10/23/08 9:43 am - EURUSD: Potential triple divergence on dailies

Steep fall to 1.2730 leaves a rather complete looking classic corrective move on the daily charts (downleg, upleg, downleg). Nice symmetry and Fibo alignment. Dailies are heavily oversold, and are about to leave a triple divergence on the daily RSI chart, while hitting the rising trendline at the same time. 1.2730 has been tested and held in all 3 sessions (Asia, Europe, US). The daily charts are screaming for a major correction now. Prices broke above the falling trendline on the hourlies, and RSI broke the long term declining trend line. A major bounce is likely at this point and could potentially go all the way back to 1.3250, the major breakdown point and the location of the daily EMA10 at this point.

Alternatively we could see further sideways consolidation at current levels. New lows in the medium term cannot be ruled out but are rather unlikely in the short term.

Action Plan: My short entry was not hit and I missed the drop to 1.2730. Admit that I was surprised by how hard and fast the pair fell, despite expecting a pullback to the 1.26..1.27 area based on wave and Fibo projections. All indicators are now calling for more upside at least short term, and I went long at 1.2864 after the hourly declining TL was broken. Stop set at 1.2670 and initial target is 1.3240.

Support:1.2730 L-10-22    1.2483 L-10-13-06    1.2331 H-4-6-06

Resistance:1.2943 H-10-22    1.3050 HSpptRsst    1.3256 HSpptRsst

RSI: Hrly: broke above decl. TL, supported by rising TL, Dly: bullish 3x div.

Hourly Chart: