The most important trading band is between $1.24 and $1.29. The width of this band is measured and projected downwards. It gives a downside target near $1.19. This support level has been breached.
The next historical support level in the immediate short term is $1.16. There is a higher probability the fall will dip towards $1.13 with a penetration to and a rebound to $1.16. This is the most bullish outcome in this environment.
However, in the longer term the next strong historical support level as noted several weeks ago, is near $1.03.
Setting downside targets based on support levels and technical projection is useful, but it doesn’t help traders identify the conditions necessary for a trend reversal.
The most significant feature on the chart is the downtrend line. The Euro must be able to move above the downtrend line before there is any possibility of a new uptrend developing. On the current positioning, that requires a rebound above $1.28.
Another key feature is the development of consolidation patterns. This is where the momentum of the fall declines and price develops a short term rally and rebound pattern, usually based around the technical support levels.
Unfortunately, there is little indication of support developing at the moment, so the lower targets, including the $1.03-markm must be factored in with any currency planning.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com. He is a regular guest on CNBCAsia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.
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