Breaking long term support happens all the time...

....Question is, will we be ready? Just because we know things are going to get better, we also know things could get worse before they do. Good traders play both sides in both bull and bear markets. Do I think that the EURO spot goes lower then now? Probably not...but if it does, we would break a 4 year support line. I think much of the bad fundamental news is priced into the EURO.

But remember...it doesn't really matter to the technician. Yes, you have to keep up with the fundamentals, but Jean-Claude Trichet talking doesn't give you entry and exit points!



Here's a sobering headline, but read the little piece afterwards:

Mounting Strains In Global Financial Markets Threaten To Topple Government's Efforts To Revive Sentiment

And, despite the global effort to stabilize markets and revive growth, it is only a matter time before feeble optimism gives way to fear once again. Indications of building strains are visible in economics, market operations and certainly price. Looking at the market’s more traditional asset classes, the sense of risk aversion is unmistakable.

-------------------------------------

What I am saying is, did anybody expect the equity markets to be where they are today? Just be ready for a trade. If this thing breaks and shows some confirmation, you can afford to take a longer term short position, because it would be a serious price level that has held for years but is no longer an appetizing price to traders.

Reasons Why The Euro Would Hold

1. The Dollar is extremely overbought and the equities are extremely oversold. (See chart below.)


2. Market Club has issued a daily up Trade Triangle for the EUR/USD.


3. We have up Triangles on both the weekly and daily in the EUR/Yen. The Japanese government needs their currency to be weak because of the type of economy they are.


4. The Euro seems stronger or even with most of the other currencies. In my mind, for the spot to go down, the other currencies would have to have less problems then Europe.

If you look at the Trade Triangle of the DX, you will notice that, in the past few months, the dailys have all been issued within a very tight range. Could their algorithims see what the chart shows above? Dollar may be continuing up, but it sure looks like it'll come down a little first.

Reason Why The Euro Might Not Hold (Technical):

Fibonnacci retraced 50% of its big move and has come all the way back down: