No change in the view in eur/$, as the market remains near recent (and multi-month) lows at 1.3450. However, the market is oversold after the sharp declines since the Nov high at 1.5140 (see bullish divergence, buy mode on the daily macd), appears to be within the final downleg from that high (wave 5), and may be forming a falling wedge/reversal pattern over the last few weeks (see daily chart below). These factors suggest that risk is rising sharply for at least a month of correcting higher, and minimum 6-7 big figure bounce. On a near term basis however, there is still no confirmation of such a low, leaving open scope for more chopping and even further, marginal new lows first. So for now, would wait for a break above the ceiling of the wedge (currently at 1.3675/90) to buy. Note that these patterns resolve sharply, so would buy on an intraday break (versus waiting for the close, and having to buy at higher levels), and initially stopping on a close back below the ceiling). Further resistance above there is seen at 1.3780/90, while support is seen at 1.3445/55 (last week’s low), and the base of the wedge (currently at 1.3395/10). Note in the Feb 16th email, affirmed the short position (resold on Jan 20th email at 1.4135) but said to use a more aggressive stop on a close above the bearish trendline from Feb 8th to compensate for the rising risk. Broke above there on Feb 16th (then at 1.3675, closed at 1.3770), flattening with a 365 tick profit.
Longer term view of an extended period of wide ranging for nearly the last year remains in place. Initially said last March (and the market just above the Oct 2008 low at 1.2335/base) that gains toward the ceiling of the range at 1.4715 and even slightly above was favored. The market did indeed rally from there, reaching the ceiling of the long term bullish channel last Nov (then at 1.5140). Again warned of the extended period of wide ranging and with the market near the ceiling, argued a major top. The market has indeed weakened sharply since, to reach the initial support at 1.3735, with further declines toward the base of the channel (currently at 1.2825/75), and potentially below still favored. Though there is scope for a month or so of consolidating higher (see above), the 5 wave fall from last Nov and a continued sell mode on the weekly macd, suggests a resumption of the longer term declines after (see “ideal” scenario in red on weekly chart/2nd chart below). Switched the longer term bias to the bearish side on Nov 2nd at 1.4825, and for now would maintain that bias.
Longer term view of an extended period of wide ranging for nearly the last year remains in place. Initially said last March (and the market just above the Oct 2008 low at 1.2335/base) that gains toward the ceiling of the range at 1.4715 and even slightly above was favored. The market did indeed rally from there, reaching the ceiling of the long term bullish channel last Nov (then at 1.5140). Again warned of the extended period of wide ranging and with the market near the ceiling, argued a major top. The market has indeed weakened sharply since, to reach the initial support at 1.3735, with further declines toward the base of the channel (currently at 1.2825/75), and potentially below still favored. Though there is scope for a month or so of consolidating higher (see above), the 5 wave fall from last Nov and a continued sell mode on the weekly macd, suggests a resumption of the longer term declines after (see “ideal” scenario in red on weekly chart/2nd chart below). Switched the longer term bias to the bearish side on Nov 2nd at 1.4825, and for now would maintain that bias.
