RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

SEP EURO

Yesterday’s relapse below last week’s 1.1713 low nullifies Fri’s bullish divergence in short-term momentum and chalks up the rebound to 1.1812 as another 3-wave correction within the broader downtrend from 25-May’s 1.2271 high.  This resumed weakness defines that 1.1812 high as the latest smaller-degree corrective high this market is now minimally required to recoup to break even the portion of the downtrend from 30-Jul’s 1.1919 next larger-degree corrective high, let alone threaten the major downtrend.  Per such, this 1.1812 level serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can once again rebase and manage the risk of a resumed bearish policy.

Only a glance at the daily chart above is needed to see that yesterday’s relapse reinstates the major downtrend from 25-May’s 1.2271 high that is either the completing C-Wave to a major bull market correction OR the dramatic 3rd-Wave to a major reversal lower that’s got extensive downside potential remaining, especially given the break of 31-Mar’s pivotal 1.1721 low that exposes the new long-term trend as down.  On this broader scale, commensurately larger-degree strength above 30-Jul’s 1.1919 larger-degree corrective high remains required to confirm a bullish divergence in momentum of a scale sufficient to break what would then be a complete 5-wave downtrend from 25-May’s 1.2271 high.  In lieu of strength above at least 1.1812 and preferably 1.1919, the trend is down on all practical scales and should not surprise by its continuance or acceleration.

These issues considered, a bearish policy and exposure remain advised for long-term institutional players with a recovery above 1.1812 required to pare exposure to more conservative levels and subsequent strength above 1.1919 required to jettison remaining exposure altogether ahead of a more protracted reversal higher.  Shorter-term traders whipsawed out of bearish exposure on Fri’s bullish divergence in short-term mo are advised to resume a bearish policy from at-the-market levels (1.1722) with a recovery above 1.1812 required to negate this specific call and warrant its cover.

SEP BRITISH POUND

Yesterday’s break below Fri’s 1.3791 low reaffirms at least the intermediate-term downtrend following 09-Aug’s bearish divergence in short-term momentum that leaves corrective highs in its wake at 1.3880 and 1.3985 that this market is required to recoup to mitigate a more immediate bearish count and reinforce a broader base/reversal count.  Per such, Mon’s 1.3880 high is considered our new short-term risk parameter from which traders can objectively base non-bullish decisions like long-covers and cautious bearish punts.

This tight but objective bear risk parameter may come in handy given that the market is sort of betwixt and between that key level on the upside and 20-Jul’s important low at 1.3573 following 28-Jul’s bullish divergence in daily momentum.  Is late-Jul’s 1.3573 – 1.3985 rally the start of a larger-degree base/reversal count OR a correction within a major downtrend from 01-Jun’s 1.4256 low ahead of what could be protracted losses below 1.3573.  Obviously, a break below 1.3573 reaffirms a broader bearish count while a recovery above 1.3880 reinforces a bullish count, so acknowledgement of and adherence to technical and trading SCALE is paramount under these circumstances.  This requires patience and flexibility to either directional outcome.  The fact that the euro has resuscitated it’s broader bear trend is hard to ignore as bearish influence on sterling, but the proof’s in the pudding beyond either 1.3880 or 1.3573.  

These issues considered, a neutral-to-cautiously-bearish policy is advised for shorter-term traders from suspected resistance around the 1.3790-area with a recovery above 1.3880 required to negate this call and warrant its cover.  A cautiously bullish policy remains OK for long-term players with a failure below 1.3573 required to negate this call, warrant its cover and expose potentially sharp losses thereafter.  In effect, traders are advised to toggle directional biases and exposure around this 1.3880 – 1.3573-range.

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