Kumowizard

EURUSD - Price reached 4,5 years "support/resistance" (?)

FX:EURUSD   Euro Fx/U.S. Dollar
402 0 5
This morning EURUSD             reached a very important support/resistance line. I do not call it a trendline , simply because that would be very confusing, suggesting that EURUSD             is a good buy now as it is still in an "uptrend" until the line (which started from May/2010) holds. So what? Maybe it will bounce, maybe not, but the true case is that EURUSD             is obviously trending bearish both on weekly, daily and 4 Hrs time frames. I read quite a lot of opinions about this support line, and I also think it has some importance, so let me tell you my view.

First of all this long support line had only one (!!!) touch point since the starting point. If spot price holds above it, that would be the second higher low. So for example, this is one reason we can not call it a "trendline", as it is basically too long on both daily and weekly time frames and has too few "higher lows". So in my opinion this "support line"will become important only if it can force Price back up from now.
What is the chance? I think for short term it is quite good, as Price is not just testing this long term line, but also the lower band of the short term wedge , and Slow Stoch has become oversold again. Meanwhile we all know how huge short positionning has been built since July in EURUSD             . If Price can not close below this psychological level for 3 days in a row, than bearish momentum will disappear again, bears will start to cover their shorts, and swing bulls will try to hop on the possible reversal again. Simply an increasing number of people will believe in the "long term" importance of 1,2250.

But I tell you something else. Switch your view! If you are a true trendfollower, lower levels are never really important during a down trend. What only matters is the sequence of lower highs and lower lows, and therefor the most importans are the upper supports!!! EURUSD             is short term bearish until trades below 1,2450-1,2500, and long term bearish until trades below the Kumo and major trendline , so until stays below 1,2650.

This doesn't mean I suggest you to go short here. It is probably crowded. I suggest you to weigh your risk and probabilities when you make a presumption, or when you are tempted to trade against the trend. I also suggest you trying to stay with a trend for as long as possible.

4 Hrs: Nothing special, bearish until trades below trendline and Kumo. The wedge is tightenning. Price has to break the wedge to finish the downtrend and to start either a counter bullish move, or some sideaway consolidation.