were followed by a lower top at 1.4579, just under the double top neck-line at 1.4628, with fresh falls having then gathered pace. A succession of bearish signals ensued, including a dead-cross of the (red & green) 13 & 52 week moving averages, a breakdown through the (blue) ultra long-term 260 week (5 year) moving average, MACD moving back under the pivotal zero line, and the (purple) 8 year uptrend line connecting
.8566 & 1.2459 being breached. As yet, there are no immediate signs of a base being formed and we see the risk of continued weakness over coming weeks and months towards 1.1434 (100% of 1.6039-1.2329 from 1.5144) and possibly the 1.1214-1.1283 area (61.8% Fibonacci retracement of the entire October 2000-July 2008 .8232-1.6039 rise / base of the (orange) projected bear channel off the (2008 & 2009) 1.6039 & 1.5144 peaks with the (2008) 1.2329 low). Attempts to develop a multi- month base may then emerge, setting up a decent corrective recovery phase to partially retrace the bear leg from 1.5144. Longer-term, we see scope for a move towards the 1.0000-1.0074 region where key psychological support and the 76.4% Fibonacci retracement of the .8232-1.6039 8 year rise merge.
Steve Jarvis
FX
FX TRADER MAGAZINE July - September 2010 55
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