it is no news to the majority of the world that the euro has been doing pretty well against both the US dollar and particularly the yen as of late. It will certainly not come as any surprise to S3 readers!
I thought of doing a little follow-up on that euro-chart and see where we could be heading next. I apologize in advance for the shoddy screen capping. As usual, chart courtesy of CMC Markets.
It has pretty brilliantly followed my recommendation from early December, and then used the ascending trend line to back it strongly. Now we are coming up to the more significant test of the upper descending trend line closing the triangle. What is the technical situation saying here?
First of all, we have a Bollinger blowout, meaning that the distant Bollinger band (annual window on this chart, and the distant band is lower) is expanding vs. the moving average. We can conclude from this that the move higher is very much supported, and breaking range.
On top of this, we also have the MACD flaring positively – coming out of a histogram trough, a bullish zero-line cross and about to bring trend with it. There’s also a moving average minimum being made (supporting the trend) and this will accelerate as the annual price differential grows longer (the MA replacing an old low value with a new high one) which will provide increasing market support at these levels until the middle of the year and will further grow for every increase above 5 cent differential between this year’s price and that of the same period last year.
There is more juice to this until the $1.40 level, but might get a little bit thin on the air around there. Still, don’t be afraid based on a single week correction! Consider decreasing exposure, or maybe going short, should the quarter (13-week) EMA fail to hold.