Just a quick update and analysis of Eur/Usd today:

After a drop from 1.4900 to 1.4000 we saw a sharp rally back to 1.4700 over the last couple of days (all approximate levels).

I have various reasons to believe that Eur/Usd made a lower high and will now decline to below 1.4000 over the next days/weeks.

Reason 1: Technicals on the chart
Reason 2: Many US and European Indices have moved significantly lower over the last 2 weeks and look like they will continue to head lower. Usually the USD strengthens when markets head lower, meaning that Eur/Usd will head lower also.

Let’s take a look at 2 charts:

On the daily chart above you can see how sharp the recent rally from 1.4000 up to 1.4700 was (again approximate levels).

I also drew in a trendline and wedge shape that coincides with a few other points on the chart which would make it very possible for a top to be in and a further decline to the horizontal line on the chart (below the most recent low of 1.4000).

But one reason is not enough to make a decision, so let’s look at the 4 hourly chart:

AS you can see on the chart above, the RSI and Slow Stochastics are very overbought meaning there is a good chance for a correction.

Not only are the indicators oversold, but there is a negative divergence between the RSI and the price action (blue lines on chart) and this usually means that the price action will follow in the direction of the divergence (i.e. down).

Conclusion

I would take a short position here at market (1.4670) with a stop above 1.4800.

As always, keep your stops in and your emotions out. Never risk more than 5% of your account on a single trade!