The FXE 60 minute chart is a good example of why I use multiple price targets on trades. The first 60 minute chart below was posted yesterday, before the FOMC announcement & before the Euro/FXE exploded to the upside with the largest single-day gain against the dollar since July 2010. That same chart was emailed out earlier this week to those who requested it.

As the second, updated chart shows, the FXE printed a high-0f-day (HOD) of 106.64 yesterday, just a mere 7 cents above the first target level and as is most often the case, a reaction (pullback) has occurred following the initial tag of that target level, with the FXE pulling back to the former key resistance level, which is now support of 104.71 (also listed on the previous charts). In fact, so far the LOD on the FXE was exactly 104.71… a textbook example of technical analysis and more importantly, this tells us that forex traders, at least since the big moves in currencies yesterday, are relying heavily on the charts for their entry & exits.

 

Simply put, this pullback to support (the FXE is still trading just above that level) offers an objective re-entry for those that took advantage of that biggest one-day move in the Euro in nearly 5 years, and booked profits pennies off the highs just before today’s big drop. The FXE (or other Euro trading vehicles) also offers as new objective long entry here with the appropriate stops set somewhat below the 104.71 level.

The technicals continue to indicate more downside in the US Dollar/upside in the Euro in the coming days & weeks and it is only normal to see some of the gains/losses posted in the Euro/$USD yesterday digested via a pullback and/or brief consolidation before the correction in the $USD resumes. Once again, precious metals & other dollar sensitive commodities will likely benefit from a decent correction in the dollar, should one continue to play out in the coming days/weeks. Conversely, US equities, which have been a direct beneficiary of the very powerful rally in the dollar, are likely to fall if the correction in the dollar continues to play out as expected. Should central bank intervention and/or market forces overcome the near-term bearish/bullish outlook for the Dollar/Euro, I will try to communicate my thoughts as soon as possible.