S-T Euro Failure Re-exposes L-T Bull; Sterling Next?

March 6, 2018 8:00AM CST

The market's recovery this morning above our 1.2372 short-term risk parameter discussed in 28-Feb's Technical Blog clearly identifies 01-Mar's 1.2166 low as the END of the decline from 16-Feb's 1.2580 high. But given the prospect that this 1.2166 low also ended a broader 3-wave and thus corrective structure from 25-Jan's 1.2577 high we'll elaborate on below, we believe the market is poised to resume the secular uptrend to new highs above 1.2580.

From a shorter-term perspective today's continued rally leaves yesterday's 1.2279 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to threaten a more immediate bullish count. Per such this 1.2279 low is considered our new short-term risk parameter from which non-bearish decisions like short-covers and resumed bullish punts can be objectively based and managed.
Only a glance at the weekly log active-continuation chart below is needed to see that the 15-month uptrend remains as the dominant technical factor. Against this bullish backdrop the sell-off attempt from 25-Jan's 1.2577 high is easily seen as a 3-wave and thus corrective affair as labeled in the daily log chart above. This relapse stopped a mere 20 pips from the (1.2185) 38.2% retrace of Nov-Jan's 1.1578 - 1.2577-portion of the secular bull and above huge former 1.2100-area resistance-turned-support. If correct, this count calls for a resumption of the 15-month bull to at least one more (5th-Wave) round of new highs above 1.2580 and in a trendy, impulsive manner straight away.

In sum, traders are advised to return to a bullish policy ahead of further and possibly accelerated gains straight away. Setback attempts to former 1.2370-area resistance-turned-support are advised to approached as corrective buying opportunities with minimum weakness below 1.2279 required to defer or threaten this call enough to warrant defensive measures.


While the market hasn't yet recouped our short-term risk parameter defined by 26-Feb's 1.4082 corrective high detailed in the 240-min chart below, the developing recovery the past few days, the market's failure to sustain recent losses below 1.3868-area support-turned-resistance and the bullish developments discussed above in the Euro are enough to conclude 01-Mar's 1.3719 low as one of developing importance and a tight but objective risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.
From a long-term perspective the technical setup in the sterling is virtually identical to that detailed above in the Euro. The long-term trend remains arguably up with the Jan/Feb's sell-off attempt stalling pretty much exactly around key former resistance from Sep'17's 1.3695-area that, since broken in early-Jan, is considered a key new support candidate.

These issues considered, traders are advised to move to a cautious bullish policy from current 1.3910-area prices ahead of further and possibly sharp, trendy gains to eventual new highs above 1.4370. A failure below 1.3719 is required to negate this call and resurrect a broader peak/reversal-threat environment.


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