Dueling Patterns on the EUR/USD

Two patterns have emerged on the daily chart of the EUR/USD. The qualifier here will be the eventual market cycle that settles in this week. That means as I look at the down channel and the rectangle patterns, I will need to confirm the down channel with a down trend and the rectangle with a distribution cycle.

The down channel is the pattern that is the better pairing with the current market cycle.

EUR__A_2_2009-02-02_1047.png

The reason for this confirmation is the four to six o’clock angle on the Wave.

eur daily 2-2-2009 2-15-55 PM.gif

With today’s U.S. Dollar Index weakness, the fiber has enjoyed a bounce and it’s a bounce at this stage in the cycle that could usher in a cycle shift. In this case the most likely scenario is a transition into the distribution cycle. A distribution cycle is simply a sideways market that is more volatile than — for example — a narrow sideways channel. In fact, distribution could be consider a wide sideways channel. If a transition completes, and therefore levels out the downtrend, the rectangle pattern (below) would be front and center.

EUR_A_2009-02-02_1045.png

“Think like a queen. A queen is not afraid to fail. Failure is another
steppingstone to greatness.”