Eur/$, "ideal" area to top (but no confirm yet).....
International Trading
Eur/$ has indeed continued higher, breaking above the July 20th high at 1.3030 and on way toward the long held 1.3120/35 resistance area next (38% retracement from the Nov high at 1.5140). However, the market is nearing overbought after the gains from the Nov low at 1.1880, is potentially within the final upleg from that low (wave 5, see numbering on daily chart below), lots of other currencies are reaching longer term $ support areas (cable at 1.5630/50, 50% retracement from the Aug 2009 high at 1.7040, $/index at 81.40/55, 50% from Nov low at 74.25, etc.), and the short term eur/$ chart may be nearing a high. These all suggest that risk is rising for at least a few weeks/month of consolidating lower and "ideally" would do so in this area. I use the word "ideally" as there are no signs of such a high "pattern-wise" (at least so far). In general from a position standpoint, don't want to make the mistake of just running in and shorting in these types of situations, as there is often a big difference between "ideal" and what actually occurs. I prefer to be a little more patient, managing the risk (if in a position) or waiting for signs of a short term pattern/reversal before going against the larger trend. Though this will usually mean not getting at the exact reversal point, the risk by waiting, will most times be quite less (remember its all about risk/reward). In the case of eur/$, rebought on July 23rd at 1.2840 and given the potential increase in risk in the position, would use a very aggressive close below the week long bullish trendline (currently at 1.2975/85) as a sign to stop. Further support below there is seen at the bullish trendline from late June (currently at 1.2920/30), while resistance above the 1.3120/35 area is at the rising trendline since June (currently at 1.3260/75).
Longer term no change in the bullish view on way toward 1.3120/35 (almost there), with potential for 1.3940/55 (50% from the Nov 2009 high at 1.5140) and even the bearish trendline from that high (currently at 1.4725/50) still favored over the next number of months. However as mentioned above, risk is rising for a month (or more) of consolidating on the way higher (see "ideal" scenario on weekly chart/2nd chart below). Switched the longer term bias to neutral on May 25th at 1.2260, from bearish which was put in place last Nov 2nd at 1.4825. Though further upside is favored in the bigger picture, just too much near term risk to switch the longer term bias here, and instead would wait for a better opportunity to switch (expected to be to the bullish side and at lower levels ahead).
