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Continued, If Intra-Range Currency Slides Define New S-T Risk Levels

Posted 02/14/2019 10:56AM CT | RJO Market Insights

MAR EURO

Overnight’s slip below Tue’s 1.1289 low reaffirms the downtrend from 31-jan’s 1.1557 high and leaves Tue’s 1.1372 high in its wake as the latest smaller-degree corrective high the market is required to recoup to confirm a bullish divergence in short-term mo, stem the slide and expose another intra-range correction higher.  Per such this 1.1372 level is considered our new short-term risk parameter from which any bearish decisions can now be objectively based and managed.

Euro FX Mar '19 240 Min Chart

 

Euro FX Daily Chart

This tight but objective risk parameter may come in handy given the market’s proximity to 12-Nov’s obviously pivotal 1.1245 low and support, the break below which remains required to reinstate the 1-YEAR downtrend.  If there’s a time and place for the market to rebound, it is here and now and we will gauge that rebound around 1.1372.  In lieu of at least such strength we anticipate a break below that key Nov low that exposes a chasm totally devoid of any technical levels of merit shy of Dec’16’s 1.0367 low shown in the weekly chart below.  This doesn’t mean that we’re forecasting a move to 1.03, but rather that the market’s downside potential below 1.1246 is indeterminable and potentially severe.

These issues considered, a cautious bearish policy remains advised with a recovery above 1.1372 minimally required to defer or threaten this count and warranty defensive measures commensurate with one’s personal risk profile.

Euro FX Weekly Chart

MAR BRITISH POUND

British Pound Mar '19 240 Min Chart

Similarly, the 240-min chart above shows today’s resumed slide below Tue’s 1.2855 low that leaves yesterday’s 1.2981 high in its wake as the latest smaller-degree corrective high and new short-term risk parameter the market is now required to recoup to arrest this intra-range slide and expose another intra-range whipsaw higher.

On a broader basis shown in the daily chart below and UNlike the Euro, sterling has only retraced around 61.8% of Dec-Jan’s 1.2479 – 1.3252 rally, leaving it a goodly ways away from its key Dec low.  So there’s no telling if sterling is gonna catch up with the Euro and start collapsing strait away or if it’s going to recoup 1.2981 that would likely mean the Euro’s gonna reject the extreme lower recesses of its key 2-month range.  Given incessantly lateral chop across all of the currency markets the past six months, acknowledgement of and flexibility to either directional outcome and a more conservative approach to risk assumption per this situation remains warranted.

British Pound Daily Chart

Given the poor risk/reward merits of initiating directional exposure from the middle-halves of ranges, we continue to advise a neutral/sideline position.  But if you must, the market’s identification of yesterday’s 1.2981 corrective high does provide a tight but objective risk parameter from which to take a punt on the bear side for a possible run at Dec’s 1.2479 low and below.

British Pound Weekly Chart

MAR CANADIAN DOLLAR

Finally and similarly, today’s break below last Fri’s 0.7508 low in CAD leaves yesterday’s 0.7584 high and exact 50% retrace of early-Feb’s 0.7660 – 0.7508 decline in its wake as the latest minor corrective high and short-term risk parameter the market is now minimally required to recoup to arrest the relapse from 01-Feb’s 0.7660 high and new key long-term risk parameter to a resumed bearish count that warns of a resumption of the 17-month bear.

Canadian Dollar Mar '19 240 Min Chart

 

Canadian Dollar Daily Chart

Indeed, the past month’s price action circled in blue in the daily chart above looks pretty similar to that that ended Jun-Oct’18’s correction before yielding to the long-term bear.  Given this market’s frustrating 2-steps-down-1-step-up behavior since Sep’17’s high, we have no confidence in concluding Jan-Feb’s recovery as a complete bear market correction ahead of the bear’s resumption OR the start of a major base/reversal count.

What we know with specificity however is that the market has identified corrective highs at 0.7584 and especially 0.7660 that it now must recoup to defer or threaten a bearish count that could be extensive.  Until and unless such strength is proven and while acknowledging still the odds of aimless whipsaw risk from the middle-half of the past couple months’ range, traders are advised to act on the premise that further and possibly accelerated losses lie ahead.

These issues considered, a neutral-to-cautious-bearish policy is advised with strength above 0.7584 exposing further intra-range chop, warranting covering any cautious bearish exposure.

Canadian Dollar Weekly Chart

RJO Market Insights