Since the Euro has already hit our daily downside targets, surpassed them in fact, it’s time to focus on the weekly chart to see what comes next:

Click on image to enlarge!

Earlier this month, price broke below the .786 retracement at 1.2931. When price closes below a .786 level on a longer term chart, the emphasis falls on the 1.272 extension of the same swing as the target. This lands at 1.1563 and is now our initial major target.

You’ll notice that price failed to break the .786 resistance at 1.5243 when it came close to being tested in November of last year. That level was derived by calculating the retracement resistance from the April 2008 high to the October 2008 low. Since we didn’t have a break of this resistance, we knew that the pattern was likely to shift to downside as no additional upside targets could come into play with that resistance level holding.

Also, price failing between .618 and .786 resistance sets up a potential Gartley support pattern when the opposing .786 support breaks. That’s the break we saw earlier this month, and it reinforces the idea of our current weekly downside target serving as support. This pattern is actually valid down to 1.0589, but the additional expansion value at 1.1435 places the emphasis towards the top of this range. That value is calculated by plotting the high in April 2008 to the low made in the following October, and projecting 100 percent of that value from the November 2009 high. The best Gartley support patterns have a similar range in the first leg and the second leg, and when combined with the target of the current low to high swing, this forms a powerful support factor. There’s also a Fibonacci timing factor. If we take the amount of time from the April 2008 high to the October 2008 low, and project it forward from the November 2009 low, we’ll find that a 100 percent timing projection lands during the week of June 6th. This is shown with the red horizontal timing line at the top of the chart, and there’s an additional Fibonacci timing factor involved to reinforce the idea of a low being established during that week, shown with the blue line at the bottom of the price section of the chart. If price is in our target zone then, there will be time and price factors working together to act as support.

As we approach this time and price target, I’ll work on shorter term timing factors on the daily chart in order to pinpoint the timing for a low. Meanwhile we know that the emphasis remains on downside, and bounces along the way should be considered as corrective in nature as long as key shorter term resistance holds, as it has all the way down.

For more from Mark including his “Chart of the Day”, visit MJBraun.net.