Charting the Breakdown Levels to Watch in the Euro XEU

Sep 9, 2011: 1:10 PM CST

News of Greece’s debt and European contagion again dominated the headlines on Friday.

The Euro broke major confluence chart support and is currently in free-fall… but what is the current structure saying and what are the current levels to watch as a reference?

Let’s take a look, starting with the Weekly Frame:

What we’re seeing is the Euro Index, symbol $XEU, which roughly tracks the EUR-USD FOREX pair (as in 140 in the Index is similar to 1.40 in the EUR-USD pair).  It’s not a perfect equal in numerical values, so keep that in mind.

First things first, the index crushed under the 140 (1.40) index level which was major confluence support from…

  • A rising long-term trendline (blue)
  • The 50 week EMA (140.08)
  • The lower weekly Bollinger Band (138.73)
  • The 200 day SMA (139.99)
  • Prior Price Swing Lows (along with ‘psychological’ support at 140 / 1.40)

As such, one can officially call a trend reversal on the Euro as the index (FOREX pair) falls towards lower support target levels.

What are some of those levels?

Let’s turn now to the daily chart, as there are no official/simple levels left on the Weekly frame.

Quite simply, the 61.8% Fibonacci Level is the active/dominant potential support line at the moment – it rests near 136.70 as drawn.

Under the ‘final’ Fibonacci retracement level is the February low near 134.50 (which is a minor level) and then the chart opens to a retest of the official 2011 January low near 130 (1.30).

In other words, keep your focus on the 136/137 level where we are at the moment for any sign of potential support/mini-bounce.

An index move under 136 (1.36) opens the door to play to the 134 level and then back to 130.

We’re in a situation where news/headlines are likely to dominate the cross-market landscape (price may behave more erratically in both directions), but as far as the charts go for guidance, continue watching these levels in the context of a new potential downtrend in motion.

Corey Rosenbloom, CMT
Afraid to Trade.com

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