EUR/USD Daily Update, Fri 30, December 2011
Good morning,
current situation is very tricky, and market makers love such issues. From one point of view - market has hit 1.618 daily AB-CD, 1.27 butterfly and some intraday targets, has formed 3-Drive buy on hourly chart - all signs of reversal are here.
But from another side - major AB-CD target from weekly pattern has not been hit yet, it stands slightly lower than current market.
So, why Market makers like it?
Because when traders start enter long, by thinking that major targets have been hit, they support these retracement to trigger more and more traders to step in. Then, since market is not quite reached significant target at 1.2830, it reverses down and grab stops of those traders. This is not 100% will happen, but my experience tells that the probability of that is high.
On 4 hour time frame trend is bullish, we see that market has reached first resistance at 1.2950 and low of butterfly. For bears will be perfect if retracement will stop not higher than 1.30 K-resistance. Otherwise it will be too deep return inside of butterfly.
On hourly time frame there are a lot of important signs. First, take a look at nice 1.618 3-Drive buy and corresponding MACD divergence. Second, recent swing up is a bit greater than previous swing down - this tells about possible conitnuaion of retracement. But at the same time retracement down from this up swing should be deep - 1.2911 at minimum.
If this will be so, then market could create "222" Buy at hourly time frame and AB=CD pattern with target around K-area 1.30. This will be perfect level to search for sell signals. That is what we have to look for today.
Anyway be extra careful and think twice before take any long positions. Don't you think that after such move from 1.45 market will reverse only due hourly 3-drive and 4-hour butterfly pattern.... And what it will do with downward momentum?