Technical Trading Tips and Techniques by 
EUR/USD (a daily chart of which is shown) consolidated for most of last week after rising dramatically during the prior week. But on this past Friday (3/27/2009), the consolidation was unexpectedly broken to the downside with a forceful 300-pip plunge. Originally, a well-defined bullish pennant pattern was in the making, but Friday’s drop invalidated the pennant as a continuation pattern, and transformed it into a potential reversal pattern. This pattern also occurred around an important downtrend resistance line extending from the second test of 1.6 back in July. Price has, for the time being, respected this trendline and settled down to end the past week around major support in the key 1.3300 support/resistance region, which represents a critical juncture. The beginning of the upcoming week of March 30 to April 3 should provide indications as to the pair’s directional bias going forward. Any substantial move below 1.3300 should head straight toward 1.3000, a critical price region from a trend perspective. Any move below that level could invalidate the recent double-bottom trend reversal. Conversely, a subsequent breakout above the noted long-term downtrend resistance line would help confirm a new uptrend targeting immediate further resistance around 1.3850.
James Chen, CTA, CMT
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There were pretty good signs that EUR/USD and EUR/JPY were due for a big drop (MASSIVE MACD divergence on the 4hrs TF). To be honest, I thought they were going to give it a last push north (about 100 pips) b4 dropping, but the big dogs have decided otherwise (with a “good” excuse from the German FM)!
Hi PQT,
I saw your comment on FF, thanks! Good point, we shall soon see if that move has any legs. Thanks for visiting!
James Chen
excellent analysis matching the market mov. I am consulting your analysis for last three weeks.
That is not a double bottom dude! Sorry, don’t want to offend but it is simply two wide with a peak in the middle that is too high! And most certainly not a trend reversal!
Hi Nadeem,
Thanks for your comments and thanks for visiting!
James Chen
Hi Trader,
Thanks for your comments! No offense taken at all. The double bottom I am referring to consist of the lows on 2/18/2009 and 3/4/2009. The peak is on 2/23/2009. That is a rough double bottom formation. I think you are referring to the first low being on 10/28/2008. I am not referring to that one as a double bottom. Thanks for visiting!
James Chen
Hi, thanks for getting back. It would help if your charts were a little more precise it would save confusion! But even the double bottom that you are referring to is not really a double bottom, not even rough? There is no centre peak as that peak is part of the left bottom bounce up and the right side is not even marginally lower but a lot lower really?
Hi Trader,
Thanks for your reply. The precision of the chart is limited by the graphic file limitations. But I would maintain that it is a double bottom pattern. Whether the center peak is part of the left bottom bounce or not is, I would argue, immaterial. There is a clear peak between troughs. As for the right bottom being lower than the left bottom, yes, that is true. But when on a longer-term timeframe, like the daily chart I have used, this difference in bottoms is not enough to invalidate this as a double bottom pattern. Very rarely does one find bottoms or tops that are almost exactly alike. Noise in the market will almost always make it such that there is a difference between the tops or bottoms. The primary principle is clear, though. At or around the support established by the first bottom, price pressure from the bulls was sufficient to push the pair back up for a substantial turn to form a second bottom. This occurred below the original bottom, but I would argue that it takes the general form of a double bottom nonetheless. I guess we would have to agree to disagree on this one. Thanks, Trader.
James Chen