Mid-Week Setups to Watch 4/06/11

“Normal is nothing more than a cycle on a washing machine.” – Whoopi Goldberg

Hello. As mentioned earlier today, I’m back to share some interesting charts.

EURUSD

As you all know – tomorrow is an important day, when the ECB is expected to raise rates for the first time since July 2008. The rate hike is already priced in, so it’s unlikely we’ll see any major move. Well, if the ECB doesn’t hike – look for a roller coaster fall to $1.38. Now let’s take a look at current charts

As seen in the chart above, a rather wide resistance band between 1.4050 and 1.4260/80 has been breached. What now? The uptrend looks healthy, we have lower highs, a new higher high, last year’s open price being challenged… until noticing a reversal candle I for one prefer to bet on further upside.

A longer term chart (above) – a different story: the trendline connecting the lower highs since reaching an all time high in 2008 is currently under pressure, arguably breached. It takes time, sometimes months, for a long-term break to be clear enough – especially if the market enters a consolidation phase orbiting around the key level. Anyway, I think we’ll see $1.5 before beginning a major move (even corrective) to the downside. We’re not far from it.

Near term charts such as 4-hr look nice, too, from a technical perspective. The chart above is like one of the basics you’ll find in “Technical Analysis” books, a classic example of price testing an upside barrier several times and, once breached, it becomes support. This is one of my preferred breakout scenarios: a steady uptrend, dips being bought fast, few failed attempts of breaking higher to cause some confusion, range compressing and finally price skyrocketing above the range’s top side, which becomes support. A time when reversal hunters become hunted.

Now let’s move forward

USDPLN

Some days ago I highlighted an USDPLN bearish setup worth your attention. It took a while for this breakdown setup to develop but things are clearer now. It keeps going down to fresh lows while writing this report and frankly, if anyone thinks it’s a good opportunity to buy at this “low” level – he must be looking at a different chart by mistake then.

Zooming out a bit, we can see that next downside target to look at comes around 2.7, but let’s count the rising trendline connecting the bottom zones since Nov-Dec 2009. This is a “final frontier” support zone, before eventually reaching 2.3-2.4 – which is my current target.

Fiat currencies don’t rise and fall. They just sink at different rates, in cycles.

EURAUD

Here’s another interesting setup developing, as seen in the chart above. Support around 1.3650 is still intact but the recovery is modest. In fact, at this point it looks like a minor pullback to the upside, to re-test the former support trendline which belongs to the uptrend started at 1.33 in February. What I plan to do is to sell on potential break of support @1.3650, with an initial objective at 1.33. It will be best if the said scenario will occur within the next 2-5 days.

EURCHF

Looking at both weekly and daily charts, we can see that the EUR currently stands near a key short-term resistance zone formed by February’s top.

In the daily chart (above) we have two days of “dip buying” while consolidating gains ahead of 1.32 – February’s top. A potential breakout will be a new chance to join the bulls on the way to 1.38.

Enough for now. Thank you for reading and you’re welcome to share your thoughts.

I’ll be back tomorrow. Cheers!

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Post tags: breakout trading, ECB, EURAUD, EURCHF, EURUSD, Interest Rate Decision, USDPLN