FX.co ★ EUR/USD technical analysis and trading recommendations for August 12, 2010

4-hour timeframe

Overview:
A new sales signal has formed with the target level of 1.3040. The target level has been already reached. The sale signal is strong and confirmed by the fixation of Chinkou Span below the price curve as well as the price fixed below Ishimoku cloud. Having overcome the second support level, the price stopped nearly the third support level of 1.2830. This makes us think about correction. Therefore, bearish trading is not recommended now. In case the downward tendency renews, which will be signaled by MACD down-reversal, the targets will be at 1.2830 and 1.2650. If the price fixates above Kijun-sen (1.3070), the current ‘sell’ signal will weaken and short positions are better to close. Chinkou Span is placed below the price curve, which confirms the present sale signal. Bollinger bands indicate a descendant movement; the bands are diverging and down-directed. MACD is decreasing testifying to possible continuation of the downtrend.
Trading recommendations:
Waiting for the end of correction is advisable in such situation. After that, it will be allowed to bear with targets at 1.2830 and 1.2650. Stop loss to place above 1.3070.
Besides the technical picture, it is important to consider the fundamental reports and time of their release.
The chart annotation:
Ishimoku indicator:
Tenkan-sen — red line
Kijun-sen — blue line
Senkou Span A — light brown stipple line
Senkou Span B — light purple stipple line
Chinkou Span — green line
Bollinger Bands indicator:
3 yellow lines
MACD indicator:
The red line and the histogram with the white bars in the indicators window.