Euro quick notes $EURUSD $6E_F (with update)

EURUSD somewhat over extended, at the moment. Will see how it develops.

first target has been achieved

—-

LATE AFTERNOON UPDATE

I was currently on a trade when I posted the above, thus the short post. I´m trying to state my position thru this blog and feel it is important to keep it up to date. 

The reason for the post is shown in the chart below. The pair was already over extended after a 130+ pip rally . Locationwise, it was on a previously thin area, marked by the dashed lines.

2011-12-20_2008

Usually, a thin area reflects a big and sharp move. In this case, the Euro suffered a sharp selloff back in the morning of December 13th, when it retraced from 1.32400 towards 1.3060. The move then continued, ending with EUR/USD marking the lows for the year at aprox. 1.29440.

However, using the first line of support 1.2980-1.3020, it rallied into the thin zone marked by the the move described previously. 

Something to note is that usually this type of zones are revisitied at a later time (sort of the theory behind filling the gap, in classical TA). The idea behind this proposition, is that markets -as a reflection of the interaction between buyers and sellers- tend to be efficient and continually look for new areas of value. Is this happens too sharply and quickly, it leaves certain areas that have not been “fully explored”, thus the possibility for them to be revisited by new developments in price.

As I was watching the process, the important rejection of buying participation (denoted in orange) for a second time, singnaled th strong possibility (I said possibility) of reaching a top, at least intermediately (the later does specifically mean I think it will still be rising). This is noted in the chart below.

2011-12-20_20062011-12-20_2005

Where it will might possibly go from here?

No idea, although I could work with some plausible ideas:

Inventorywise, there are quite a few long positions committed, which -so far- have helped to cushion sharp downmoves and mantain the lows marked last week. We could really go in either direction. It is the middle of nowhere, short term.  There is no clear direction and no real edge. Better to stay on the sidelines. Longer term, there is still quite a ot of short inventory above. Therefore, if it holds, EUR/USD most likely will challenge new lows. Taking the opposite view, if the shorts decide to vcover their positions, this could eventually ignited a rally until new supply comes into the picture. Given the current political scnario in Europe, I really doubt it, although anything can happen.

2011-12-20_19552011-12-20_2025_001

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