(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; uptrend lines in green; downtrend lines in red; horizontal support/resistance levels in yellow; Fibonacci retracement levels in grey; 200-period simple moving average in light blue.)

2/22/2008 – EUR/USD – Is the Euro poised to reach a quadruple top? As of this writing, the EUR/USD daily chart, as shown, seems to be hinting at this direction. The bigger question, of course, is what will happen if and when that quadruple top is reached. Will it be a true quadruple top where price promptly retreats from the resistance posed by the all-time high? Or will it be a clean breakout of the pre-existing triple top? In either event, traders are watching the general 1.4950 region very closely. Confirming indicators/oscillators like the displayed Stochastics (which have entered overbought, thereby hinting at an impending downturn) should not be taken too seriously, as these types of indicators lose much of their utility in trending markets. On the other hand, it could certainly be argued that the pair is currently in a well-defined horizontal trading range (bordered by the two yellow horizontal lines), where oscillators can certainly be of use. But this range could also be seen as simply a consolidation before continuation of the long-term, record-breaking uptrend in the EUR/USD. With the closest upside resistance well-defined in the region of the aforementioned all-time high, support to the downside in the event of a downturn resides at several levels. These support levels include the closest green uptrend support line, as well as the 23.6% and then the 38.2% Fibonacci retracement levels (the low-to-high retracement span being measured from the bottom of the recent bull-run on 8/16/2007 to the all-time high on 11/23/2007).

James Chen

Chief Technical Analyst

FX Solutions

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