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Eur/$, more of the same...for now...

Wed, Nov 26 2008, 16:54 GMT
by David Solin

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In eur/$ have been warning over the last few weeks of an extended period of wide ranging before resuming the decline back to the Oct 28th low at 1.2335 and even below, and the market has indeed ranged over the last month. Still seen as a correction with eventual new lows but scope remains for more wide chopping, with some chance for a retest (and temporary break) of the Oct 30th high at 1.3290 first (also 38% retracement from the Sept high at 1.4860). Note too that further important resistance is just above there at the ceiling of the month long bullish channel, currently at 1.3410/20. Nearer term however, the confidence of such a near term upmove is not very high, while trade is likely to stay choppy. In general for now, would trade with a very short term outlook (too short for the scope of these emails), fading key support/resistance areas and aggressively trailing stops (to keep risks at a minimum) as this extended period of ranging plays out. If bigger picture, can just be patient for better signs that this month long period of consolidating is complete or an approach (and slight break) of 1.3290, to rebuild bigger picture shorts. Nearby resistance is seen at 1.3080 (yesterday’s high) while support is seen at 1.2735/50 and the more important month long bullish trendline (currently at 1.2435/50). Note, only temp resistance and 300 tick fall after reaching the sell area at 1.2735 (bear trendline from Oct), and before stopping on the recent close above the ceiling of the bearish channel since Aug (then at 1.2680, closed at 1.2955 on Monday).

Longer term, the long held bearish bias and target at 1.2125/75 (50% retracement from the Oct 2000 low at .8230) remains in place. Note too that the last month of consolidating is seen as a correction, with eventual new lows below 1.2335 (see shorter term above). However, the market is oversold after the sharp declines since the July high at 1.6035, while a number of financial market cycles reverse in the mid Dec timeframe. This in turn suggests new lows below 1.2335 (if they do indeed occur) may be short-lived and limited, before forming a potentially important bottom (for at least a few months, see “ideal” scenario in red on weekly chart/2nd chart below). For now, would maintain the long held, longer term bearish bias but will be looking to turn more neutral and potentially bullish for the more medium term on new lows below 1.2335.

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Published on  Wed, Nov 26 2008, 17:01 GMT

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