Weekly Forex Play Jan 8 2012

EUR/USD Current Price: 1.2720
Daily High/Lows:

EURUSD-Jan-8-2012

Fri Jan 6 1.2811/1.2698
Thu Jan 5 1.2945/1.2771
Wed Jan 4 1.3072/1.2897
Tue Jan 3 1.3076/1.2931

Pivots: S3: 1.2596; S2: 1.2660; S1: 1.2723; P: 1.2834; R1: 1.2898; R2: 1.3008; R3: 1.3119

EUR/USD: The EUR/USD had a major drop since last week (1.2958 to a low of 1.2698 on Jan 6th) in light of Europe’s unresolved sovereign debt crisis and Friday’s strong US Non-farm Payrolls. The EUR/USD has been trending down since the high swing of 1.4245 on October 27, 2011. Since last week’s low of 1.2857, the pair corrected up to 1.3076 earlier this week before resuming its downtrend. Now, 1.3076 is the key level to watch, as a move above, will temporarily halt the daily downtrend and a larger correction will take place. Moving down to the hourly chart, price should stay below 1.2811 for further downward price action. A move above that level will correct the move starting from 1.3076 to the current lows. Use your Fibonacci tool to calculate such a correction. Orange wave (3) extension targets include: 127% at 1.2644; 138% at 1.2606; and 162% at 1.2526. Black wave iii extension targets include: 138% at 1.2652 and 162% at 1.2500. Therefore, it is highly likely that we will see a major correction once in the target zone between 1.2500 and 1.2650. Also recall further support resulting from the Aug 2010 low at 1.2586. The theme to sell the rallies is still in order, with caution, since we are close to some major targets. On the daily time frame, our initial stop loss would be at the 1.3076 level, so selling close to that level is advisable. Sells taken on shorter time frames should use 1.2811 as the stop loss area. Expect consolidation once price trades above that level. Moving down to the hourly time frame and assuming we reach the average target of 1.2600, expect a retracement on the last swing move from 1.3076 to 1.2600(?) to the following levels: 38.2% at 1.2783; 50% at 1.2839; and 61.8% at 1.2895.

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