Eurodollar (EUR_A0-FX): Daily Bearish 1.13 Extension

The daily chart of the Euro in Figure 2.6 shows a distinct bearish 1.13 extension that failed to continue higher. In fact, it marked a temporary top for the market in late 2009.

Figure 2.6.

This is an excellent example because it clearly represents the nature of the 1.13 extension as a failed breakout. In this case, the index reversed a few points above the completion of the extension. Furthermore, the price action rolled over quickly and declined shortly after testing this critical resistance. The lack of continuation just above the prior peak at the 1.13 extension was indicative of a trend that is not going to continue. Situations like these underscore the importance of the 1.13 extension in defining critical potential resistance.