As shown on the yearly chart below, the pair is under strong negative pressure after topping at 1.6038 in 2008 , we have 3 strong signs of reversal , the pair was rejected from the 200 extensions of (0.5540/1.0507) with spinning top – reversal candle – and the bearish divergence of %R indicator, 3 strong signs put the EURO under strong pressure the past 3 years, however; check out the second yearly chart below , you’ll find out that the pair broke above a bull flag in 2007, then the upper border served as strong support , so far the pair is still hovering around the upper border of the bull flag.
Anyway, %R indicator suggests that consolidation from 1.6038 – 2008 high – will likely to continue between 1.2330 – 2008 low and 1.5143 – 2009 high – before the next breakout, a yearly close below 1.2330 will extend the consolidation from 1.6038 to 1.1600/1.1200 levels, while a yearly close above 1.5143 will resume the bullish move to 1.8000 levels.
The last point, with the close of this year -2012 – the EURO will put a fractal below the year of 2010 at 1.1875, this scenario will suggest a bullish move to 1.4000/1.4500 levels during 2013 before falling to 1.3000/1.2300 levels.
Another scenario supports this view, the candle of 2012 is bullish with long lower shadow and short upper shadow, It indicates that sellers dominated during the year and drove prices lower. But, buyers later reappeared to bid prices higher by the end of the year and the strong close created a long lower shadow.
Few days are left to end the year. a yearly close below 1.3000 is supposed to weaken the bullish scenario while any close above 1.3000 will keep the bullish view strong and intact.
Wednesday 26 Dec 2012 10:50 PM
Written by me, Published on forextstreet.net on Wednesday 26 Dec 2012