Forex and Next Euro Targets

"Everybody is wrong when the trend changes." This is an old saying in trading, and is well worth noting. It first means that if you are trading following the trend (which you better be) that your trade will be a loser when the trend turns on you. Not much you can do about that. You might as well try to stop the ocean tides from turning. But there is also a more subtle meaning that evades less experienced traders. That is, trends seldom turn on a dime. In a bearish trend such as we've had in the euro since the end of '09, the price action will make several false bullish hints at a turnaround, before actually pulling it off. Even then, the downtrend may not be completely over. So you must always be careful about committing to a direction until it is clearly established.

We noted in the day's trade alert (just go to www.thefxtradingmasters.com to sign up) that the euro has put together it's first string of multi consecutive up days in over 2 months. That speaks a good deal about the underlying risk appetite that is creeping back into the market, and is reversing some of the safe haven US dollar buying that has been going on.

And while I would expect that risk appetite to continue for at least a few more days, it doesn't necessarily mean that the euro bear has gone into hibernation. From here, at 1.2245, we are just bumping up against the 200MA on the 4H chart. Price action has stayed below here since mid April. Breaking this barrier would be pretty significant. We should note, this is the first real attempt to do so.

Beyond this level, we have resistance at 1.2320, 1.2350 and 1.2450. That last figure is also the 161.8 extension of the move from the current low.

On the news docket this week we have a few big ticket items. Tuesday will bring the CPI (inflation data) from the UK, while Wednesday will present their Jobless claims and employment rate. We'll also see US housing data, permits and new starts, which while generally considered to be level 3 data, has been known to cause big moves in the absence of any other news, and especially f the results deviate in a significant way from what is expected. On Thursday we will have the US CPI data, and see if rising prices caused the sales slump last month.

That should do it for today. Let's see what the market brings us.

Happy Trading!

Bill
www.thefxtradingmasters.com
bill@thefxtradingmasters.com