The Euro could not hold its gains made after the announcement of the TARP bill rejection and continues to lose ground against the dollar. The slide accelerated after key support at 1.4373 (50% Fibo retracement) was broken yesterday in Asia. Liquidity in the US financial system continues to be a problem, causing a high demand for the US Dollar and high volatility. The slide currently underway will likely continue until the next resistance at 1.4149, followed by 1.4068. We may see a bounce first due to oversold hourlies, followed by another leg down towards 1.4068.

Alternatively, if the pair manages to break back above 1.4301 and the declining trendline is broken, we should see further upside towards 1.4373.

Action Plan: Our long was stopped out yesterday in early Asia when Fibo50 was broken. Failed to take profit during the sharp spike in NY trading. Long term trend now clearly down, and we must trade the short side. Highly oversold hourlies offer low risk/return for a short trade at this point. Looking to sell a failure near 1.4257.

Support: 1.4149 L-9-19    1.4070 L-9-16    1.3881 L-9-11

Resistance: 1.4301 L-9-29    1.4373 Fibo50    1.4489 Fibo62

RSI: Hrly: Capped by decl. TL, Dly: falling

Hourly Chart:

News that the House failed to approve the TARP bill caused the dollar to be sold off very quickly, and EURUSD spiked up by over 100 points. The pair quickly fell back to 1.4425, and is now moving up again, likely for sustained gains.

Alternatively we may see consolidation at current levels with high volatility and and a retest of 1.4301.

Action Plan: Stay long. Our long survived the dip into 1.4373, where the 50% Fibo retracement provided support. Long is now in play, but high volatility is a concern. Stop 1.4350, Target 1.4590.

Support: 1.4373 Fibo50    1.4301 HSppt    1.4257 Fibo38

Resistance: 1.4489 Fibo62, HSpptRsst    1.4555 HSpptRsst    1.4592 Fibo62

RSI: Hrly: Broke through declining TL, Dly: neutral

Hourly Chart:

Went long on a pullback after the break of 1.4460 and a break of the declining RSI trendline. Momentum strong and in support of the trade. Hourlies recovering from oversold and have room to run. Stop at 1.4350, Target 1.4600.

Hourly Chart:

EURUSD bounced off the 61.8% Fibo retracement of the 1.3881-1.4866 range at 1.4489, but staying close to that level, and charts don’t look like a bottom is in place yet. Market players are cautious ahead of the vote on the $700 billion bailout bill. May go long if the current low holds and the pair bounces when Europe opens, but prefer seeing a clear confirmation of upside momentum first.

The past few days of a slow grind lower favor a final “fallout” before the market turns up again. Need to hit a level that sparks enough buying interest to turn market sentiment around. Next support comes in at 1.4430 (38.2% Fibo retracement of the last upswing). Below that is the 50% of the 1.3881-1.4866 range at 1.4373, which is also strong hourly support.

Hourly Chart:

The New York Times reported that “After a marathon round of negotiations that ended in the predawn hours on Saturday, Congressional leaders and Bush administration officials said they were nearing consensus on a $700 billion rescue plan for the nation’s financial system, and that a deal might be announced on Sunday evening before the markets open in Asia. ”

This could cause extreme volatility in the forex markets on Sunday and Monday. Caution when trading during those times, potential for false breakouts. Volatility may persist during the European and US sessions as well.

Still grinding lower in its hourly channel, but key resistance at 1.45 is getting close. Possibility of an upside breakout before that though, but I think it’s more likely we will see one more leg down to test 1.45, which should generate enough buying interest to propel the pair out of its channel. and towards 1.48. Daily EMA10 and EMA20 are catching up with price and are both above 1.45 now, and price is back inside it’s 2%/10-day moving average price channel. Hourly correction pattern doesn’t look complete yet, despite the hourly double-bottom at 1.4555. Watch out for a significant move next week, long consolidations are often followed by large directional moves.

Alternatively, we may see a break of the upper channel boundary this morning (now at 1.4690), followed by more upside. Caution going long in that case, it would still leave the way open for a return to 1.4555 and 1.45.

Action Plan: Sidelined. Plan on going long on bounce out of the 1.4490..1.4507 area.

Support: 1.4592 Fibo68    1.4545 HSppt    1.4507 Fibo50

Resistance: 1.4866 H-9-22    1.4907 H-8-22    1.4961 DFibo50

RSI: Hrly: capped by a decl. TL and turning down, Dly: key resistance at 66

Hourly Chart:

GDX (Market Vectors Gold Miners ETF) continues its gradual pullback after the strong bounce in mid September. Support is found near 34. We should see a few more days of consolidation at those higher levels followed by a new major upleg. First significant resistance is 39, followed by 42.5 (61.8% Fibo retracement). Above that level, a move towards 52 and beyond becomes likely.

Daily Chart:

Consolidation between 1.47 and 1.48 continues, now for the third day. That’s a good sign that the market prepares for a new upleg (long term). For the short term, I expect to see a move below 1.46. Still waiting for a clear bottom to appear on the charts, and a test of 1.45 is still viable. That’s where the daily EMA10 and EMA20 lie as well. Hourly RSI is rolling over, and has room to fall.

Alternatively, if 1.46 is holding, we may see continued sideways trading until the end of the week.

Action Plan: Sidelined. Plan on going long on bounce out of the 1.4490..1.4507 area.

Support: 1.4592 Fibo68    1.4545 HSppt    1.4507 Fibo50

Resistance: 1.4866 H-9-22    1.4907 H-8-22    1.4961 DFibo50

RSI: Hrly: turning down, Dly: key resistance at 66

Hourly Chart:

The pair continues to consolidate, and rejected 1.4740 this morning (declining TL resistance). The houlies don’t show a clear bottom yet, and I expect a retest and break of 1.4620 during the NY session. Next support is found at 1.4592 (61.8% Fibo retracement), and more significant support around 1.45. A return to 1.45 is likely, and if recent volatility continues the correction may go well beyond that.

Alternatively, we could see a sustained break of 1.4750, and a retest of the prior high at 1.4866. If that occurs, there is a good possibility of a failure at that level, and return to lower levels.

Action Plan: Sidelined. Plan on going long on bounce out of the 1.4490..1.4507 area.

Support: 1.4592 Fibo68    1.4545 HSppt    1.4507 Fibo50

Resistance: 1.4866 H-9-22    1.4907 H-8-22    1.4961 DFibo50

RSI: Hrly: lacks direction, Dly: key resistance at 66

Hourly Chart:

EURUSD moved up sharply yesterday when the markets reacted to the release of the TARP and its impact of the US Dollar. Now we’re seeing a corrective pattern unfold that is typical after a sharp momentum move, as positions are being adjusted, profit is being taken, and traders take time to assess the true impact of the new proposal. From a technical point of view, the chart pattern in EURUSD is very similar to late August 2007, which can give us clues on how the next few days may unfold. (Interesting is also the similarity in EURJPY for the same time frames.)
I expect more downside for the rest of the NY session, as well as the Asian session. We should see the upleg of the corrective wave sometime over the next 24 hours, possibly in early Europe, often a period with a bullish bias for EURUSD. Caution if planning on going long there, since another leg down is likely. Once this corrective wave is over, I expect the uptrend to continue, possibly with slow momentum at first forming a base around 1.45..46.

Alternatively, we could see an acceleration of the corrective move, possibly testing 1.4550 within the next few hours. Consolidation at the lower levels, and more upside from there is possible.

Action Plan: Sidelined. Plan on going long on bounce out of the 1.4490..1.4507 area.

Support: 1.4591 Fibo68    1.4545 HSppt    1.4507 Fibo50

Resistance: 1.4866 H-9-22    1.4907 H-8-22    1.4961 DFibo50

RSI: Hrly: Capped by declining TL. Dly: 66 is key resistance.

Hourly Chart:

Hourly Chart for Aug 27..28 2007: