Strategy: Pending Short
Prices put in a Bullish Engulfing candlestick pattern above support at 1.2831, the 23.6% Fibonacci expansion, hinting a bounce may be ahead. Resistance lines up at a long-term falling trend line established from May 2011, now at 1.3125. A break above that initially targets 1.3283. Alternatively, a reversal through support exposes a rising trend line set from the July 24 low (1.2653) and the 38.2% Fib (1.2620). Overall positioning favors a bearish bias for now but we will opt to hold off on entering short until the series of higher lows traced out from the July 24 low is convincingly overturned on a daily closing basis.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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