10/01/08 7:58 am - EURUSD: At critical juncture

The Dollar gained against the Euro again overnight, and is now consolidating near 1.40. A retest of the lows at 1.3880 is likely at this point, but the pair may bounce ahead of this level near 1.3920 where daily TL support comes in. 1.3880 is good support. Right below that, at 1.3840, lies the weekly 50% Fibo retracement of the 2005-now range, a very strong support level that is also supported by a weekly TL that started all the way back in October 2000, which marked the beginning of this long term Dollar bear. R A break below 1.3840 opens the way for a lot more downside.

Alternatively, we may see consolidation ahead of 1.3880, near current levels, and a sideways trend over the next few days until daily and/or weekly TL support kicks in and forces a directional move.

Action Plan: The daily trend is down but the potential for a turnaround is high at this point. As long as 1.3840 is not broken we favor buying the next bounce, but would definitely sell a sustained break below 1.3840. Sidelined for now since risk/return is low for a short, and volatility still high.

Support: 1.3881 L-9-11    1.3840 H-7-23-07, Weekly Fibo50    1.3680 H-4-27-07

Resistance: 1.4150 HRsst    1.4257 Fibo38    1.4373 Fibo50

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

Hourly Chart:

Daily Chart:

Weekly Chart: