Eur/USD, still short but concern rising…..by David Solin

In the Dec 13th email on eur/$, affirmed the short position (sold in mid Dec at 1.4750) and the market has weakened since, currently testing support at 1.4300/10 (38% from the June low at 1.3265).  Also, the downside momentum over the last few days is starting to slow (despite the plunge in cable), while in the bigger picture view that the last month of weakness is only a correction (versus the start of a major new downleg, see longer term) remains, and are starting to raise the risk in the short position.  For now, would use a more aggressive stop on a close back above the broken base of the month long bearish channel (currently at 1.4405/15, see daily chart below).  Note, in the final week or 2 of the year, markets will often drift in their current trend and would suggest the potential for further softness into the end of the month.  Next support below 1.4300/10 is seen at 1.4280 (Sept high) and 1.4165 (38% from the Aug low at 1.3360).

In the Dec 13th email on eur/$, affirmed the short position (sold in mid Dec at 1.4750) and the market has weakened since, currently testing support at 1.4300/10 (38% from the June low at 1.3265).  Also, the downside momentum over the last few days is starting to slow (despite the plunge in cable), while in the bigger picture view that the last month of weakness is only a correction (versus the start of a major new downleg, see longer term) remains, and are starting to raise the risk in the short position.  For now, would use a more aggressive stop on a close back above the broken base of the month long bearish channel (currently at 1.4405/15, see daily chart below).  Note, in the final week or 2 of the year, markets will often drift in their current trend and would suggest the potential for further softness into the end of the month.  Next support below 1.4300/10 is seen at 1.4280 (Sept high) and 1.4165 (38% from the Aug low at 1.3360).

 

Longer term, the view remains unchanged as the last month of declines are seen as a correction (wave 4 in the rally from the June low at 1.3265), and suggests an eventual resumption of the longer term gains after its completion (within wave 5, see “ideal” scenario in red on weekly chart/2nd chart below).  Currently however, there are still no firm signs that this period of correcting (wave 4) is complete and leaves open scope for further near term weakness first.  For now, would continue to trade the shorter term view (still short, see above), but with the expectation of a good bigger picture chance to buy for new highs ahead (and potentially at lower prices). 

 

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Foreign Exchange Analytics has it's roots in both the emerging information technologies and the global economy that characterized the last two decades.  As currency transaction volumes soared in the wake of the 1985 Plaza accord, the need for timely concise information on what forces were driving and would drive exchange rates became critical.   David Gilmore was one of a new breed of analyst that saw a void of relevant, market moving... More