EUR/USD Analysis - 10 December 2012

EUR/USD Weekly

EUR/USD Daily

EUR/USD H4

Details

After a correction to 1.2750 (Fibo 61.8) of the 1.2000-1.3180 ascendent wave the price has broken out of its downtrend channel on the weekly timeframe as part of a inverted head and shoulders and is contained in a bullish flag, while holding above the H&S neckline and below both the 200 period MA and the faster MA.

For the long-term our trade setup is to buy on a breakout of the bullish flag at 1.3246 with a stop loss inside the flag's range at 1.3027 and a target at 1.3976 and a second target at 1.4758, where a potential triple top can be formed.

In the short and medium term the price is most likely to drop to 1.27 before the uptrend will be resumed.

On the Daily timeframe the price is contained inside a uptrend channel and has formed a triple top at the 1.3120 resistance where it was recently rejected and dropped to 1.2875 at the middle of the weekly bullish flag's range while the pair is now testing its faster MA and a possible upside correction for the 1.3087-1.2875 descendent wave is also pending with the possibility of forming a head and shoulders on H4.

Our trade setup for the short to medium term horizon is placed at a strategic point which provides a good risk/reward ratio.

The trade setup was: sell at the current level with a stop loss above the triple top at 1.3206 (and above the weekly bullish flag) with a target at 1.2728 near the next support and the 200 day MA.

This trade is currently 188 pips in profit and remains active until the daily target at 1.2728 is hit or until further notice.

On the H4 timeframe the price is contained inside a uptrend channel and is holding above its 200 period MA while a upside correction for the 1.3060-1.2875 descendent wave is possible, with the prospect of forming a potential head and shoulders if the channel support and the 1.2890 support remain valid.

There are two possible scenarios:

1) Buy at the current level with a stop loss placed below the 1.2890 support and a target at 1.2949 near Fibo 61.8 of 1.3060-1.2875 (higher chances of getting hit than the second target) and a second target at 1.2994 near Fibo 38.2 and the 1.3005 resistance

2) If scenario 1 fails and the 1.2890 support and channel support are broken, we have a sell setup at 1.2866 below Fibo 100.0 of 1.3060-1.2875 with a stop loss at 1.2903, a initial target at 1.2790 and a second target at 1.2700 which is near our daily target (1.2728).

The previous H4 short setup is now closed with 180 pips profit.

Weekly (Long term)

Buy at 1.3246

Stop loss at 1.3027

Take profit 1 at 1.3976

Take profit 2 at 1.4758

R:R 230/1400

Daily (Short to Medium term) Setup is active now

Sell at 1.3096

Stop loss at 1.3206

Take profit at 1.2728

R:R 112/380