Near term eur/$ outlook:
As been discussing since the Nov 9th email, there is still no confirmation of a bottom (arguing further downside), but expect the downside momentum to start slowing. This has indeed occurred and along with a number of other bullish signs, suggests that a bottom for at least a few weeks is approaching. In addition to the slowing downside momentum, the market is oversold after the sharp decline from Oct, is seen within the final downleg in the fall from the Oct 15th high at 1.1495 (wave 5) and technicals are turning upward. At this point there is still no confirmation of such a low "pattern-wise" (5 waves up for example), but any further near term declines below the earlier 1.0600 will likely be limited. Also don't forget that lots of longer term support lies just below that earlier 1.0600 low in the whole 1.0500/50 area (base of channel from March, bullish trendline from 2000 and the multi-week falling support line) and adds to the view that any further, near term downside would likely be limited. Nearby resistance is seen at the nearly 2 week bearish trendline/ceiling of a potential falling wedge/reversal pattern (currently at 1.0730/45), with a break/close above arguing that the bottom is in place. Bottom line : multi-week bottom seen nearing, any further downside below the earlier 1.0600 would likely be limited.
Strategy/position:
With a multi-week bottom seen near and any further downside from here likely limited, would buy here (currently at 1.0615). Initially use a wide stop on a close below 1.0485 (just below that longer term support), but switching to a more aggressive, trailing stop once the confidence that the final low is in place rises.
Longer term outlook:
No change in the very long held view of an extended period of ranging/consolidating from the March low at 1.0455 (seen as wave IV in the decline from that May 2011 high at 1.4940), and with an eventual resumption of the longer term declines after (within wave V). Both the "sloppy/messy" trade since March (characteristic of a correction) and bearish long term technicals (see sell mode on the weekly macd) continue to support this view. Near term however, a multi-week bottom is seen approaching (see above) and along with the seasonal chart that is higher into the end of the year (see 3rd chart below) suggests a more extended period of consolidating before resuming that longer term decline below the March 1.0455 bottom. A final note, suspect at the Fed and US data will be the driver to the action (how much of a bounce if any, etc.) before the new lows below 1.0455 are seen. Bottom line : action from the March low at 1.0445 is seen as a large correction with eventual new lows, but there remains some scope for another few weeks (or more) of this wide ranging before the new lows are seen.
Strategy/position:
Though new lows below 1.0455 are favored, just too much near term risk for at least a few weeks of further consolidating first to just switch the bias to bearish here.
Current:
Nearer term : long Nov 23rd at 1.0620, risk further near term bottoming.
Last : short Nov 11th at 1.0770, stopped Nov 12 above bear trendline from Oct (1.0745, closed 1.0815).
Longer term : declines below long held 1.0455 still favored, risk for another few wks of wide range first
Last : bull bias Sept 21st at 1.1225 to neutral on Nov 4th at 1.0860.
As been discussing since the Nov 9th email, there is still no confirmation of a bottom (arguing further downside), but expect the downside momentum to start slowing. This has indeed occurred and along with a number of other bullish signs, suggests that a bottom for at least a few weeks is approaching. In addition to the slowing downside momentum, the market is oversold after the sharp decline from Oct, is seen within the final downleg in the fall from the Oct 15th high at 1.1495 (wave 5) and technicals are turning upward. At this point there is still no confirmation of such a low "pattern-wise" (5 waves up for example), but any further near term declines below the earlier 1.0600 will likely be limited. Also don't forget that lots of longer term support lies just below that earlier 1.0600 low in the whole 1.0500/50 area (base of channel from March, bullish trendline from 2000 and the multi-week falling support line) and adds to the view that any further, near term downside would likely be limited. Nearby resistance is seen at the nearly 2 week bearish trendline/ceiling of a potential falling wedge/reversal pattern (currently at 1.0730/45), with a break/close above arguing that the bottom is in place. Bottom line : multi-week bottom seen nearing, any further downside below the earlier 1.0600 would likely be limited.
Strategy/position:
With a multi-week bottom seen near and any further downside from here likely limited, would buy here (currently at 1.0615). Initially use a wide stop on a close below 1.0485 (just below that longer term support), but switching to a more aggressive, trailing stop once the confidence that the final low is in place rises.
Longer term outlook:
No change in the very long held view of an extended period of ranging/consolidating from the March low at 1.0455 (seen as wave IV in the decline from that May 2011 high at 1.4940), and with an eventual resumption of the longer term declines after (within wave V). Both the "sloppy/messy" trade since March (characteristic of a correction) and bearish long term technicals (see sell mode on the weekly macd) continue to support this view. Near term however, a multi-week bottom is seen approaching (see above) and along with the seasonal chart that is higher into the end of the year (see 3rd chart below) suggests a more extended period of consolidating before resuming that longer term decline below the March 1.0455 bottom. A final note, suspect at the Fed and US data will be the driver to the action (how much of a bounce if any, etc.) before the new lows below 1.0455 are seen. Bottom line : action from the March low at 1.0445 is seen as a large correction with eventual new lows, but there remains some scope for another few weeks (or more) of this wide ranging before the new lows are seen.
Strategy/position:
Though new lows below 1.0455 are favored, just too much near term risk for at least a few weeks of further consolidating first to just switch the bias to bearish here.
Current:
Nearer term : long Nov 23rd at 1.0620, risk further near term bottoming.
Last : short Nov 11th at 1.0770, stopped Nov 12 above bear trendline from Oct (1.0745, closed 1.0815).
Longer term : declines below long held 1.0455 still favored, risk for another few wks of wide range first
Last : bull bias Sept 21st at 1.1225 to neutral on Nov 4th at 1.0860.
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