The broader perspective on this pair can be seen here: EUR/USD and Stock Market Weekend Briefing.  I will not post a lot in this daily outlook for March 22 since I continue to think there are better opportunities until a legitimate breakout occurs.

As we begin trading this week, the pair continues to be weak after the selloff late last week.  Having broken below support at 1.3540 a test of range lows is quite possible.

Support comes in at 1.3500-1.3480, followed by range lows between 1.3450-1.3430.  Movement below indicates another leg down in the downtrend.

Resistance comes in at 1.3550 and 1.3590-1.3600.  Beyond this resistance comes in at 1.3640 and 1.3690-1.3700.

Ultimately the pair remains in range within a longer term downtrend.  False breakouts remains a high probability as we have already seen several.

Cory Mitchell, CMT

~Know your risks when trading. Please read the Legal Disclaimer page.

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Here is an uber quick look at what developed in the markets this week and what to look for next week, namely the EUR/USD and S&P 500.

The EUR/USD suffered a major setback Wednesday, Thursday and Friday.  It just could not stay above the 1.3800 level and fell off aggressively back into the former range.  This makes a retest of range lows a reasonable assumption.    The short-term upward trendline was broken, and ultimately the daily downtrend was left in tact other than a slight penetration.  A break below lows at 1.3430 would set up another leg down in the downtrend.  A target for the break downwards is 1.3060.  False breakouts remain a high probability, as has been stated in the daily analysis for quite some time, and as was just witnessed with the small push above 1.3800 and subsequent retreat.

On average (14) the EUR/USD is moving 302 pips in a week.

EUR/USD Daily

Other than Friday, the stock market had a good week continuing to push above the 1150 mark and closing out the week at 1159.90.  Support now comes in at 1150, along with initial trendline support at 1140 and further support at 1125.  A drop back into this area would warrant concern and signal a false breakout.  Blue lines on the chart mark potential trendline support if the initial trendline line is broken.

Target on the upside is just below 1200 and if that is broken then 1250.  The average weekly movement for the S&P is just under 31 points.  Keep this in mind, as it will likely take a week or long to reach this initial upside target, and several weeks to hit the second target if this market continues higher.

SP-500 Daily

Cheers,

Cory Mitchell, CMT

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The Following is you daily EUR/USD outlook for March 19, 2010.

The EUR/USD is generally a strong trending currency, but for well over a month the pair continues to elude it’s tendency.  Moving in a choppy fashion making higher highs over the past couple weeks, indicating an upward bias, the drop on Thursday back below 1.3640 once again shifts the short-term outlook back to neutral.

Previous posts have included warnings about the high likelihood of false breakouts, and this continues to be a low probability environment for trend traders.  There is a need to avoid the wanting of being the first person into an emerging trend – a legitimate breakout will provide ample profit opportunity.

From Yesterday’s post here are levels to watch within the range:

“A drop below this support level [1.3640] indicates a move test further support at 1.3620, 1.3540 and range lows if 1.3520 is penetrated.”

Targets on the upside are: 1.3840, 1.3920 and 1.3940-1.3960.  Resistance inside 1.3820 comes in at 1.3650 and 1.3750-1.3760.

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Cory Mitchell, CMT

~Know your risks when trading. Please read the Legal Disclaimer page.

The following is your daily EUR/USD outlook for March 18, 2010.

The pair finally did break above 1.3800 Wednesday, did a quick stop clear to just below 1.3820 and then retreated, currently trading at 1.3735.

As I pointed out yesterday the break of 1.3800 was almost inevitable, and the bias remains to the upside.  Targets are: 1.3840, 1.3920 and 1.3940-1.3960.

The breakout didn’t have much conviction, but the pair continues to make higher highs, albeit in a choppy fashion.  Now we need to see if it can put in another higher swing low.  As long as the pair remains 1.3640 the bias remains to upside.  A drop below this support level indicates a move test further support at 1.3620, 1.3540 and range lows if 1.3520 is penetrated.

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Happy Trading,

Cory Mitchell, CMT

~Know your risks when trading. Please read the Legal Disclaimer page.

The following is your EUR/USD outlook for March 17.

Even on a Fed day the pair could not get above 1.3800 on Tuesday.  That said, it does appear that it will happen.  Since early march the EUR/USD has continually put in higher and higher swing lows.  1.3800 does need to be moved through, but barring a drop below 1.3640, it is highly likely to occur.  Such a move through this important resistance level indicates a move higher, with targets at  1.3840, 1.3920 and 1.3940-1.3960.

A drop below 1.3640 indicates downward pressure and a move back lower to test support at 1.3530 and if that is broken a re-test of range lows at 1.3430.

Over the past 2 years, average true range (12) has bottomed out around 100 pips average movement per day.  Currently we are close to this level and thus volatility is likely to increase.  A breakout higher is a likely catalyst for this.  No breakout, and thus continued price action within the established range, means volatility will likely remain near current levels on average.

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~Know your risks when trading. Please read the Legal Disclaimer page.

The following is your daily EUR/USD outlook for March 16.

Like a child who refuses to clean his room, the EUR/USD also refuses to move with conviction.  Yesterday I posted that a pullback into the 1.3700 region was expected but movements much lower indicate a further move down may ensue. So far the pair has pullback as far as 1.3640.  Additional support comes in at 1.3620.

In recent price action we do have higher highs and higher lows indicating the start of uptrend.  For this (short-term uptrend) to continue the pair will need to stay above 1.3550.  A drop below that indicates a bull trap and a re-test of range lows at 1.3430.  The “saucer” like formation starting from early February makes that scenario less likely than a move higher.

Ultimately 1.3800 remains the level to watch (on the upside) as stated yesterday.  Even though some swing highs were broken on Friday resistance remains at 1.3800 and just below 1.3850.    Prior to this minor resistance is now likely at 1.3730-1.3740.

The pair trades at 1.3675 at the time of this writing.

Fed day today. Be prepared as this could be the catalyst of a trend.

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~Know your risks when trading. Please read the Legal Disclaimer page.

The following is your daily EUR/USD outlook for March 15, 2010.

The downward daily trendline was broken on Friday, setting up for a further move higher in the EUR.  Short-term caution is still warranted due to the high likelihood of false breakouts.    That said, the “saucer” like formation on the daily charts makes a re-test of the lows recently put in a low probability in the near term.  A move above 1.3800 is what needs to be seen next.  With a high number of shorts in the EUR a short squeeze could ensue if the major resistance levels at at 1.3800 and 1.3840 are taken out.

An upside a target is at 1.3870 as well at 1.3890-1.3910.  Beyond this we are looking at a longer term target of 1.4030.

Pullbacks may occur into the 1.3730-1.3700 region.  Additional support comes in at 1.3680 and 1.3620.  A drop back below 1.3680 would indicate the break higher was false and the pair will move lower once again or continue to stay in a more range-bound environment.  A further drop, where that situation to develop, would likely find support at 1.3540, with a drop below 1.3520 indicating a retest of range lows at 1.3430.

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Cory Mitchell, CMT
~Know your risks when trading. Please read the Legal Disclaimer page.

The following is the weekend recap and looks at a longer term analysis of the EUR/USD than what is covered in the analysis I post each day in the Daily Outlook.

The pair made a definite effort to break to the upside.  Shorts in the EUR are very high and a “short squeeze” could occur if the pair manages to get above 1.3800.   In addition to this, the daily downward trend was penetrated on Friday, but closed just below it.

Targets are now in sight on the upside at 1.4030 and 1.4170.  A short-term upward trendline is now in place as can be seen on the chart (below).  A break above 1.3800 as well as the daily downward trend line makes a re-test of the lows near 1.3440 a low probability possibility in the near term.

The pair closed at 1.3767 (or close to it) and the weekly average movement is about 300 pips.  This put our first target within reach, but the second target is beyond what the typical movement would indicate for this week.

On the downside, old resistance will is now likely to act as support at 1.3700.  Occasionally I mention a “confirmed breakout”.  In this case a confirmed breakout is when the pair pulls back after a breakout (as it has done) and respects a primary support level (1.3700 in this case) and then pushes higher again.  If you think in terms of a trend, this set-up creates the initial stages of a trend – higher highs and higher lows.  We do not always get “confirmation” though as sometimes the market does not pullback to near the breakout point.

Further support comes in at 1.3600 which is our short-term daily upward trendline and also at 1.3540.  Beyond this key support is at 1.3440 or the range lows.

Also of note is the “bowl” formation we can now see from the daily price action between early February and now.  This also indicates an upward bias.

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EUR/USD Daily - FreeStockCharts

Cory Mitchell, CMT
~Know your risks when trading. Please read the Legal Disclaimer page.

The following is your daily EUR/USD analysis heading into March 12.

The pair barely had a pulse Thursday, covering a range of only 70 pips at the time of this writing.

I feel like a bit of a broken record saying the same thing every day, but I continue to be of the view that waiting for a trend is superior to trading within the range where support and resistance hold little significance.  That said there are a several points to watch…

Currently we are near the upper end of the range, 1.3700 and 1.3740 are likely resistance levels.  Beyond this resistance comes in at 1.3800 and 1.3840.  Breaking above 1.3800 indicates a further move higher as the downward daily trend would be broken.  Given that false breakouts are highly probable, a resumed breakout direction move after a pullback is my preferred method of entry (ie. breakout, pullback, move back in breakout direction, entry).

Minor support comes in at 1.3620 followed by 1.3540 and 1.3440 – this is a pivotal level and very likely beyond the reach of Friday’s daily range, but a move below indicates another leg in the downtrend.

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The following is your daily outlook for the EUR/USD -March 11

A push higher on Wednesday still kept the pair lower than the previous swing high, thus tightening the short-term triangle formation.  The high Wednesday is within a couple pips of the downward trendline (hourly) which connected the last two swings highs.

Ultimately the pair remains between the major pivotal levels of 1.3740 and 1.3430.  I have pointed this out many times, but support and resistance within this range are not crucial, and since the EUR/USD is a trending currency trading with the range is not an ideal strategy.

That said, there are of course opportunities for short-term traders.   The minor trendline resistance mentioned above comes in at 1.3670 with horizontal resistance at 1.3680.  1.3700 ad 1.3740 are more significant resistance beyond.  Movement above 1.3740 indicates an further upward correction.

Overall trend still remains down on the longer term charts, and the pair works through a sideways correction.    Support is likely in the short-term through 1.3630-1.3615 followed by 1.3540-1.3530.  A break beyond this is likely to challenge the lower portions of the range, namely 1.3500-1.3490 and 1.3430.

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~Know your risks when trading. Please read the Legal Disclaimer page.