Article originally published on innerfx.com and republished here with permission
Quote of the day: “The world is round and the place which may seem like the end may also be only the beginning.” ~ Ivy Baker Priest
Good morning. Things are getting uglier for euro as it fell below $1.4, suggesting a test of July’s bottom at 1.3835. Euro’s decline comes as a result of more talking about the possibility of Greece exiting the euro zone. Trichet’s dovish commentary also fueled the decline.
As you can see in the chart below, last time the euro managed to find decent bids around 1.3850 and reversed – but this time there’s no clue that it is dealing with a decent support, so I think it’s best to look for new selling opportunities once former support at 1.400 will be tested, or when price breaks below 1.3850, eventually.
Yesterday I thought we’ll see a 4th test of .8900 but oh well… I guess Trichet couldn’t wait any longer. We’re back around support zone and an upside correction will probably be short-lived – hence keeping an eye on the .8750/65 intraday resistance.
Median fib level was breached yesterday, providing a great selling opportunity as noted in my previous report. The 62% level also failed to hold and if you wonder why, here’s a little piece of advice for new traders who are still exploring the “magic” of fibs: these levels are reliable only when the market is trending and you’re following the trend, meaning you buy around fib support when the trend is upward – sell when trend is downward. But in EURCAD’s case, there’s no uptrend to be seen here.. it’s been broken some days ago when price breached below 1.39-1.400 – and last long tailed candle of September 6 just confirmed that we’re in a downtrend, as the rally was short-lived.
Equity markets were not impressed by Obama and Bernanke’s speeches yesterday, hence AUDUSD is still trading below 1.0650 and looks a bit heavy on intraday basis. The warning sign for the bulls, and I’m one of them, is quite obvious. We’ll see how this turns out
and the hourly chart: