EUR/USD Trades – EUR/CAD and EUR/AUD Lead EUR/USD Drop

EUR/USD Current Price: 1.4272 Daily High/Lows:

EURUSD-Sep-1-2011

Thu 1 Sep 1.4387/1.4226

Wed 31 Aug 1.4471/1.4358

Tue 30 Aug 1.4535/1.4384

Mon 29 Aug 1.4551/1.4466

Pivots: S3 1.4065; S2 1.4131; S1 1.4196; P 1.4292; R1 1.4357; R2 1.4453; R3 1.4548

EUR/USD: The EUR/USD price action over the last several months is a sideways consolidation between 1.4000 and 1.4580. The breakout trade hasn’t worked in the EUR/USD, and neither has the trend trade. (unless you trade the trends on the smaller time frames!) Last week we compared the price action of the commodity crosses, EUR/CAD and EUR/AUD, to the EUR/USD. 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. This week, the EUR/AUD registered 5 down days to EUR/CAD’s 4 down days and the EUR/USD’s 3 down days. The breakdown of these crosses might have caused one to consider selling the EUR/USD at 1.4550 4 days ago. In fact, the EUR/USD formed a nice reversal pattern on that day. (evening star and shooting star) Based on the daily chart, the EUR/USD has more room to drop down to the long-term moving averages at 1.4130-80. Only a move below 1.4000 will cause the EUR/USD to suffer substantially.

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