Hello Forex Traders,
A new month of trading is ahead of us! The first week will have the usual news events all technical analysts and traders must be cautious of. Interest rates on Euro and Pound are on Thursday and the NFP of the USD on Friday. But let us take a look what we can expect till then.
EURUSD DOWNSIDE SNOWBALL
The EURUSD respected the daily 61.8% Fibonacci retracement level as expected. However, the downside thrust and impulse was more than I personally anticipated – especially considering the previous weekly candle close above the 1.3710 yearly high. And that just proves that one never knows whether a support or resistance will cause a shallow or deep retracement – or even a reversal.
The downside thrust was basically similar to a snowball that turned into an avalanche as price raced to lower levels – falling from 1.38 to 1.35 in tens of hours and not tens of days. This is somewhat of surprise when you can compare it to the choppy price action of the entire year.
Due to this “last minute” downside of October, the monthly candle stick has a substantial wick on top and last month’s low already has been broken on the very first 2 days of November trading.
Also the weekly chart is showing weekly engulfing twins, which is obviously a very bearish price action signal.
How do you view these candle sticks and price action? What is your interpretation? Let us down below!
LONG TERM INTERPRETATION
What does mean for the EURUSD?
Nathan actually has a great video on the EURUSD – where he shares his perspective for the EURUSD to fall 1,000 pips. That potential is surely out there so make sure to take a look.
My conclusion would be the same: very bearish. With the weekly engulfing twins in play I am expecting more downside at last to challenge the weekly bottom at 1.31 – if not the monthly bottoms at +/-1.28. A break of those levels would confirm the long-term bearishness of eventually reaching 1.20 and then 1.1 & parity.
WHEN AND HOW FAR?
a) When should we expect it?
Looking at both the higher and lower time frames the bearishness could continue for a while.
Of course, we should be aware of the fact the EURUSD could eventually correct this tremendous fall with some type of a relief rally before renewed selling starts. Due to massive weekly momentum, however, I would expect a bear flag to form on the hourly chart and then – at very minimum – one more break out trade to downside before any correction up might happen. After that correction up I am expecting a new renewed downside pressure to materialize.
Bear flag, down trend continuation, then up correction, then down again seems currently the most likely path.
b) How far could the downside pressure take us?
We will need to see how price action behaves when it gets closer to weekly and monthly support. But for the moment we can space out the chart by using those S&R’s and estimating where the wide open spaces are. Take a look at the screenshot below for a more detailed view of the expected spaces to the down and upside.
Last but not least, make sure to check out these links:
Don’t forget to leave a comment! Thank you for sharing this article as well.
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