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EUR/USD Classical: Poised for Trend Reversal
Written by article default Tuesday, 12 October 2010 08:22
EUR/USD: The pace and intensity of this latest Euro rally that began in early September, has been most impressive, with the currency pushing higher on a daily basis to finally break above major psychological barriers at 1.4000. However, daily studies are well overbought at this point, and the risk from here is for some form of a corrective pullback before considering a bullish resumption. The key to a reversal is now entirely contingent on the daily close in the major. Although we have seen previous daily higher lows broken to the downside on numerous occasions throughout the rally, we have yet to see a daily close below the previous daily low. The market has now put in a dramatic sequence of 24 consecutive closes higher than the previous daily low, and we would therefore need to see a close below the previous daily low (1.3867) to officially break the sequence and likely trigger the start to a legitimate corrective decline. It looks as though there is a very good chance of this on Tuesday, with the market having broken some key trend-line support and triggering a double top which easily projects additional declines into the lower 1.3700’s.
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