Friday, January 23, 2015

XEU Euro Monthly Chart 11-Year Low Fibonacci Retracements Sideways Symmetrical Triangle Downward-Sloping Channel

The euro drops to the 62% Fib retracement of the rally from 2001 to to 2008 from 0.84, under parity (1.00) to 1.58. The 62% Fib is 1.1213 and the euro is at 1.1261 printing a LOD at 1.1166. If price ventures lower under the 62% Fib a full 100% retracement down to 0.83-0.85 is on the table. Rick Santelli mentioned the Fib retracement on CNBC business television so reference that video if you want to study the Fibonacci retracements more closely.

Sometimes a 76% Fib retracement will occur and that is at the 1.02 level. The big question is if the euro moves to parity at 1.00 (dark blue square). The breakdown out of the red sideways symmetrical triangle is projecting a move to 90. The downward-sloping channel shows the euro approaching the lower support rail and this support continues in conjunction with the 1.08 horizontal support. The stochastics are oversold and will create the initial dead-cat bounce in the monthly time frame. The indicators such as RSI are weak and bleak wanting lower lows after any bounces, but the RSI is oversold as well so a basing would actually be expected say during H1 2015.

The 1.08-1.12 level is sturdy support. It would not be surprising to see price move through 1.08-1.15 into summer time. In other words, the expectation for a continuing collapse in the euro may be premature. Nonetheless, when a price is dropping like that it is hard to know where the bottom is.

The pink boxes show the strong trends over the years like the downtrends in the euro in 1998 and 2000-2001. The uptrend was strong in 2003-2005 and also again as the peak was placed in 2008. After that peak, however, the ADX falls like a stone and there is no strong trend in place for the last six years and this is proven out by the sideways move through 1.20-1.50. That may change since the euro fell out of bed when Draghi fired the QE money bazooka yesterday. The euro is plummeting but the ADX is only at 19. The downtrend in the euro is not strong in this long-term monthly basis until the ADX moves up into the pink box. If the ADX remains at 20-ish and flat or lower, then the euro will likely flatten out and not drop as much as everyone thinks.

The stochastics should create a near-term bottom now into February for a bounce but then weakness should continue on the monthly basis. The 1.08-1.12 range has a good chance of holding into summer time. The next few days are important to see if the knife keeps falling, or not. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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