EUR/CAD and EUR/AUD Lead EUR/USD Correction

EUR/USD Current Price: 1.3866 Daily High/Lows:

EURUSD-Sep-15-2011-website41

Thu 15 Sep 1.3938/1.3704
Wed 14 Sep 1.3784/1.3591
Tue 13 Sep 1.3740/1.3558
Mon 12 Sep 1.3695/1.3495

Pivots: S3 1.3470; S2 1.3606; S1 1.3742; P 1.3840; R1 1.3976; R2 1.4074; R3 1.4171

EUR/USD: The EUR/USD finally broke down, hitting a low point of 1.3495 from the initial swing high of 1.4551, trend line break at 1.4300 and confirmation break at 1.4000. It is still worth comparing the EUR/USD price action with that of the Euro commodity crosses, the EUR/CAD and EUR/AUD. We noted that these crosses typically “lead” the price action on the EUR/USD, so keeping an eye on these crosses is a good idea. For example, if those crosses are trending down, as they did the past two weeks, the EUR/USD will likely trade down as well. When these crosses are correcting up, as they did the last few trading days, it is difficult to sell the EUR/USD successfully. This week, the EUR/USD and EUR/AUD bottomed on the same day, registering a low of 1.3495 and 1.2987 respectively. The EUR/CAD edged out a lower low, given the inherent strength of the CAD. So, what happens now? The EUR/USD corrected 38.2% of the drop, as did the EUR/AUD, with the EUR/CAD at the 23.6% mark. A continued move higher suggests a deeper correction to the 50% retracement level is likely. For a resumption of the downtrend, watch for a break in the EUR/USD below 1.3704 and a break below 1.3358 in the EUR/AUD. If we break down below these levels, it is quite possible that the downtrends will resume. If not, then we have a greater correction in store for these pairs.

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