A Lesson on "Anticipation".

In this lesson we are attempting to anticipate market behaviour of the EUR/USD pair. There is a difference between "anticipation" and "predicted". Chartist act on what they see happening in the market, and do not try and predict what the market will do. By having analyzed current conditions in the market, anticipation means constructing two potential scenarios for market action.

Today, we want to see if the market shows validation or invalidation of our scenarios.

We are going to wait on a news announcement (US trade balance) and set up an example and scenarios for what may happen to this pair.

EUR/USD Daily Chart Analysis 

Last week we had a significant move, but since then the market has not gone anywhere. Overall, we seem to have a clearly defined, mild uptrend, behaving quite technically.

It has broken its previous high, and tested previous low, and has up threw the the fibonacci levels to reach the most recent high. This is a crucial level of resistance. What will happen in the future will this pair depends on what happens at the test of these two previous highs.

Preferred and an Alterative Scenario to Market Action.

We currently see a pretty strong upmove in our stochastic indicator, and it is still pointint upwards, indicating momentum is still strong. RSI has not gone above its overbought level either. On the news, we may expect the pair to break the resistance and attempt to test the 1.39 level.

After testing 1.39, it is likely that the pair may fall back down and retest the current levels. The level that had acted as resistance should turn to support. If support holds, we can safely anticiapte that we are seeing a contintuation of the market trend.

Our second, or alternate scenario, is that the highs may be broken in an intra-day bar, and then head down to retest previous lows.

We Shall Return to This Example Later 

As the news did not move the market, we will return to this analysis and set up in a later lesson.