EUR/USD Analysis – Week Starting May 6th 2012

EUR/USD 4hr Chart Analysis

EUR/USD Last Week

EUR/USD made some interesting moves last week. Unfortunately no proper reversal trades formed on the Daily, 8hr or 4hr charts so I took no trades on EUR/USD last week.

EUR/USD started the week between the 1.3265-1.3285 resistance area and the 1.3190-1.3210 support area. It ranged between those two areas until Tuesday when it broke the 1.3190-1.3210 support and tumbled down to our next support at 1.3120-1.3140. EUR/USD spent the next few days stuck on top of the 1.3120-1.3140 support area. The Bears didn’t seem able to break the 1.3120-1.3140 but the Bulls were not able to repel the Bears either.

On Friday the Bears eventually broke through the 1.3120-1.3140 support but it did not make it down to the next support at 1.3040-1.3060.

eurusd analysis wrap up

Long Trades on EUR/USD This Week

Going long early in the week could be risky. Above last weeks close price of 1.3080 there is the 1.3100 psychological level providing resistance. Last week the 1.3100 did not seem to impact price at all so it may be ignored this week too. However, when it comes to psychological levels I never ignore them. It would be smart to keep an eye out for resistance at the 1.3100 and possible bearish reversals.

After the 1.3100 psychological level the Bulls will be confronted by the major resistance areas at 1.3120-1.3140. This area held very as support well last week so it could present a problem for the Bulls. If you are going long you should watch the 1.3120-1.3140 closely as it is a place in which Bears can enter the market.

After the 1.3120-1.3140 there seems to be a minor resistance level at 1.3160 which could cause a few problems. If the Bulls manage to cross all that resistance the next major resistance areas is at 1.3190-1.3210.

eurusd analysis long trades

Short Trades on EUR/USD This Week

Short trades seem a little safer this week. The first major support area is below last weeks close is the 1.3040-1.3060. The Bears may have trouble breaking through this area and it held very well last time it was approached on the 18th of April.

If the Bears manage to push through the 1.3040-1.3060 they will then need to break the psychological level at 1.3000. The 1.3000 is a very significant psych level and it has held price back since mid February this year. The last attempt at the 1.3000 was on the 15th of March and it is what sparked off the major Bull rally we saw in March. So do not doubt that the 1.3000 is a very strong support level that can cause reversals.

If the Bears break the 1.3000 the next major support area is the 1.2950-1.2970.

eurusd analysis short trades

Ranging on EUR/USD

As always ranges are possible, I will be looking out for ranges between the 1.3040-1.3060 support and the 1.3120-1.3140 resistance. The 1.3100 psychological level could get in the way of this range so watch out.

Summary

There is a lot less support and there is resistance this week so I would not be surprised to see some further moves down. That being said the 1.3000 level is extremely strong and it could hold the Bears back.

As always I will be looking for indecision forming on support and resistance. If the price reaches the 1.3000 I will definitely be looking for a reversal set-up at this level.

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21 thoughts on “EUR/USD Analysis – Week Starting May 6th 2012
  1. Nick: Excellent Analysis. I think than the support area of 1.3140 – 1.3120 was broken las friday for the NFPR Report, and i see EUR/USD between 1.3050 – 1.3000 next week. Thank you and one question, You do not trade anymore GBP/JPY ? 

    1. I thought the NFP report drove price up and then it tumbled down about 1hr after the report. I was not around Friday though so I cannot be sure.

  2. Nick, good analysis, just one question (being a very new newbie here) counting from the first bar to the right of tbe blue line denoting the start of the week on the top chart above, why isn’t the 9th and 10th bars good example of indecision coming into resistance as well and therefore (again only to my eyes) would have suggested a good short (which worked out but of course might have only been lucky and not according to the analysis I am making as opposed to yours.  Just would like to see why you rejected this trade.  Perhaps the 10th bars wicks were a little the wrong way round ??

    1. There are a few reasons. First of all there was no preceding trend. On the 4hr chart if a preceding trend happens before the weekend it does not count in the new week.

      Also the indecision candles wick is too low. Generally I like to use the low of the indecision candle as an entry. If the wick of the indecision candle is so low I would be afraid that price might bounce from it.

      You have access to the course so you know in the basics section I talk about higher highs and lower lows. Generally in a bearish reversal trend I want to see lower lows. With the wick of the indecision candle so low it would be a long wait to see a lower low.

  3. The Bears, the Bulls. Anyone who looks at the market like that will lose money. Smart and successful traders are neither bearish nor bullish; that’s trading with emotions and not with what price is doing. Not taking anything away from your analysis, that was good.

    1. Thats what Nick was doing….. Showing us what price might do if buyers or sellers take control. Nick is covering every outcome a.nd telling us what price will do if it moves up or down.

    2. Your comment makes no sense. Bearish and bullish means buying and selling. You say traders concentrate on what price does. All price does is move in a bearish or bullish direction, this is the nature of price.

    3. As Jimbo said my analysis is always neutral. I never say price will move in one direction or the other. I lay out multiple scenarios and suggest how price will react in each scenario. I do this using support and resistance.

      I have neither a bearish nor a bullish outlook on the market this week. I am aware it can go in either direction.
      The terms Bulls is interchangeable with bullish, buying and buyers. Bulls are buyers and buyers enter the market at support. The opposite is true of Bears.

      It would be good if you could explain yourself further because right now you make little sense. First you misinterpret my analysis and say it is flawed then you commend me on my good analysis….

    4.  Now this is a bit controversial. I believe like you do that traders should be like journalists in a way. Being neutral… but when the chips are down; when price has revealed what it might be doing within your chosen Time frame, you cannot be neutral.
      I’m not sure I would call that emotional as you seem to imply.
      Nick did a good neutral analysis but one that I understand will take a position if need be!

  4. Thanks Nick. Since euro opened below the 1.3040-1. 3060 is the level now resistance and not support?

    1. Sorry about the late reply Jess, when I say support area in my analysis it is only a support area because the price is above it. As soon as the price dips below a support area it becomes a resistance area.