Price Action Favors Upside for EURUSD & EURJPY
Two things stood out on both the EURUSD and EURJPY charts last Friday which favor the current upmove in both markets heading into the new week. Those markets held on to their respective price patterns of higher lows, higher highs and higher closes, and when they sold-off last Friday following the dissappointing U.S. retail sales number — which we would expect given the major currencies are slaves to U.S. stock market direction of late for various reasons — they only retraced approximetaly 38% of last week’s rally. A tenet of technical analysis is the more shallow the retracement, the stronger the market. With both markets holding thier previous 4-hour uptrends, despite last Friday morning sell-off, and with U.S. stocks ending the week with an exclamation point of a rally, despite 2-months of weaker retail sales numbers, the markets with the most shorts in them, EURUSD and EURJPY, were in a good position to sqeeze out a rally tonight. What started as a short-covering uptick on the four-hour chart could easily blossom into a modest counter-trend rally on the Daily chart.
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Jay Norris is the author of the best selling book Mastering the Currency Market, McGraw-Hill, 2009, and a Senior Market Strategist with BrewerFX.com
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