EURUSD Finally Confirms L-T Bearish Count

December 15, 2016 3:41AM CST


With overnight's break below 13Mar15's 1.0462 low the market has finally confirmed our long-term bearish count reintroduced in 09May16's Technical Webcast that contended all the price action up from that Mar'15 low is a 3-wave and thus corrective structure.  On this very long-term scale 03-May's 1.1617 high remains as the key secular risk parameter this market ultimately will need to recoup to break the 8-YEAR bear market and expose a new secular bull.

The weekly log scale chart below also shows understandably historically bearish sentiment levels that are typical of major BASE/reversal-threat environments.  But as always, traders are reminded that sentiment is not an APPLICABLE technical tool in the absence of an accompanying confirmed bullish divergence in momentum needed to stem the clear and present downtrend.  We will discuss such specific momentum failure levels below.

Euro Index Weekly

The quarterly log scale chart below shows today's break to not only a new low for the 8-year secular bear market from Jul'-08's 1.6040 high, but also the lowest Euro rates since Jan 2003.  And by breaking 2015's 1.0462 low the market has exposed an area totally devoid of any technical levels of merit shy of Oct 2000's 0.8228 low.  In effect, there is no support .  The ONLY technical levels of any pertinence now exist in the form of former support-turned-resistance around 1.0500-to-1.0525 and prior corrective highs at 1.0670 and 1.0875 that we'll discuss below.  This does not mean we are forecasting a move to 0.8228, but it certainly does mean that until and unless this market proves strength above at least 1.0875, ANY amount of downside is in play, including a run to levels well below parity.

We have noted the (0.9895) 1.618 progression of Jul-Oct'08's initial 1.6040 - 1.2329 decline from Nov'09's 1.5147 corrective high for what it's worth.  But traders are reminded of our disdain for all merely "derived" technical levels like channel lines, Bollinger Bands, the ever-useless moving averages and even the vaunted Fibonacci progression relationships we have cited often in our analysis.  Such derived levels NEVER have proved to be a legitimate, objective reason to buck a clear and present trend without an accompany momentum failure, and they never will .  Yet we routinely hear about and read analyses that cite such levels.  Herein lies the importance of identifying prior corrective highs and risk parameters like 1.0670 and 1.0875.

Euro Quarterly

Euro Index Daily

The daily (above) and 240-min (below) charts show the past couple days' resumption of the secular bear trend below former 1.0525-area support that's now considered new near-term resistance.  This resumed bear leaves smaller- and larger-degree corrective highs in its wake at 1.0670 and 1.0875 , respectively, that serve as our new short- and longer-term risk parameters to a still-advised and aggressive bearish policy.  The market's downside potential remains indeterminable and potentially severe.

In sum, a full and aggressive bearish policy remains advised with strength above 1.0670 required to even defer the bear, let alone threaten it, and warrant defensive steps by shorter-term traders with tighter risk profiles.  A bearish policy remains advised for long-term players as well with a recovery above 1.0875 required to move to the sidelines.  In lieu of such strength we anticipate further and possibly accelerated losses.

Euro Index 240 min


Dollar Index 240 min

Needless to say, the technical construct for the USD Index is identical to that detailed above for the Euro, only inverted.  The past couple days' break above 24-Nov's 102.05 high reaffirms the secular uptrend and leaves corrective lows in its wake at 100.73 and 99.43 that serve as our new short- and longer-term risk parameters to a still-advised bullish policy and exposure.

Dollar Index Daily

Dollar Index Weekly

The massive nature of this secular bull market is clear in the weekly chart above and quarterly chart below.  The market's remaining upside potential is indeterminable and potentially severe with no levels of any technical pertinence above the market shy of Jul 2001's 121.20 high.  ALL levels of any technical merit currently exist only in the forms of former 102.05-to-101.78-range resistance-turned-support and, most importantly, prior corrective lows at 100.73 and 99.43 .  In sum, a full and aggressive bullish policy remains advised with weakness below 100.73 and/or 99.43 required to threaten or negate this call depending on one's personal risk profile.

Dollar Index Quarterly

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.