Red's EUR-USD forecast: Recovery slowing, Diagonal Triangle forming under 1.3380

This Correction Rally: The EUR-USD pair is in a correction rally after Mr. Bernanke's speech Tuesday kept the possibility of QE-3 open.

The market pushed the EUR-USD above resistance at 1.3310, and is now testing the 1.3370-1.3380 resistance Zone.

Note: the market is flattening, but is not fading back to the Bearish scenario because it continues to make higher highs and higher lows.

The Triangle-Double Top: look at the price action into Wednesday's US session as a diagonal triangle, and note that a Diagonal Triangle can be a wave C of a corrective structure, so it can be an early signal that the correction is rally is taking its last stride.

A break below 1.3280 will clearly break below the Triangle, and to some, it may look to be a Double Top. This action is not necessarily a sign of Bearish continuation, but it would establish a Top to this week's sideways action under 1.3280.

A break back below 1.3225 then may give the market more reason to continue the Bearish scenario. Then if the market closes the week below 1.3145, we open up 1.3046, 61.8% retracement of the rally from June 2010 @ 1.1876 to May 2011 @ 1.4939.

A Continuing Correction: The market may extend the current correction ahead of the European Central Bank meeting Thursday. The resistance at 1.3380 to the 1.34 psychl pivot is very important. A break above this targets the 1.35-1.3520 pivot. The ability to close above this mark, seen as last week's range's Central pivot, suggests to me a more significant correction, opening up toward 1.37. If that breaks, the next mark is 1.3790, essentially reverting back to the 200 period (SMA) simple moving average seen int he 4-H chart below. Stay tuned...

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Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.