The EURUSD made another volatile but indecisive movement this week, made another Doji on weekly chart. Last week I talked about the triangle which suggests a consolidation phase with 1.3800 as a key level. That condition remains the same. This time, I want to take a closer look at 1.3800 level from another technical perspective called “change in polarity” which is one of the most important principles of technical analysis. This principle simply means that a broken support becomes a resistance and a broken resistance becomes a support. As you can see on my weekly chart below, the 1.3800 level has been a key level since May 2009. When price breaks below 1.3800, it becomes a resistance in a bearish outlook. On the other hand, when price breaks above 1.3800, it becomes a support in a bullish outlook. What happened this week, price slipped above 1.3800 as a resistance, but whipsawed to the downside and closed lower below that level. So from this point of view, the 1.3800 remains a valid resistance area, still in a bearish view until price makes a clear break above 1.3800 which would change the outlook to a bullish view testing 1.4000 – 1.4300. Like I said in my daily comment yesterday, the failure to move consistently above 1.3800 could create a false breakout scenario, which is also support the bearish view especially if price able to make a clear break below 1.3500 testing 1.3250 even back below 1.3000.
Have a great weekend and see you guys next week.
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