EUR/USD Technical Analysis October 19, 2011

EUR/USD had an absolutely wild day during the Tuesday session as the market originally sold it off, and hard – only to turn it around in the late hours of the NY session. After that came another bit of a selloff, resulting in a long-legged doji for the daily candle.

The China GDP numbers missing slightly spooked the markets and the EUR/USD sold off as a result. The late hours in New York saw a story that stated the Germans and French had reached an agreement to increase the EFSF to over 2 Trillion Euros, and that the banks would be recapitalized. This turned out to be overblown, and the market fell again. The Tuesday session did show one thing though: There is serious concern about Europe still.

The set up is easy though: A breaking of either end of the doji trades in the same direction. If we break to the upside – it becomes a buy. Alternately, if it breaks to the downside – it is a sell. Either way, this pair will remain hostage to the headlines that will certainly continue to come out of the EU.