Eur/Usd -
Daily trend is firmly lower with the 61.8 fib at 1.3485, Daily Trix still bearish, price bounced off down channel support at 1.3585 to form a hammer looking candle which would point to a retrace coming. Droping to to 4 hourly chart, slow stochastic has crossed up with Trix beginning to turn up although has not crossed +ve.
Looking at previous patterns we have two scenarios which may be unfolding.
1. Price copys the minor bounces seen on 21st of January and the 1st of ferruary which would give us a move to 1.3740/50, then a continued move lower to the 61.8 fibo on the daily chart.
2. Should price break the 1.3750 lvl then a longer retracement may be unfolding very similar to that of the retracement of the 22nd of december to the 13th of january. looking at a possible AB CD measured move to 1.3940 which also coincides with the daily down channel resistance.
The price action late friday has turned the indicators bullish, thus turning us to immediate resistance of which 1.3720 looks the most probable, with 1.3745 the 38.2 fib and fridays high.
How to play this -
Given that daily charts remain bearish and 4 hrly charts have not turned up, the chances of a pullback into the 1.3650 area remain good. A break of 1.3750 would indicate that the case for a longer and stronger retracement. Should the 1.3750 area hold, I would expect to see a pullback into 1.3645 where I will be watching to exit the third 1/4 of our open 1.4000 short. If 1.3750 area breaks then I will exit the third 1/4 @ market.
The remaining 1/4 will run until I see a break of the 4 hourly 100 lwma, which would indicate a return to the down channel resistance currently perched at 1.4225
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