The Euro has dropped substantially since May 4th after a very long uptrend from the 1.2870 area in January all the way up to 1.4930 area on May the 4th. Many traders were burnt trying to catch the Euro top, after all, fundamentals were and still are pretty worrying. That said, Germany's economy is doing well and as Germany exports around 80% of it's produce in Europe a high Euro has not been a major issue.
Sovereign debt continues to weight and the Euro has now dropped 61.8% from the swing low of 1.3430 on Feb 14th to the swing high on May the 5th. This also happens to be the area of the weekly S1, so holding it is critical. Today's (May 23) IFO figures were good giving this up move some extra oomph. So the question is, is this enough to see a bigger retracement to the upside, or have these figures simply helping the short covering before the next down move.
Right now is seems to me that the 1.4150 area (roughly daily R1 depending on the open close you use). A 50% retrace up places the Euro around 1.4160 area. So all eyes must be on these levels as a failure to rise above that level, may trigger the next round of selling. The market is fickle and the Euro is a Teflon currency, no mater how bad the situation in the Euro zone is, when risk appetite is there, Euro bulls are there too.
For those who read my blog regularly, You will know that I prefer very small risks and am always looking for the scalp that becomes a swing. This is what I continue to do today, I have this bias for a further down move around 1.4150 but am not married to it. Will wait patiently to see what happens around there and be ready to act, up or down. As I mentioned earlier I use Forex Rebellion (Russ Horn's system) on 15 minute charts to confirm when my 1 minute scalps have the potential to become swings.
By the way, I am not ruling out a potential move to 1.42 area as part of an ABC pattern. Bottom line is keep wide awake and focused and trade your own Forex trading methods, make sure that you stick to your own rules, as your intuition will grow from there.
Have a good day trading.
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