DEC EURO

Despite an uptick in short-term volatility this week, this market has yet to recoup even a minimum level required to threaten our broader, if intra-range peak/correction/reversal count.  By virtue of overnight’s break below not only Mon’s 1.1632 low, but also 25-Sep’s 1.1630 low (the importance of which we’ll address below), the 240-min chart below shows that the market has defined overnight’s 1.1783 high as the latest smaller-degree corrective high the market is now required to recover above to confirm a bullish divergence in short-term momentum and provide the first bit of evidence against a broader bearish count.  Peer such, this 1.1783 level is considered our new short-term risk parameter from which a still-advised bearish policy and exposure can be objectively rebased and managed by shorter-term traders with tighter risk profiles.

Stepping back, the daily (above) and weekly (below) charts show overnight’s slip below 25-Sep’s 1.1630 initial counter-trend low.  We acknowledge that this is a very, very minor break of that 1.1630 low, but we are not into rationalizing data.  And whether one wants to “fade” this “break” or not, it is clear that the market has identified corrective highs at 1.1783 and at 21-Oct’s 1.1895 next larger-degree corrective high that this market must absolutely recoup to even defer, let alone threaten a broader bearish count.

The technical facts are:

• the market has left corrective highs and risk parameters at 1.1783 and 1.1895 consistent with a broader peak/reversal-threat environment
• today’s break below 1.1630 confirms a bearish divergence in WEEKLY momentum (below)
• the market has thus far rejected the (1.2025) upper-quarter of its incessant and massive four year lateral range
• this year’s rally from 1.0671 has spanned a length within a few pips of its (1.2038) 0.618 progression of Dec’16 – Feb’18’s 1.0367 – 1.2580 previous major rally attempt, AMIDST
• historically frothy market sentiment/contrary opinion levels not seen in at least 32 MONTHS and, in the case of the Bullish Consensus (marketvane.net), since May 2014!

Such frothy sentiment levels would not matter to us one iota IF the market was sustaining a trendy, impulsive move higher.  BUT it has been ERODING for the past two months.  This combination of factors reinforces our bearish count that requires a recovery above at least 1.1783 and preferably 1.1895 to threaten.

These issues considered, a bearish policy and exposure remain advised with a recovery above 1.1783 required for shorter-term traders to move to the sidelines and commensurately larger-degree strength above 1.1895 for longer-term players to follow suit.  In lieu of such strength, we anticipate further and possibly accelerated losses ahead.

DEC BRITISH POUND

While the EUR/GBP cross remains at the upper recesses of its massive four-year lateral range, suggesting the euro may be more vulnerable to a relapse than sterling, it’s hard to imagine sterling sustaining an uptrend while the euro sells off per our preferred count discussed above.  Against this backdrop and while overnight’s rebound confirms a bullish divergence in very short-term momentum shown in the 240-min chart below, a recovery above 21-Oct’s 1.3182 corrective high and short-term risk parameter remains minimally required to threaten our broader peak/reversal count.

This said, while Mon’s 1.2855 low left in the wake of yesterday’s bullish divergence in mo remains intact as one of developing importance and a micro risk parameter from which non-bearish decisions can be objectively based and managed, traders are advised to keep a close watch and acknowledge the prospect of a directional move either way.

From a longer-term perspective, the daily log scale chart above and weekly log chart below show similar peak/reversal facts similar to those discussed above in the euro, including:

• 08-Sep’s bearish divergence in momentum that defined 01-Sep’s 1.3483 high as the END of the uptrend from at least 18-May’s 1.2079 low
• the market’s rejection of the extreme upper recesses of its TWO YEAR lateral range
• a clear 3-wave and thus corrective recovery from 23-Sep’s 1.2679 low to 210Oct’s 1.3182 high that
• stalled within a few pips of the (1.3170) 61.8% retrace of Sep’s initial 1.3483 – 1.2679 decline amidst
• historically frothy sentiment/contrary opinion levels that have warned of and accompanied all previous key highs and reversal.

Indeed, at 64%, the bullish Consensus (marketvane.net) is the highest since Aug 2014!  This fact would not matter at all IF the market was sustaining trendy, impulsive price action higher.  But price action has been flagging for two months.  Against stubbornly bullish sentiment, we believe this combination warns of downside vulnerability per our broader peak/reversal count until and unless the market recovers above at least 1.3182 and preferably 1.3483.

In sum, a bearish policy and exposure remain advised with a recovery above 1.3182 required for shorter-term traders to neutralize exposure and longer-term players to pare exposure to more conservative levels.  In lieu of such strength and especially on a relapse below 1.2855, we anticipate further lateral-to-lower prices for weeks and perhaps months ahead.