in my free newsletter I send out to subscribers last week I have included this brief article focusing on the differences between this year 2012 bounce off the powerful, long-term 1.20 support area, and similar bounces we had in 2009 and 2010. Hereunder is the original text of the article, followed by my most recent analysis and comment.
‘In the first part of last week’s EUR/USD forex pair review, I have showed the long term support the Euro confirmed recently at 1.2140 on the EUR/USD spot market. The last 2 times the Euro came off the bottom of this huge sideways move we can see on the 20-year weekly chart, respectively in 2009 and 2010, price moved higher violating the weekly sequence of moves lower and then came back to the all the way half way back from lows to highs (blue line) where typically we have interest from long traders and program trading. You can see it in the picture below (check here the same image with comments). Will 2012 be the same? The half way back in 2012 corresponds to the 1.2620-30 area. However this year what is different is the position and direction of the 200-day SMA which is currently supporting price. While in 2009 and 2010 the 200-day SMA was out of the way and trending downwards, supporting a test of the half way back area, this time the 200-day SMA is flat and acting as support. I still expect the 1.2630 level to trade because there is where a lot of long interest is located, and historically it has been tested. However we also know that, on the weekly timeframe, price traded an extension long at the 1.2820 area which lines up with the 200-day SMA, and maybe professional traders are going to be be happy anyway with that price. Will the retail interest located around the 200-day SMA be able to distract smart money and program trading wanting to push price lower into the 1.2630 area? This is the main question and I believe it is going to be answered in the coming two weeks.’
Comment: after analyzing recent trading action I now believe that program trading flipped to longs last Friday, October 12th after price violated the next traditional short setup above the 1.2986 level. We are now trading within a weekly extension long from 1.2820 with targets at 1.3340 and then 1.3620. In this move higher price has the potential to climb above 1.2830. Shorts are warned.
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