Strong rebound that started in Europe and picked up in early New York has now hit 1.42 and is overbought with RSI at 77. Early afternoon NY time is often a time strong rallies end, and I expect one more push above 1.42 before either a minor pullback or a leveling out and consolidation at the current levels in Asia. Would not be surprised to see another pullback to the daily EMA10 (1.4050ish) before 1.43 is challenged.

My long that I entered two days ago 1.4110 is in play and I lowered my target slightly to 1.4220.

Strong rally sliced through several strong resistances and took us back all the way to 1.41. My long target was hit for a nice profit of 142 points, which felt good after the 131 point loss I took two days ago.

On the dailies, it looks like we got a bottom in place at 1.3747. Now heavily overbought, we’re approaching strong resistance at 1.4125, and I expect this level to hold, given that the RSI is already at 80. That, and the fact that this rally started after a downleg without any major upward consolidation phase, suggests a strong pullback will happen first before this upmove continues. I do expect another strong upleg following this one as soon as RSI has corrected back to neutral (45..50).

In the short term, I think a decline to the 50% Fibo at 1.3962 is the most likely scenario. I went short at 1.4095, stop tight at 1.4150, and target is 1.3970.

Support: 1.4013 Fibo62, HRsst   1.3962 Fibo50   1.3912 Fibo38, HSpptRsst

Resistance: 1.4125 SpptRsst   1.4177 H-6-11   1.4235 Rsst

RSI: Hrly: heavily o/b, Dly: neutral

Hourly Chart:

Daily Chart:

Went long at 1.3933, stop at 1.3840, target 1.4098.

1.4050 was tested and held, price bounced well ahead of it at the daily EMA10, but the price action suggests that it will be retested. 1.40 is the Fibo projection of the current hourly downleg, and also the 38.2% Fibo retracement level of the last upleg. The EMA10 at 1.4075 is critical regarding today’s close, and if broken, requires a close above it to maintain the bullish bias.

Still sidelined, and waiting for a long entry opportunity, ideally somewhere in the range of 1.4000..1.4060.

Support: 1.4075 DEMA10   1.4062Fibo50   1.3998 Fibo38

Resistance: 1.4245 HRsst   1.4337 HRsst 1.4362 H-12-29

RSI: Hrly: bearish, capped by decl. TL, Dly: rolling over

Hourly Chart:

Strong rebound overnight confirms 1.3250 as strong support. The pair is now challenging its upper channel boundary. I expect another run to this boundary (now at 1.3470), and a break above should result in a move to 1.3580. I added another long position at 1.3410 but will flat a failure at 1.3470. A failure to break out of the channel during the US session will likely result in sideways consolidation above 1.3330…60.

My other long position entered yesterday morning at 1.3363 is now in play and I tightened the stop to 1.3215. Stop on the new long is tight at 1.3349. This second long position is a short-term momentum trade and I’ll let go of it easily for a small profit if 1.3470 holds, otherwise I will tighten the stop on a break above that level and turn it into a long-term position. 1.3475 is the location of the daily MA200 and could prove to be strong resistance.

The RSI is near overbought, but shows a breakout above its declining trend line. Dailies are getting more and more bullish.

Support: 1.3363 Fibo62   1.3330 Fibo50, SpptRsst   1.3245 Fibo62, Sppt

Resistance: 1.3470 HRsst, DMA200    1.3580 H-4-5   1.3737 H-3-19

RSI: Hrly: broke above decl. TL, bullish, Dly: bullish

Hourly Chart:

1.32 didn’t hold either, but the pair carved a nice bottom at 1.3150, with a strong close above its hourly EMA10 this morning. This bounce should continue, and re-test 1.33, currently strong resistance. 1.3150..70 is good support, with the daily MA100 being at 1.3170 today.

The hourly RSI is still supported by its long term rising trend line, and has turned up. The daily RSI has turned bullish.

Hourly moving averages EMA10, EMA48, and MA100 are converging again, indicating a trend change may be in sight, and so are the daily averages EMA10, EMA20, and MA100. There is little incentive for the bears to go short at this point with 1.2940 being fairly close. The bulls however are looking at a  second upleg with a fibo-projected target of 1.42.

My long was stopped out last night for an 80 point loss. I’m long again as of this morning with a net entry at 1.3209. Stop is at 1.3119, target is 1.4160.

Hourly Chart:

Unless the pair can break back into the 1.25’s, the downtrend is likely to continue and 1.2510 should cap any upward move in the short term as longs taken above this key level are trying to get out. Daily and Hourly trends are down, and the hourlies are only marginally oversold and have room to run lower.

However, having said that, the very good low-risk entry opportunity for bulls still exists, and the closer we get to 1.2328 the smaller the reward gets for new bears. It is exactly this setup that often leads to turns just ahead of a key level. In our case, as we get closer to 1.2328, more and more shorts are taking profit and more and more longs are entering.

At this point the only supports left ahead of 1.2328 are 1.2422 and 1.2387, none of those are of high significance. The market is likely to slowly drift down from here unless we get some Euro-bullish news that could swing things the other way. I will only abandon my bearish bias if the hourlies move into the 1.25’s and close above their EMA10, or I see a clear trend line break on the hourly price and RSI chart. Keeping my powder dry for now, not enough reward for a short.

Hourly Chart:

I added a live chart of the EURUSD pair to the sidebar, and a larger version can be accessed here.

Highly recommended: Interview with Peter Schiff, president of Euro Pacific Captial:

http://www.europac.net/Schiff-Bloomberg-10-28-08_lg.asp

EURUSD consolidated sideways as expected and maintains upward pressure. 1.3746 is currently strong resistance. I expect one last pullback towards 1.36, possibly as low as 1.3550, and then a strong push upwards to next major resistance at 1.3980, the 38.2% Fibo of the 1.3442-1.4865 range, and the current level of the daily EMA10.

Alternatively, we could see a break of support at 1.3550 which would likely lead to a retest of the low at 1.3442.

Action Plan: The momentum has turned up, and oversold dailies are in favor of the long side. Plan on buying a bounce out of 1.3605, or 1.3540 (preferred, but may not see that level again). Target is 1.3975, stop at 1.3515.

Support: 1.3600 HSpptRsst    1.3442 L-10-6    1.3360 L-8-16-07

Resistance: 1.3700 HSpptRsst    1.3746 L-10-2, Fibo21    1.3986 Fibo38

RSI: Hrly: supported by rising TL, Dly: Bullish failure swing

Hourly Chart: