XEU Euro Daily Chart

Price bounced as projected by the falling wedge and positive divergence posted a week ago. The RSI and MACD line, however, (black circles) printed lower numbers hinting that price will need to come back down under 132 in the days/weeks ahead. For now, the short term daily time frame, price is bullish with the 137-138 gap fill targeted, but, once that is achieved, weakness should resume. Note the neon green lines that show the indicators long and strong over the last week or two.

The ADX shows a strong trend is in place as the euro falls which reinforces the intermediate term bearishness and lower euro prices in the future. Pay close attention to the asset relationship; euro down=dollar up=commodities down=gold down=equities down=treasury price up yields down. And, of course, the visa versa, which was exhibited by the huge 10/10/11 rally: euro up=dollar down=commodities up=gold up=equities up=treasury price down yields up.

Note the textbook descending triangle in blue. Many times the first strong move out of the triangle is a fake-out, like late August, then price comes back inside the triangle and moves out the other side. This behavior can go either way for triangle patterns, this pattern worked out where the upside was the fake out, then failure below the triangle baseline occurred. The target is the distance of the vertical side of the triangle, thus, 141 to 149 is a difference of 8 points, so 141-8 = 133 target, not too shabby, hitting the target dead-on which also provided indication that a relief bounce would be prudent.

Projection is for some ebb and flow over the next few days, 137-138 gap is a target for the upside, then weakness should resume with sideways to sideways down action in the weeks ahead to fill the lower gaps and test lower support at the 129-132 area. This target will probably coincide with the resolution on the Greece matter, as well as a potential QE3 in the States, where then equities, and the euro, since they move the same way, would launch. Of course the news flow dictates the euro action so just take things day to day for now. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here or anything linked to this site. Consult your financial advisor before making any investment decision.