EUR/USD, still following the

The view in eur/$ remains unchanged as the market continues to form a large pennant/triangle since the Nov high at 1.4965. As been mentioning, these are “continuation” patterns that generally resolve sharply higher but break down into 5 legs, and arguing a final test of the base first (see “ideal” scenario in red on daily chart below). Recently reached the short area from the Jan 30th email at the approach of the ceiling of the pennant (at 1.4895), before reversing sharply lower over the following few days.

The view in eur/$ remains unchanged as the market continues to form a large pennant/triangle since the Nov high at 1.4965. As been mentioning, these are “continuation” patterns that generally resolve sharply higher but break down into 5 legs, and arguing a final test of the base first (see “ideal” scenario in red on daily chart below). Recently reached the short area from the Jan 30th email at the approach of the ceiling of the pennant (at 1.4895), before reversing sharply lower over the following few days. Given that trade within these patterns is often choppy, would now use an aggressive stop on a close above the multi-day bearish trendline (currently at 1.4835 and is falling rapidly), and may even want to get more aggressive with a stop/reverse on approach of the base (currently at 1.4390). Nearby support is seen at 1.4580 (62% retracement from the Jan 22nd low at 1.4365), while resistance is seen at 1.4700.

Longer term, the long held view is also unchanged as the pennant that has been forming since Nov is seen as a large correction (wave IV in the rally from the June low at 1.3265, see numbering on weekly chart/2nd chart below). Though this argues an eventual upside resolution of the pattern, it would be seen as the final upleg in the rally since June (wave V). At this point, the longer term bias remains to the upside but would be looking for signs of a more important top (at least a few months or more) on the move above 1.4965 (sentiment shifting broadly to the bullish side, etc.). Longer term resistance is above there at the ceiling of the nearly 2 ½ year bullish channel (currently at 1.5200).

David Solin
Partner, Foreign Exchange Analytics
E-mail dsolin@fxa.com, (860) 767-9102

 

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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