EUR USD Technical Analysis 26 Jul 2012

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By Dirk de Bruin
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Good morning traders! It's currently Thursday 26 July and I'm here with a fresh perspective on Eur/Usd. I believe that we have seen a short-term low at 1.2040 and currently trading at 1.2149. I think that a bounce until 1.2250 or even 1.2330 is possible and a break of 1.2330 would leave a lot more room to the upside. I do still think that the medium to long term trend is still to the downside and it's just a matter of time before the 1.2000 level gets taken out. Let's have a look at a daily chart:

EUR USD Technical Analysis 26 Jul 2012

EUR USD Technical Analysis 26 Jul 2012

The above chart is a daily chart of Eur/Usd. The indicators on the chart are as follows:

 

Yesterday was a bullish engulfing candle. This means that it was a big up day that "swallows" the previous small down day, and it is usually interpreted by technical analysts as a bullish signal. You can see that the 21 EMA is still about 100 pips above the current price level, and this 21 EMA tends to be the first level of resistance where price action returns to when a rally occurs. If that 21 EMA breaks to the upside, the next resistance level is likely to be the 50EMA. Something to look out for is the confusing signal of the positive RSI divergence where the price action has made a lower low while the RSI has in fact made a higher low. This signal is not always correct, but it could mean that there is the possibility of a big bounce if the recent low of 1.2040 is not taken out. Signals, signals. It can go up and it can go down, right? As a trader I like to take the market one small step at a time. For now, I expect a rally of at least 100 pips to the upside, and I would be looking to get long Eur/Usd at around 1.2130 with a stop just below 1.2050. Let's take a quick look at a 4 hour chart to see if we can confirm signals for a coming rally:

The above chart is a 4 hour chart of Eur/Usd with the same indicators listed above for the daily chart. I've drawn vertical lines to indicate what happens when the MACD histogram indicator crosses above the zero line. Usually as you can see there is a sizeable rally, and price action has revcently crossed above the zero so that is a good sign. Also, the 4 hour price action has broken the 21EMA and is hovering on it and looking like it's consolidating to move higher. The RSI is above 50 and slow stochastics are above 50 and still pointing up. All in all, there is good technical evidence for Eur/Usd to move higher over the coming hours and days and a long trade as I described seems like it could be profitable. Remember to always use a stop loss, trade according to your account size, never risk money you cannot afford to lose and always do your own research to see if you agree with anybody's trade recommendation before taking it.

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