Hi my dear friends here, recently the Euro dipped to a new 12-year low on Friday at 1.0462, which is only 7 pips above our long term 71.4% retracement level. As far as I remember, I have talked about this level several times, and bottoming only 7 pips above it indicate its importance. Therefore, this level will be in the center of my today’ analysis.
Late last week, the price broke above the top of the falling channel from the ECB top, but the reaction was limited, and the price was back to retest this channel (please refer to chart #1). This behavior is a yet another indication of a probable bottom in the area, because retesting the top of a channel which was broken to the upside is bullish. The fact that the retest level included reaching a new bottom does not change that at all. However, it is obvious that we are facing a very strong downtrend, and we should not get very excited about bullish breaks unless they show enough strength to convince us that they mean business.
As said in all of last week’s analysis, the next long term target is 1.0454. Take a look at attached chart #2, you will see that the falling trend line connecting October 2008 & June 2010 major bottoms (the red trend line on the attached chart), is currently running very close to 1.0454! I guess we can test this important level in the near future in order to get more clues on the long term direction of the single currency.
As for the short term analysis, the first resistance is provided by the falling trend line from Thursday’s high, which is currently running around 1.0565. A break above this level, especially if it comes with the trend low as close as possible to 1.0454 would be a good bullish sign (Friday’s low 1.0462 is surely close enough to 1.0454). If we break above this level, the euro will be expected to recover targeting 2 micro term retracements at 1.0599 & 1.0621. Here is where the bulls are invited to prove their strength. If we top very close to either of those levels, the recovery could be over. But breaking above these levels would be another positive sign, may be an extremely positive sign. The targets for breaking 1.0621 include 1.0678, 1.0713 & 1.0750, among other levels.
First support is provided by the rising trend line from Friday’s 12-year low, which is currently running at 1.0515. As long as this level holds the Euro has a chance to stretch this recovery higher, but if the price breaks below it, that chance gets thinner & thinner. A break below this level would make reaching a new 12-year low highly probable. In this case we need to keep both our eyes at the price as it approached 1.0454. This level could be the reason why this sharp drop is not stopping, it may be the awaited target & turning point, after 1.1096 failed to be. Testing 1.0454 should provide us with info about the direction of the next big move, and it is simple: a bottom very close to this level is a reason to expect a strong rising move, while a clear & clean break below it is a reason for this trend to go lower & lower. A break below this level will be expected to target 1.0419, 1.0359 ahead of what looks like an important level at 1.0333. So better careful Kevin, Nader, Adnan, Tiger, Amanda, Fipsie, Diego, Delcios and others..Happy trading..
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