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Don't Call It a Comeback: The Story of the EURUSD's Reversal
Last week EURUSD was testing the bottom of a descending trendline, and while I don't trade dollar strength because I don't trade against what I perceive to be the long-term trend, I expected it to fall. Looks like I was wrong. EURUSD did shoot out of the descending triangle quickly -- but it did to the upside. So is EURUSD ready to start an uptrend again? Let's see what the charts tell us: 1. The four hour chart shows the moving averages bullishly aligned, Moreover, the three consecutive bullish candles, each with higher lows, and coming following a downtrend, suggests a three white soldiers pattern, which would be a bullish sign. [IMG]http://farm4.static.flickr.com/3029/3059181367_1f6f36e4d8_o.jpg[/IMG] 2. Meanwhile, on the daily chart, we also see the three white soldiers pattern, as well as the moving averages having turned bullish. [IMG]http://farm4.static.flickr.com/3277/3059999734_c9eba02d18_o.jpg[/IMG] 3. Lastly, on the weekly chart, we see that the market has been trading in a range for the past few weeks, consolidating its previous sharp moves. Now, though, we see a bullish breakout, as well as a change in direction on the 5 EMA. [IMG]http://farm4.static.flickr.com/3140/3060008722_82a073e2f9_o.jpg[/IMG] [B]Key Levels[/B] If you're looking to go long EURUSD, I'd look for resistance at around 1.3250, with support at 1.2950. A break above the 50 EMA, which is currently at around 1.3250, may suggest a larger reversal of trend is forming. [B]Fundamental Factors Confirm[/B] We're seeing dollar weakness show up in other markets as well; USDJPY broke south of its descending triangle, and gold has broken above resistance at both $748 and $800. US stock market traders will want to be particularly wary of bull markets at this time; is it really a bull market if it were priced in another currency, like gold? Long-term I am very bearish on the US dollar, so now seems like there may be an opportunity for dollar bears in the EURUSD market. [I][B]Disclosure:[/B] No position in EURUSD. Short USDJPY. [/I]
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