Morning technical analysis – 31 January 2014 | Alpari Newsroom …

Morning technical analysis – 31 January 2014 | Alpari Newsroom …

Morning technical analysis – 31 January 2014

January 31, 2014


Craig Erlam


Technical analysis


Things could be about to turn a lot more bearish for the euro as it attempts to break below a couple of significant levels of support. The first is the ascending trend line, which dates back to 6 September. The pair has respected this level on a number of occasions, including yesterday, but today we’re seeing the first attempt at a break below it. Just below here we have the 61.8 fib level, which the pair failed to close below, despite numerous attempts, a couple of weeks ago. A break below both of these should start the next phase of euro selling, with the next target being 1.34. This has previously been a significant level of support and resistance on numerous occasions so I would be very surprised if we don’t see this again. Just below here we also have the 200-day SMA, around 1.3370. If the pair fails to close below the trend line, which is very possible given that the pair has erased most of its losses in the last half an hour or so and there’s still plenty of time to go on both the 4-hour and daily charts, it could actually become quite bullish in the very short term. Although this would not change my short to medium term bearish view. All this means is that following such an aggressive sell-off yesterday, we may see a small correction in the pair. If this is the case, the marabuzo line of yesterday’s candle will be key. A failure to break above this would be quite bearish and could prompt another assault on the trend line, while a daily close above this would result in a piercing pattern which is typically bullish, although it requires a confirmation candle to support this. This would be a candle on Monday that closes above yesterday’s opening level.


Sterling is closing in on a key level of support, having been in a short term bearish trend over the last week. So far, this just looks like a textbook retracement and as a result, I still think the pair will continue to push higher in the coming weeks. Confirmation of this should come if the pair fails to break below 1.6435, where the 200-period SMA on the 4-hour chart intersects the 61.8 fib level. Also around this level is the ascending trend line, which dates back to 2 August, making this a significant level of support for the pair. A failure to close below here should prompt a move back towards last weeks highs, around 1.6667, with the next level of resistance after that being 1.6745. In the same way that a failure to break below the trend line would be bullish, a daily close below here could be very bearish, prompting a retest of the descending trend line that the pair broke above, and retested, towards the end of last year.

Author: Craig Erlam

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Morning technical analysis – 31 January 2014 | Alpari Newsroom …

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