Eur/$ is ranging since the Oct 28th low at 1.2335 but with no signs “pattern-wise” of a more important bottom, is seen as a correction and with eventual new lows below 1.2335 after. However on a very near term basis, there are questions in regards to how this shorter term period (next week or so) of correcting will play out. May be forming a pennant/triangle over the last week, suggesting another week or so of tighter and tighter ranging before resolving sharply lower. Could also see a short-lived bounce back to the Oct 30th high at 1.3290 and even temporarily above first. At this point the very near term view is somewhat a toss-up, but in both cases, eventual new lows are favored (see daily chart below). So for now, would short on a break above the 1.3290 high and approach of the ceiling of the 3 month bearish channel (currently at 1.3470/80). However, if the triangle scenario does play out, should have a chance to short near current levels a week or so down road. Nearby resistance is seen at the ceiling of the potential triangle (currently at 1.3150/60) support at the base (currently at 1.2550/60). Note only temp resistance on the Oct 28th resell at 1.2500 before stopping the next day above the bear t-line from late Oct (then at 1.2645, closed at 1.2960).
Longer term, the market is oversold after the sharp declines from the July high at 1.6035. Though this suggests that risk is starting to rise for at least a few months of correcting higher, there are still no signs “pattern-wise” that a bottom that magnitude is in place, and suggests at least some further downside ahead. Note however, that the long held support/target at 1.2100/50 (50% retracement from the Oct 2000 low at .8230) remains in place, while there is potential for a bigger picture reversal in the mid Dec timeframe. So could see a final, but limited push to new lows into mid Dec before forming a minimum 3-4 month bottom (see “ideal” scenario in red on weekly chart/2nd chart below). At this point however, don’t want to get ahead of ourselves so for now for the longer term, would have a longer term bearish bias.
