12/06/08 1:02 pm - EURUSD: A repeat of what happened two weeks ago?

The Euro staged a modest recovery on Friday afternoon, along with the stock markets, after news on bailouts for GSEs and auto industry hit the wire. I’m expecting markets in Asia and Europe to react with similar relief when they open, and post gains that will likely lift the Euro further against the dollar.

The pattern on the hourly chart shows some interesting similarities with the pattern that developed two weeks ago. On 11/21, also a Friday, we saw a deep dip that almost challenged the previous low, followed by a recovery during the last two hours of trading. The sharp rally from the low to the top of the price channel is also similar. It is quite possible that we’ll see this similarity hold over the next 24 hours, with a continuation of the pairs recovery until the end of the Asian session, maybe until resistance at 1.2847, at which point the typical sell-off should take the pair down again, possibly to 1.2730, before Europe picks up the ball and drives it to 1.3080.

My long entry is set at 1.2765, since I want to see a break above 1.2730 first, as well as a breakout out of the triangle pattern. If Asia doesn’t take the pair beyond 1.2730, then we could see another fall towards 1.2565.

Support: 1.2627 HSppt    1.2565 Fibo21, HSpptRsst    1.2465 Daily UpTL, HSpptRsst

Resistance: 1.2730 HSpptRsst    1.2800 HRsst    1.2847 H-12-4

RSI: Hrly: neutral, Dly: supported by rising TL

Hourly Chart: