A Quick Look at the Daily Euro Chart Feb 17

Feb 17, 2010: 10:27 AM CST

With the US Dollar Index completing its daily Bull Flag, the Euro completed an opposite bear flag.  Both currency indexes are at key inflection points, so let’s take a quick look at the key level to watch now in the Euro Index.

Euro Index ($XEU) Daily:

We see the Euro Index making a “measured move” bear flag pattern (near-perfect example for reference) into the 136 index level, as a positive momentum divergence in the 3/10 Oscillator forms.

This is a bullish chart signal, and suggests that we could see a bounce from this level – the prior two days have shown that bounce.

Overhead resistance levels to watch include the 139 level – the 20 day EMA and 140.  Any move that rises above that level will be viewed as a bullish confirmation signal that odds favored higher prices.

Until then, we are just seeing an oversold ‘bounce’ off of a price projection target and a positive divergence.

But there’s something else important about the 136 level….

Euro larger daily view:

The 135 index level reflects roughly the 61.8% Fibonacci retracement of the March 125 low to the November/December 2009 151 high.

That adds more importance to the 135 level as key support.

Should the Euro break through 135 to the downside, we would then expect lower prices ahead, as a failure to hold this powerful potential support level would be a telling sign.

I also showed the past Elliott Wave count (identical to the dollar… but in reverse) along with the lengthy negative momentum divergence – both of which indicated odds strongly favored the downward correction we just witnessed.

To follow along with recent updates on the Dollar Index, view the following posts:

January 18: “Bull-Flag Forms in the US Dollar Index”

January 27:A Bump in the Road in the Dollar Index Bull Flag?

Feb 4: “A Quick Quad-Market Assessment of the Thursday Sell-off”

February 9: Dollar Doji Sell Signal

Especially view the following comparison posts:

December 19:  “Year to Date Elliott Wave and Momentum Look at the US Dollar and the Euro

November 1:Color Daily EURUSD Shows Lengthy Divergence (with Elliott Count)

October 19:Andrews Pitchfork Update on the US Dollar Index

These posts show how the analysis tracked and how the concepts played out in real time as we formed reversals in both these markets – great for reference and education.

To keep up with more detailed analysis each week, become a member to the Weekly Intermarket service.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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