The time has finally come to see what this euro breakout is really made of. Referring to the weekly chart, price held below the weekly .618 retracement for a majority of the summer before breaking higher in November. Now the real test will be at the 78.6% retracement at 1.3240. The .786 ratio is my favorite retracement and is derived by taking the square root of .618. If you take the square root of 1.618 you can get my favorite extension, 1.272. RSI is diverging lower telling us that this price breakout is not confirmed.

Referring to my comments this morning, I believe that EUR/USD will fail and return to sub-1.3000 levels before moving through these highs. So for tonight, we are coming into the Asian open with bids on the book to buy USD/JPY, and will be looking to get short EUR/USD into the price levels shown on the 30 min chart. The weekly .786 at 1.3239 is shown in orange and will serve as the foundation for our short trade. Analysis of the 30 min legs shows resistance as high at 1.3243, so we must allow for that. Let's look to get short EURUSD in halves at 1.3235 and 1.3245 with stops above R2 at 1.3266. Look to take profits on a maximum of one-third of your position at pivot point and channel support at 1.3170. From there, look down to this morning's level of 1.3086, which also happens to now be S2. If we are right on this trade, you should be able to carry at least a half position into December below 1.3000.

Daily and Weekly pivot points for November 28, 2006

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.