Up to the May meeting of the ECB (the
last but one) the EURUSD pair was enjoying a real sense of resilience. The
trend was definitely up, as can be seen by the slope of the 200 Day EMA (blue
line on the chart above).
There was considerable turbulence during
the May meeting and following press conference, and after the dust settled
there was a real sense that something had changed. In Technical Analysis terms
this has not been easy to see, but if we trace price action in terms of the close
of each day’s bar since then, a pattern does begin to emerge.
Firstly, there was a clear double top
formed around that time. Since then, it has not been too fanciful to imagine
that there was a series of lower lows and lower highs which, as we know, constitutes
a downtrend or, in this case, could make up the beginning of a downtrend.
The
close is more definitive
This idea of using the close of the
bar in order to plot a trend, rather than the high or low, makes some sense.
Especially on the daily bar, this is the price level at which all market participants,
both bulls and bears, have reached a place of equilibrium after the day’s
battle. Each has fought his or her best, and some will have changed sides, but
they will have only done that when they are in possession of the maximum amount
of information relating to that day’s activity.
The following day is a different
matter but as we are concerned with a trend over a period, rather than any one
point of data, this something that will be taken into account in due course.
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