* Last Candlesticks pattern: Dragonfly Doji
* Time of formation: Aug 2010
* Trend bias: Down
Daily
* Last Candlesticks pattern: Morning star
* Time of formation: 29 June 2010
* Trend bias: Up
The single currency moved pretty much in line with our expectation and despite rebounding to 109.56 on Monday morning this week (we recommended in our previous update last Friday to sell euro at 109.00 targeting for 106.30-40), price then quickly retreated sharply from there and reached our indicated target at 106.30/40 (with 260 points profit) before rebounding from 106.16. This bounce from 106.16 suggests downtrend is not ready to resume yet and further consolidation would take place, however, upside should be limited to this week’s high of 109.56. Only a daily close above the Kijun-Sen (now at 109.83) would signal a temporary low has been formed at 105.44 earlier and then correction to 110.09 (50% Fibonacci retracement of 114.74 to 105.44) and possibly 111.19 (61.8% Fibonacci retracement) would follow but reckon the Ichimoku cloud area (now at 111.40-70) would hold.
On the downside, a daily close below this week’s support at 106.16 would revive our bearishness and signal rebound from 105.44 has ended at 109.56, bring retest of this support later. Below there would extend downtrend to 105.00, however, loss of near term downward momentum would prevent sharp fall below 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74) and price should stay well above 101.98 (61.8% projection) and bring rebound later.
Recommendation: Short position entered at 109.00 met target at 106.30/40 with 260 points profit
Recommended Trade for This Week: Sell @ 109.80 with SL Above 110.50 for 107.00
On the weekly chart, despite last week’s selloff to 105.44, the subsequent rebound from there left a ‘Dragonfly doji’ candlestick pattern there, suggesting consolidation above this level would take place, however, it is necessary to see a long white candlestick in order to confirm a low formation, otherwise, downside risk remains. A weekly close above the Tenkan-Sen (now at 110.08) would be the first sign that low has been made and then rebound to 111.19 (61.8% Fibonacci retracement of 114.74 to 105.44) and possibly 112.50 would follow but reckon resistance at 114.74 would cap upside.
On the downside, below this week’s low at 106.16 would revive bearishness for a retest of 105.44, however, break there is needed to confirm downtrend from 169.97 has resumed for further weakness towards 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74), however, loss of near term downward momentum should prevent sharp fall below 101.98 (61.8% projection) and risk has increased for a rebound later.
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