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Nearby Euro Straddling Key Support Level

ByThe Pattern, Price & Time Report
AuthorJames Hyerczyk
Published 05/26/2012, 08:58 AM
Updated 05/14/2017, 06:45 AM

Barring a massive buying spree or short-covering rally, the Nearby Euro futures contract is expected to finish the week sharply lower and in a position to continue its sell-off next week.

This week, the single currency took out the January bottom at 1.2637 to post a new low for the year. Additionally, the market also spent a little time below the August 2010 bottom at 1.2535. This price is expected to be defended heavily since the next downside target is the June 2010 major bottom at 1.1832.

There are no significant Gann angles providing support at this time, however, the Euro is walking down a downtrending Gann angle from the 1.4908 top at 1.2708. This price is essentially resistance; however, it may act as a pivot price from time to time.

Weekly-Nearby-Euro-Chart
The main trend is down on the weekly chart as demonstrated by the series of lower-tops and lower-bottoms. The main trend will not turn up unless the main top at 1.3287 is violated. Because of severely oversold conditions, the Euro is ripe for a daily or weekly closing price reversal bottom. Although this chart pattern will not turn the main trend to up, it can trigger the start of a significant short-covering rally.
 
A significant amount of speculators likely went short after 1.3000 was violated. These traders currently have a significant amount of open position profit. The longer the Euro hovers around the old bottom at 1.2535, the more nervous these short-traders will become. This is the area at which a short-covering rally may begin.
 
Although a new shorting opportunity may emerge if 1.2535 is violated with conviction, short-traders have to avoid getting caught in a bear trap. It is better to take the quick exit if wrong than to hold on while the market goes through a retracement.

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