|
2010 has been a negative year for the Euro so far. In recent times, concerns over the economic conditions in Greece have seen the value of the European currency deflated, but right now it is holding around a key level.
The 1.37 level is the 50% retracement level or half way point of the bull range from October 2008 up to November 2009. WD Gann said that the 50% milestone of a range was the most important level to watch and that it was possible to make a fortune by watching this one rule alone.
Chart 1 below shows the entire bull market range from the October 2008 low on the Euro Futures Contract (EC-Spotv in ProfitSource).
Chart 1
click to enlarge
At time of writing, Wednesday afternoon, the Euro has spent the last eight trading days hovering around this 50% milestone.
Chart 2 shows that this 50% level also lined up with a 100% repeat of the First Range Down from the November 2009 top.
Chart 2
click to enlarge
There are many reasons that the 50% milestone is important. The two most common applications of this milestone are to rate the strength of a market and to watch for support and resistance levels in a market.
If the Euro can hold above the 50% milestone and make higher swing bottoms, we can look for higher prices moving into the second quarter of 2010. If it continues to head south, the 62.5% retracement is the next one to watch.
I remember seeing a similar setup in the SPI200 futures contract while I was undertaking Safety in the Market’s Platinum Program in 2006.
Chart 3 below shows the SPI200 futures contract (AAI-Spotv in ProfitSource) finding support on a 50% milestone in July 2006.
Chart 3
click to enlarge
Note that initially the market broke through the 50% milestone in June 2006, then it came back above the 50% milestone, then it spent the whole month of July consolidating above this level.
After the period of consolidation above the 50% level, the SPI200 took off to record new highs and I think we may be seeing the same kind of setup here on the Euro.
While I wouldn’t be rushing into buy Euros just yet, I am certainly watching this market closely to see if can provide a good base to get long out.
As always time will tell, but I wouldn’t be surprised to see a strong second quarter in the Euro.
Be Prepared!
Mathew Barnes
|