As we wrote last week the EURUSD closing above the 20EMA was a good short term technical signal for the bulls and the pair has not disappointed.  Since then it has posted 3 consecutive bull candles and has put together 5 consecutive up days which it has not done this entire year.  This is confirming the short term technical bias to the upside but the pair has its challenges.

Looking at the chart below on the daily time frame, we can see the Kumo or cloud is looming above and is quite massive.  The kumo represents support and resistance so the thicker the cloud, the thicker the resistance.  This could present some challenges to the upside as it clocks in at 1.3081 which was very close to the daily high today.  The first fib level for this massive downmove comes in at 1.3318 and if the pair can close inside the kumo, then we could see an attack on the first fib.  The momentum is struggling and not smooth so its not totally inspiring but the 20CCI has posted 5 bars above the zero line and a 6th bar would represent a short term trend in place to the upside.  With 1.2500 holding well and no daily close below it, this could be the first attempt at establishing a bottom.

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The oscillators support this move in the short term but a break is needed above the kumo for the bottom to really be confirmed.  Ironically this coincides with the 50% fib of the most recent downmove and a break here would tell us that the trend and bias has shifted to the upside.  Until then, short term cautious buys are warrented but if a violent sell-off happens at 1.3000 or the cloud top, then the party on the upmove is over and we suggest waiting to establish longs again either at 1.2500 or the 20EMA on the daily charts.

Chris Capre is the current Fund Manager for White Knight Investments. He specializes in the technical aspects of trading, particularly using Ichimoku, Momentum, Bollinger Band, Pivot and Price Action models to trade the markets. He is considered to be at the cutting edge of Technical Analysis and is well regarded for his Ichimoku Analysis, along with building trading systems and Risk Reduction in trading applications.