Eur/$ has again turned lower after yesterday’s test of the bearish trendline since Dec (see daily chart). However, the downside momentum over the past few weeks is slowing while the market is nearing the bottom of the large range since Oct (with more wide ranging favored, see longer term below). This in turn suggests that a potentially important bottom with eventual gains all the way back to the Dec high at 1.4715, may be in place (or at least close). Note too on a very short term basis, the upmove over the last few days occurred in 5 waves, adding weight to the view that a bottom may be in place (see shorter term chart at www.fxa.com/solin/comments.htm ). For now want to be long, but with some risk of more basing and even further slight new lows below 1.2710 as part of a larger bottoming first, would wait for a break above the bearish trendline since Dec (currently at 1.3065/95) to buy. Would also buy on an intraday break (versus waiting for the close) as it could trigger a further upside acceleration. Key support is just below 1.2710 at the falling support line from late Jan (currently at 1.2660/75), and the bullish trendline since Oct (currently at 1.2600/10).
Longer term view remains unchanged as the market is still seen as within an extended period of wide ranging/chopping (for at least another few months) as the extreme volatility over the last few years eases (common after period of high volatility). Within this extended period of ranging there is potential for eventual gains all the way back to the Dec high at 1.4715 (see “ideal” scenario in red on weekly chart/2nd chart below). However, there are no still no firm signs that a bottom of that magnitude (see shorter term above) is in place, leaving open scope for more chopping/lower prices first. Generally best in this type of market to trade with a shorter term view to try to catch some of the nearer term swings (which can, and will be substantial) within the longer term ranges, or can fade the extremes of the larger range.
