EUR/USD Monthly
Hopefully you can see why I have been observing the resistance zone around 1.3850. The close last month provided us with a Bearish Marabuzo candle, and to offer more confidence we may have seen a top around the 1.385 resistance. This still leaves plenty of room for a bullish retracement back within the side of the body, but from a structural point of view I am seriously questioning the possibility of a pivotal high like seen back in Feb '13.
EUR/USD Weekly Chart
This is where it becomes a little messy. Compared to the monthly charts. the weekly charts are throwing me a few curve balls. Firstly the weekly candles, while edging lower, have too much overlapping action for my liking. So we could be witnessing a correction lower. When you see candles that overlap so much it highlights the whipsawing price action the markets have provided with it changing its view from one week to the next.
We are currently trading just above 1.350, and we could easily see a bullish retracement within last week’s candle before further losses. In the event we do break lower than 1.350 then we have the 38.2% fibs to take care of (around 1.345) with a confluence of support between 1.335-8.
So what can we, as traders, deduce from this?
If we have 2 (or more) higher timeframes in disagreement, then we can assume other market participants are also experiencing confusion and lack of ideal direction. This in turn helps us choose whether we should trade for those longer 'home run' swing trades or stay nimble and ready to jump in and out of the market to catch smaller profits.
Personally, I am not looking to become a trading hero in the daily timeframe, as my style requires at least the daily and weekly to be aligned (and preferably more).
Also with EUR/USD being the highest traded currency it is also an excellent proxy for other markets you may be trading.
EUR/USD Weekly Chart" title="EUR/USD Weekly Chart" width="474" height="242">
SUMMARY:
- Whilst the monthly charts look increasingly bearish the weekly chart (and daily) provide many layers of support to slow any losses
- The weekly shows characteristics of both a bullish correction and a topping pattern, making it ambiguous
- Therefor this makes it harder to choose directional trading on the daily timeframe and may be best to trade on H4 and below until we see a clearer picture
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