Daily Outlook 07.01.2008 by Dimo Dimov

The euro rose sharply against the dollar on Friday and reached 1.4824. However it was at these high levels shortly and was sold off as a result. This retreat shows the short term direction upon me so I expect more downside in coming days. The fall below the previous low 1.4694 is very important for the direction so I gave a strategy on Friday to enter short on a break of this level. The chart shows the impulsive scenario i.e. for a forthcoming sell-off of the euro. It suggests that wave 2 is currently developing as a running correction. The problem in this case is the fact that currently the fall started from 1.4824 look more like corrective combination instead of impulse. However my experience reminds me that in such a way looks running corrections prior to beginning of the strong movement in wave 3. With an eye on this I stay on my short position but I change my confidence level because the impulsive scenario is not the only possible scenario at the moment. Very important resistance level is 1.4776 so my stop loss is just above it. A key support is 1.4657

Trading strategy: 08:27 EST; 13:27 GMT

Short position from 1.4693, stop loss - 1.4780, target – opened

Confidence level – changed from high to low

This analysis has only informational and educational purpose and does not represent a proposal for buying or selling currency contracts.