Strategy 30 October 2013

EUR/USD – signals suggest risk of failure ahead of 1.40 is high

EUR/USD has seen a sharp move higher over the past 3 months; it has risen from a low of 1.2755 to a high last week of 1.3833, a rally of approximately 8.5%. It has now reached the 61.8% retracement of the move down from the 2011 peak, this is located at 1.3833.

We would also highlight that we have a 13 count on the weekly chart, which is something we have not seen since 2008. Directly overhead lies the 2008-2013 resistance line at 1.4002 and the 1.3958/50% retracement of the move down from the 2008 peak.

With such a dense band of resistance, 13 counts on the daily and weekly charts and the weekly Elliot wave count, which also indicates that this is likely to be the end of a wave 4 move, the risk of failure here has increased.

We have a short term support zone circa 1.3646/1.3577 (October high), but to confirm that the market has topped we would like to see failure at and a close below the 3 month up channel at 1.3405. This should be enough to signal a slide back to the 1.3104 September low and eventually back to the 1.2755 July low.

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