EUR\USD Analysis 20 August 2010

Weekly Trend direction: Bearish

Weekly trend reversal level: 1.3340

Key G7 resistance levels: 1.2900/20, 1.2960, 1.3030, 1.3100

Counter-trend and scalping opportunities:

Strategy: Whilst below the weekly trend reversal level sell rallies to resistance levels after an entry signal. Today’s trade suggestion: A sudden reversal of fortunes for the Euro has created a large bearish weekly candle and a drop below last week’s reversal level. That means we are bearish this week, whilst below 1.3340, a long way above us. Remember that August is traditionally a tough month to trade due to thin markets creating sudden swings in both directions. The two hundred period moving averages are around about the first resistance levels between 1.2900 and 1.2960, and these are the first levels where we’ll look to sell. Targets will be back down at 1.2750 and perhaps lower.

Update: Pretty much ranged since the start of the week. The strategy remains the same – sell into rallies, with resistance levels unchanged. After last week’s dramatic move lower, it’s not unusual to get a period of consolidation whilst the traders not on holiday digest the moves.

Update Friday: No change – strategy remains the same!

Summary: Sell rallies to resistance levels, starting at 1.2900, after a clear G7 entry signal. Target 1.2750 and perhaps lower.

EUR/USD Hourly chart: