EURUSD broke through resistance at 1.4705, as well as 1.4810, to peak at 1.4866 so far. Now highly overbought, and consolidation/correction over the next 2 days likely. Good support found in the 1.4490..1.4510 area (Fibo levels, convergence of daily EMA10 and EMA20 in about 2 days.)

Missed going long on the breakout of 1.4705, will wait for a pullback and plan on going long on bounce. Caution: high volatility persists, and pullback can potentially go deeper than expected based on technicals. Pullback to 1.4360 (TL support and Fibo50 of 1.3881-1.4866 move) possible, or even a retest of 1.3881. Enter with momentum near key levels, and keep stops tight.

Hourly Chart:

The TARP package is widely seen as bearish for the dollar (essentially a dilution of the money supply by $700bln, on top of all the other Fed/Treasury measures to deal with the mortgage crisis). The market responded accordingly, and the Euro appreciated against the dollar overnight and this morning, in Asia, Europe, and the US. 1.4630 resistance has been broken, and next major resistance is 1.4708, the 38.2% Fibo of the range from 1.6037 and 1.3881. Hourlies are supported by a rising trendline, that soon will push the pair into overbought territory. Daily RSI is near a key resistance level of 66 that hasn’t been broken since the main uptrend started to turn in April 08. I’m expecting the current daily uptrend to consolidate by heading lower over the next two days, starting near current levels, and then to resume and push past 1.4708.
High volatility also favors the revisiting of prior support levels. 1.4435 is first major support, followed by 1.4360.

Alternatively, we could see the gradual upmove continue and accelerate on a break of 1.4708. The pair would be highly overbought in this case, and a return to 1.4544 or 1.4435 likely during the next day.

Action Plan: The daily trend has turned up and demands long positions only at this point. Will stay sidelined until prices have returned to either 1.4435 or 1.4360, and RSI has hit 50 or below, then go long on a bounce out of these levels.

Support: 1.4544 HSppt    1.4435 HSppt    1.4360 HSpptRsst

Resistance: 1.4708 DFibo38    1.4810 H-8-28    1.4907 H-8-22

RSI: Hrly: supported by rising TL (not sustainable), Dly: near key res. at 66

Hourly Chart:

Daily Chart:

EURUSD broke 1.4285 in a strong rebound, and technicals favor a continuation of the up move. Caution though if 1.4285 is retested. Keep stops tight below 1.4285 if going long.

Continued liquidty crisis and strong demand for USD caused selling of EURUSD last night. Resulting high volatility and deep pullback stopped out our long position.
Prices found initial support at 1.4150, and are now challenging key resistance at 1.4285, the 62.8% Fibo of the current range, and also prior channel resistance. The bias is still up, but caution is advised when entering market long in middle of this volatile range.

Alternatively, we could see continued weakness and a retest of 1.4070. If that support gives, it opens the way to 1.3880.

Action Plan: Either wait for clear break of 1.4285 and buy a bounce out of that level when first retested (preferred), or buy bounce out of 1.4070 if that level is challenged again. 1.4285 was just broken in a sharp upmove, but prices need to stay above 1.4285 before new long position should be entered. Enter near key levels with tight stops, or keep stops wide for long term positions.

Support: 1.4130 Fibo38    1.4075 HRsst    1.3881 L-9-11

Resistance: 1.4268 Fibo62, HRsstSppt    1.4390 HRsst    1.4460 HRsst

RSI: Hrly: broke through decl. TL, now slowly rising and back above long-term rising TL

Hourly Chart:

Prediction: Channel breakout was followed by consolidation above the upper channel boundary, and another strong upmove followed in early Europe. The pair has corrected lower since but is stabilizing at the high of yesterdays range. I expect further consolidation for the rest of the day and through the Asian session near 1.44, followed by a strong upmove towards 1.4650 during the European and US Friday session. This would end the week with a very bullish bias for the Euro and set the stage for more gains next week. Good similarity with the price action during the last week of August 2007.

Alternative Scenario: Alternatively, we could see a return into yesterdays 1.4270-1.4380 range, and potentially a retest of the prior channel boundary of 1.4270. If this level fails, it would open the way for further downside and a return to 1.4075.

Action Plan: Missed the bounce out of 1.41 yesterday, but went long on the corrective bounce at the end of Asia which is often a good time to go long when the trend is up. Long is in play, and I’m targeting 1.4650. Stop set wide at 1.4183 due to increased volatility.

Support: 1.4274 HSppt    1.4075 HRSppt    1.3881 L-9-11

Resistance: 1.4540 HRsst    1.4570 L-8-26    1.4630 L-8-19

RSI: Hrl: Finding support around 50. Dly: Room for further gains.

Hourly Chart:

The EURUSD pair broke through channel resistance at 1.4270 with good follow-through. Expect a pullback to the breakout level (1.4270) over the next few hours, but not unlikely that it keeps moving up since momentum is strong. Target in the near term could be 1.4650, next major technical resistance on the dailies.

The Euro gains are partially linked to golds large upmove today, $88 at the time of this writing, that’s a daily gain of over 11%! Panic in the financial markets caused flight to quality, and gold never fails to fufill that role, especially since it has been so oversold lately and ready for a rebound anyhow. We’re likely to see more gains in both Gold and the Euro over the next few days.

EURUSD Trading Recommendation: Buy bounce out of 1.4270 if given the chance. Target 1.4650. Stop 1.4185, or tighter. Pair should not return back into channel with this kind of momentum.

Prediction: Last nights upside momentum faded when it hit resistance at 1.4270 which is now significant resistance and confirms the current price channel between 1.4270 and 1.4070. Once this channel is broken, new follow-through in that direction can be expected. Overall, the daily charts continue to look like they are forming a bottom, and RSI on the hourlies is slowly picking up, but still maintains a downward bias short term.
I expect the bounce at 1.4130 to be challenged again, followed by either another bounce at that level, or a bounce near 1.4070. This should be followed by a break of 1.4270, and further upside. EMA10, 20, and MA100 on the hourlies are converging, a good sign that a new directional move is about to come. Not quite there yet though, and current chart pattern leaves room for one more significant downside stab inside the channel.

Alternative Scenario: Alternatively, we could see a break of 1.4080, followed by further downside and a challenging of 1.3880.

Action Plan: Wait for next pullback and go long on a bounce out of either 1.4130 or 1.4070, or somewhere in between. Next deep bounce likely to provide the momentum for an upside breakout past 1.4270.

Support: 1.4131 HSppt    1.4083 HSppt   1.3881 L-9-11
Resistance: 1.4268 HRsst    1.4322 HRsst    1.4480- H-9-14
RSI: Hrl: RSI rolling over after breaking through decl. TL

Hourly Chart: