Nick Nasad
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EUR/USD - Time to Pick a Top in Daily?

The EUR/USD is at an important juncture as it flirted and was rejected from 6-month highs this past week. Will the 7-week rally become exhausted and we see a fall back into the range we've had throughout 2013?

The rally has been fueled by some positive data out of Europe, in which we have seen the Euro-zone economy finally come out of recession. However, the dynamics are likely to change somewhat with the ECB continuing to need a dovish policy, while the US Fed is seen starting the process of unwinding its stimulus - i.e. its quantitative easing policy.

In this article, its interesting to note that the expectation of 60 analysts surveyed by Bloomberg showed a collective year-end price target of 1.27.

If we do have a prolonged 1-3 month slide in the pair, the current area could be the launching point, and therefore we should consider the trading plans we may want to work with in such a scenario.

While, in this time-frame a move back above 1.34 is certainly possible, it will be interesting to see if the EUR/USD will be able to reach the 1.35 area, and what kind of price action shows up there. If there is a reaction, the 1.3510 resistance would be a nice place to place stops.

If the turn may already be starting, and we want to try our hand at calling this top, stops above 1.3415 (and preferably above 1.3450) will tell you if there's still some bullish momentum.

At the same time, if we are able to spot the turn and use that to our advantage in the short-term timeframe, knowing that we are in a bearish move can provide plenty of opportunities along the path down.

- Nick