Eur/Usd

A quick look at the Euro/Usd before the Christmas week crazy trading kicks in, this is the time of year when price action wont be as useful as it would otherwise and the end of year is also a time when many positions for those in the pro money world who trade longer time frames.

This is my ten mile high view. Look for the obvious and proven price history, ignore the current candle because it is not yet closed and of no value to us. We see where price has been and how it reacted. The short story is, price has come from a higher price to a lower price and with good pace and little to hinder it. This tells us the bears are in full control and there are no signs of this changing on this time frame yet. If there is no sign change, or no sign of change, then we continue with a bearish view until price proves otherwise.

Another monthly chart with one important addition. A yellow line to show support and resistance. This is an approximate area and not a single line/pixel or 1 thou tolerance line. It is an area.

We need to know ahead of time where price can potentially react, we need this for entries, exits and stops. All are of equal importance in trading. On the next chart we will look a little closer and get more intel.

Weekly chart.

Not much different you say, close but look again. The yellow line now has a corrected value to 1.20000. This is a price area that many will look for a bounce, if enough traders share the same view, then there will be a bounce because it becomes self full filling. Plus there are strong technical reasons for a bounce there, we see historic buying to the left of price in May 2012. When old and clean price areas like that are untouched for a long period of time, then can show violent reactions and price takes off quickly. If this happens, you may not see a pull back until price has gone some distance. But if price stays in the area for a longer period of time, it means there are less interested buyers. That would not be good for the Euro, because any drop through 1.20000 will be hard to contain. If it did happen, I would expect the ECB to announce some major purchase of bonds etc to happen quickly. This is nothing more than a money game to see who can do the least and spend the least to make the most amount of money, that is from a Gov perspective. Any Gov react to the markets rather than stop them falling, they are always last to the party.

Daily chart.


I marked what looks like messy price action to show the bears are still in control. The retraces are chaotic, yet still comply with standard supply and demand groups. Note how price is slowing down as it gets closer to the major area of buying back in 2012. Pro money has to unload as price falls and buy in before it hits what eventually becomes the bottom. Otherwise a single close and open of new positions would create such spikes that it would be near impossible for anyone to gain a good entry and hold onto it. The last few days show a strong push down and given the time of year it is, this may be nothing more than positions being liquidated and willing sellers taking the orders for a quick trip down for equally quick profit into a safe area.

Price has closed lower and shows a strong close with no buyers or signs of a pull back on this time frame.

Lastly the 4hr chart.


I have placed some white lines showing the retraces and the boxes where the bears took over again. It does look more and more messy the lower you get in time, but its still perfect supply and demand trading. Wider stops than normal were needed inside all this mess in order to pull out a few winning trades.

On the last two candles there is some buying, not much and still closed below the previous bottom. The closer we get to 1.20000 the more risk you take on when shorting.

There are other pairs who are also coming close to major potential turning points and it is no fluke that this happens in or around the same time. For the past 100 years the markets have behaved like this and will still be behave the same in the next 100. You or I wont change them one single bit with our tiny influence.

I did get an email requesting to show on a chart where pro money comes in. Looking at the chart below I will give you a hint, look for the box and then look for the reaction. The reaction is the result of pro money, but they hide most of their tracks inside the box. On lower time frames there is more intel on what it looks like and will look very much the same, you are safer to trade the retest of the pro money result than the initial break. Any strong break will have a test and continuation, most of the time. But trading a break is a lower pay out and higher stop hit count.