The longer term bullish view in eur/$ for nearly the last year, of an extended period of wide ranging, is finally coming near its completion (not quite there yet). Last March and the market just above the Oct 2008 low at 1.2335 (base of the range), said that longer term gains all the way back to the ceiling (Dec high at 1.4715) was favored, and the market has indeed recently reached those levels. View a major top (at least 10 big figures and more likely declines all the way back toward the base of the 5 year channel, currently at 1.2550) as getting very close. However, there are still no signs that a top of that magnitude is in place pattern-wise, while important time cycles across a number of financial markets reverse in mid Oct, and suggests that another few weeks/month of topping and even further slight highs are likely first (see “ideal” scenario in red on weekly chart below). Note too that major resistance is just above recent highs at the ceiling of the 5 year bullish channel (currently at 1.4900/1.5000). Switched the longer term bullish bias that was in place since May at 1.3350 to neutral on Sept 8th (then at 1.4490), as the risk/reward was (and continues to) shifting away from a long side position. So for now for the longer term, would be patient to allow this longer term topping to play out over the next few weeks/month, but with the expectation of a chance to switch the longer term bias to the negative side ahead.
Nearer term, the market is correcting from yesterday’s high at 1.4840 and slight break/false break of the ceiling of the bullish channel since June. With the market near term overbought, there is scope for another week or so of consolidating, but with a resumption of the longer term gains to new highs after (see “ideal” scenario in red on daily chart/2nd below). So for now if more aggressive, would use near term weakness toward 1.4585/95 (38% retracement from the Sept 1st low at 1.4180) as a chance to buy for new highs. Initially stop on a close below the previously broken rising trendline since June (currently at 1.4540/50), but will want to trail stops more quickly on gains (and especially new highs), as the market is seen approaching a potentially major top (see longer term below). Note too that a break below this trendline would not change the view of more topping into the mid Oct timeframe, but would suggest a deeper retracement first (and even an outside chance for a spike all the way down to the base of the multi-month channel, currently at 1.4150).
