Chart of the Week June 7th

Yes, its true – we are looking at a monthly chart.  Why you ask and what does this have to do with us day traders?
Well we thought you should know the pair just had its 1st weekly close below 1.2160 which as you can see from the chart is the 50% fib of the entire low to high for this pair.  This is significant because even thought he market is net long USD by about $23.2B (billion), or aka heavily long the USD, the market is still selling the euro.

Now that we have eclipsed this technical level, it should act as a resistance point on rallies for the market to continue selling off further.  Where are we headed next?

There is a 2month base of support at 1.1634 which was the low for 2005 and the floor for the rally from 1.16 – 1.6000 (a 4400pip move), so we are guessing this will likely attract price to it.  Profit taking here would be advised but should we get strong momentum and a weekly close below it, then 1.15 is next on deck so there is still plenty of downside for the pair.

Ultimately, we still like being net short on the pair as it has now declined 6months straight and only gained one week in the last 7.  Thus, the money being made is selling so why even consider longs at this point?


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