It is difficult to figure where the Euro is going. An inspection of the daily and 4-hour charts reveal 2 possible scenarios.
Bearish flag
The daily charts suggest that the Euro may continue its downward move because of this continuation pattern. The flag is characterized by the flagpole and which suggests a lot of momentum. A body of the flag completes the pattern. This body is usually perpendicular to pole. A body that converges into a triangle is called the pennant.
For the flag to be valid, price remains within the resistance and support of the flag. It is ultimately confirmed when it moves downward and breaks the support level (see dotted line motion).
Daily charts print a possible bearish flag
Reversal
The 4-hour charts paint a slightly different picture that can be visualized as a bullish reversal. The Euro was range bound the past 2 weeks (last week of 2009 and first week of 2010). This week price made an upside movethat was higher that last weeks high. Action till now seems to suggest that a support has been formed. If the bullish picture is true, price will find a base and penetrate Monday’s high level. Otherwise, the downside move below support will support the bearish flag scenario.
Weekly high
