The drop to 1.2760 stopped out my long position this morning. The lack of the rebound to extend much beyond 1.29 and the drop below the 61.8% Fibo level and MA100 now increases the risk for further downside. Daily EMA10 is now pointing down, prohibiting me from going long. Standing aside for now and will look for a short entry opportunity on a rebound towards 1.31.

RSI continues to post bullish divergences (now triple) and the pair is challenging a declining trendline. Price pattern calls for further upside to at least the 38.2% retracement at 1.2990. There’s good potential for an accelerated move to 1.31.

My long established this morning is in play, and even though entered a bit early, charts now show a double close above the hourly EMA10, my usual entry signal. Staying long with a target of 1.3100, but may consider earlier exit tonight.

Hourly Chart:

Long position was stopped out but I re-entered it pretty much at the same level of 1.2792 after realizing key Fibo support comes in at 1.2776 (61.8% retracement). This is overlapping with the daily MA100 and is near price support from July. Coupled with a bullish divergence on the hourly RSI chart, I feel like giving my long another chance, now trading a 3-Drives pattern on the hourlies instead of a Gartley. Stop set 15 points below the 61.8% retracement level at 1.2760. New target is based on the adjusted 61.8% retracement of the drop, set at 1.3112.

The Gartley Buy pattern on the hourly chart is quite long in its second leg, but a double close above the hourly EMA10 prompted me to go long. Price is close to the daily MA100 which often provides support and resistance for this pair. I’m setting my stop about 15 points below its current level, at 1.2790. Target is 10 points below the 62.8% retracement of this pattern, at 1.3130. I expect price to slowly grind upwards after this steep drop, and am prepared to be very patient with this trade. It could easily take until early next week before the target is reached.

Hourly Chart:

We’re having the first decent correction in this strong EUR/USD rally, but it’s very sharp and appears to be forming a Gartley pattern against the 1.2730-1.3330 upleg. There is fairly good Fibonacci confirmation and symmetry on the pattern so far. It is too early to tell whether we’ll see the rebound that this pattern calls for, but after a strong uninterrupted uptrend like the one we had I think it’s rather unlikely to see price simply roll over from here and head for the 1.18’s. A more likely scenario is some consolidation after the drop we just had, maybe for a day or two, and then another push towards the highs which could be capped by resistance at 1.3250, or extend higher to 1.35. All in all I believe the current price action is most likely to lead to some sideways trading on the daily chart, with opportunities to catch the last portion of this bullish correction in the overall bearish long-term trend.

Hourly Chart:

Daily Chart:

Stopped out very quickly on the previous short trade, and price is now likely headed towards 1.32. Sidelined until the daily EMA10 has turned down.

Hourly Chart:

The pair made yet another hourly high, and is now stalling at key support of 1.3120, the 61.8% Fibo retracement of the 1.5143-1.1875 range, the 78.6% Fibo of the 1.6037-1.2328 range (previous leg on the weekly chart), and a key historical support/resistance level that was tested many times in the past 2 years. My expectation is for the pair to quickly pullback, especially since the upmove that started in early NY trading has no legs, meaning it wasn’t preceded by a move to the downside. That’s often a sign that the move may reverse quickly.

My previous long was stopped out at entry, and I re-entered my long at 1.3119, with a tight stop at 1.2345 and a target of 1.2370. Again, this is a very low-risk entry opportunity to enter near a key level, but also a break from my trading plan which requires waiting for confirmation. If this trade gets stopped out, I will definitely wait for clear confirmation before going short again, especially since the next resistance zone near 1.3250 is not nearly as clear cut at as this one at 1.3120.

Hourly Chart:

Sharp drop in early European trading and a bounce that fell short of closing above the hourly EMA10 should produce further downside in the US session. The 1.3045 was taken out, held during a retest, and is now acting as an important resistance level. There is strong support at 1.2965, and I expect price to move there and pause. A break below 1.2965 could see a quick move to 1.2890.

RSI has broken below its rising trend line support, and is expected to stay in bearish territory, below that trend line.

My short trade is in play and I tightened the stop to 1.3093 (entry). Target is still 1.2345.

Hourly Chart:

The break of 1.3045 finally came last night, but there is very little follow through. The 3-day sideways consolidation phase should have produced a more explosive upmove, and the fact that price could only rally 40 points within the first 4 hours of the break may be a sign that the Dollar is about to make a comeback. The EURUSD is facing strong resistance in the 1.3120…1.3130 area, where the 61.8% Fibo retracement level of the 1.5143-1.1875 range lies, and the 1.27 extension of a recent hourly range. There is a bearish divergence forming on the daily RSI chart. Hourly RSI is bullish looking with a break above the rising trend line, but is in overbought territory.

Many other currency pairs (AUSUSD, NZDUSD, USDCHF, USDCAD) are at major key support/resistance levels, and show early signs of topping/bottoming out. It’s too early to declare the beginning of a USD rally yet, but the evidence is mounting that it may just be around the corner (we may see it within a day or two).

I went short at 1.3092 with a tight stop at 1.3145. This is clearly a trade against the daily trend, but low risk/return and major structure support in the 1.3090..1.3125 area are in favor of the trade. The 1.3090 area was also major resistance in late 2008 and early 2009. 1.3250 is a too obvious resistance area and would encounter a whole army of bears that will go against it at that level. I believe it is likely we will see the pair roll over ahead of this level, and the 1.3090…1.3125 level may well be it.

My short entry at this level is also attempting to trade a 3-Drives pattern that has formed on the daily chart in the 1.1875-1.3106 range. Target for the trade is 1.2345, the 38.2% level of this range.

Hourly Chart:

Daily Chart:

I exited my long position at 1.2978 for a 32 point profit due to the close below the hourly EMA48 and lack of upside follow-through after 3 attempts to break higher.