EURUSD
Overnight’s short-term mo failure below 03-Jan’s 1.2004 corrective low confirms a bearish divergence in short-term momentum that defines Thur’s 1.2089 high as one of developing importance and possibly the end of a 5-wave Elliott sequence up from 12-Dec’s 1.1717 low as labeled in the 240-min chart below. Especially stemming from the extreme upper recesses of a 4-month range capped by 08-Sep’s pivotal 1.2092 high, this 1.2092 high remains as not only a key long-term risk parameter, but a short-term one as well from which the risk of any non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed. This said however, former 1.1961-to-1.1941-area resistance cannot be ignored as a near-term support candidate sandwiching the (1.1947) Fibonacci minimum 38.,2% retrace of Dec-Jan’s 1.1717 – 1.2089 rally.
The daily (above) and weekly (below) log scale charts show the magnitude of the 1.2092-area that has held as resistance for exactly four months as of today. A break above this threshold is obviously required to confirm Sep-Nov’s sell-off attempt as a corrective affair within the context of what we believe is a new secular bull move in the Euro from Jan’17’s 1.0341 low. While that 1.2092 high remains intact however, further consolidation within the 1.2092 – 1.1554-range should not surprise, with a relapse to this range’s lower-quarter around the upper-1.16 handle well within the realm of possibility.
Another factor contributing to continued resistance around the 1.21-handle area this general area’s former condition as major support from Jun 2010 until its breakdown in Jan’15 as shown in the monthly log chart below. We’ve discussed this long-term factor often since last Aug and it remains a factor yet today. Along with the return to relatively frothy bullish sentiment levels accorded the Euro, these factors reinforce a continued cautious bearish policy for longer-term players with strength above 1.2092 required to negate this call and warrant its cover. Shorter-term traders with tighter risk profiles are advised to neutralize any bullish exposure and move to a cautious bearish policy by first approaching recovery attempts to the 1.2025-area as corrective selling opportunities with a recovery above 1.2092 required to negate this call, warrant its cover and reinstate the major uptrend. In lieu of such strength and especially if the market can break suspected support around the 1.1950-area, we anticipate further lateral-to-lower prices that could span weeks and eventually test the lower-quarter of the 4-month range.
USD INDEX
Overnight’s break above last Wed’s 92.26 initial counter-trend high present a similar but inverted technical condition to that detailed above in the Euro with 02-Jan’s rejected/defined 91.75 low considered our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
The fact that this short-term bullish divergence in mo stems from the extreme lower recesses of the 4-month range contributes to a broader base/reversal-threat environment. Former 92.50/.60-area support serves as new near-term resistance however, so a break above this area is needed next to reinforce this bullish call while a relapse below 91.75 and our new short-term risk parameter to negate it.
These issues considered, shorter-term traders are advised to neutralize any bearish exposure and move to a cautious bullish stance from current 92.30-area prices with a failure below 91.75 required to negate this call. A cautious bullish policy remains advised for long-term players with a failure below 91.00 required to negate this call.
