By Russell Glaser – Yesterday the dollar showed for a bit of strength in the face of the two week EUR/USD correction. This was due to doubts over the new flexible Chinese fx policy.
We can see from the daily chart that the two week period of strength from the EUR may just be a short term correction in the long term bearish trend for the EUR/USD.
Trend line 1 notes the long term trend line which takes into account all the price action of the EUR/USD’s bearish move since December. Sharper sloping trend lines are drawn below this. Trend lines 2 and 3 show when the bearish trend of the pair accelerated.
The recent upward correction for the EUR/USD shows a breach of trend Line 3, but the appreciation halted at trend line 2, with 2 failed attempts to close above this line. This shows significant selling pressure at this trend line and at the price of 1.2460.
Trend line 2 begins on April 15th. The second point of contact is on May 10th, and the 3rd point of contact is yesterday. The three contact points show the trend line is a significant trend line. Taking a position when the price arrives at a trend line can be a good entry opportunity into a trending market.
Continued selling of the EUR/USD should send the pair to its next support level at 1.2150, with a further target at the swing low of the daily chart at 1.1875.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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