Daily Technical Update
May 21, 2010

EUR/USD Finds Short-term Bottom

Daily and Weekly: From the daily time-frame, we can see a bigger possible rally. I know just yesterday, I wrote “Bottom-pickers Go Away!” Well, signs are now finally showing a possible bottom. But I would still carry the same precaution and limit my expectation of a rally attempt.
The daily shows the 1.31 area at the 61.8% retracement, also coincident with where the SMA 50 should be, as well as a previous minor support turned into resistance. This is the furthest I would expect the rally to reach before another attempt at breaking the 1.24 support zone.
This means the market may have a tough time getting past here. But even before 1.31, 1.2750 is an important area to break above. Not shown here, but it is 61.8% retracement of the down swing from the start of May. The market may actually turn back down at the 1.2750 level.
A possible wave count is given, but is not resolved. From this scenario, the correction can actually reach 1.35. However, I am skeptical of that since so much resistance is at 1.31.
In the weekly, we see the market testing an important support. A break of this leads to a swing projection target of 1.15. The market proved to respect this support this week. There may be some further bounce, but the bearish attempts are heavy, and should be respected and anticipated to test the support again.
Fan Yang
Currency Analyst
Commodity Trading Advisor

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All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.