EUR/USD Daily Update, Wed 31, August 2011
Good morning,
Today, I would like to discuss with you situation on daily time frame with a bit different angle.
The fact that market could not hold above 1.4550 tells me that probably it's too early to expect indecision condition elimination. Although NFP release could shake markets a bit, but major information will come on September 20 - next FOMC meeting.
Second, it looks as bearish W&R signal on daily time frame, since market has returned right back - below 1.45 level. It means that this was just stop grabber and nothing more. Due to this moment I can't exclude deeper retracement down, even to 1.4240 area during current week.
But major things that I would like to discuss is some other signs. Take a look at daily time frame. First, current move up looks like bearish wedge and that is not good for bulls. Although there is no divergence with MACD inside of its body (that is very common), still, this is the wedge.
Second, Look at MACD Hist. I use it to assess momentum strength of current move. Momentum should support the price. If this is not the case, it means that reversal is somewhere near. We can see that momentum itself is not impressive and it does not support current move up.
And finally, Tick volume - it also does not support move up. Although it could reduce due decreasing overall traders' position with uncertainty, still this is not supportive sign for bulls.That what is worry me currently.
What we have to watch over today trading session:
1. Next strong support area is 1.4360 - daily Conlfuence + pivot support 1.
On 4-hour time frame trend is bearish, yesterdays plunge was really strong, and probably it will continue. Also this sell-off confirms reversal by Butterfly "Sell", and target of butterfly reversal pattern is 1.27 at 1.4260 - right near daily 1.4237 Fib support. So, two potential targets - 1.4360 as strong daily support that market should at least respect during first touch. If it will not hold - then 1.4240-1.4260 area.
On hourly chart we see some retracement up that could turn to "222" Sell pattern. Personally I like to watch for 1.4470 area since this is Agreement and potential target of 3-Drive sell. But if market will not reach it, I will watch for some thrusting bars down and shifting hourly trend to bearish before enter short.
