The 240-min chart below shows the market’s gross failure Fri to sustain Thur’s gains above 19-Oct’s 1.1682 high and subsequent bearish divergence in short-term momentum below our 1.1591 smaller-degree corrective low and short-term risk parameter. While the market as yet to break 12-Oct’s key 1.1537 low, this market’s inability to get and stay up off the mat leaves Thur’s 1.1703 high in its wake as the minimum level it now needs to recoup to resuscitate some semblance of even an interim correction higher, let alone a broader reversal, and mitigate a count calling for a resumption of this year’s major relapse to new lows below 1.1537. Per such, Thur’s 1.1703 high serves as our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a resumed but cautious bearish policy.
An alternate bullish count would call Thur’s 1.1703 high the b-Wave “irregular” of a corrective retest of 12-Oct’s 1.1537 low from 19-Oct’s (a- or 1st-Wave) high at 1.1682. A break below 1.1537 will obviously negate this call and reinstate this year’s major bear while a recovery above 1.1703 is required to confirm it and expose a larger-degree correction or reversal higher.
From a longer-term perspective, the daily (above) and weekly (below) charts show the drubbing the euro as taken all year from 0-Jan’s 1.2368 high. This relapse has recently stalled near the (1.1519) 50% retracement of 2020’s entire 1.0671 – 1.2368 rally, but the market has yet to arrest the decline with a bullish divergence in momentum of a scale sufficient to break the bear and reject/identify a more reliable low and support from which to objectively base a longer-term bullish policy. 03-Sep’s 1.1912 larger-degree corrective high remains intact as THE KEY long-term level this market needs to recoup to, in fact, break this year’s major slide. Given that that’s three full figures away and perhaps impractical for even long-term institutional players, last week’s 1.1703 high serves as the next best and tighter risk parameter above which we can begin to suggest non-bearish decisions like short-covers and cautious bullish punts. There are NO LEVELS of any technical merit between 1.1703 and 1.1912 around which to base directional bets, so technical and trading SCALE comes into play.
In sum, a bearish policy remains advised for longer-term players with a recovery above 1.1703 required to pare or neutralize bearish exposure. Shorter-term traders with tighter risk profiles whipsawed out of bearish exposure following 19-Oct’s bullish divergence in short-term momentum are advised to stay on the sidelines for the time being given the market’s position in the middle of this month’s 1.1537 – 1.1703-range presents poor risk/reward metrics on initiating directional exposure. Another bearish divergence in short-term mo from the upper-quarter of this range will present a favorable risk/reward punt from the bear side.
DEC BRITISH POUND
Against the backdrop of flagging behavior in the euro, it’s hardly a shock that sterling has eroded over the past week or so with last Wed’s bearish divergence in short-term momentum below 1.3735 defining 20-Oct’s 1.3833 high as the end of the recovery attempt from at least 12-Oct’s 1.3568 low and possibly the end of a 3-wave and thus corrective structure from 29-Sep’s 1.3412 low. Further weakness below 12-Oct’s 1.3568 low remains required to confirm this month’s recovery as a 3-wave and thus corrective event that would re-expose the major bear trend from Jun’s 1.4256 high. But the Fibonacci fact that the (suspected c-Wave) rally from 12-Oct’s 1.3568 low came within two pips of the (1.3831) 1.000 progression of 29-Sep-to-11-Oct’s initial (suspected a-Wave) rally from 1.3412 to 1.3675 would seem to reinforce this bear market correction count.
Reinforcing a longer-term bearish count is another Fibonacci fact that Sep-Oct’s entire recovery stalled within a pip or two of the 50% retrace of May/Jun-Sep’s entire decline ion both a futures contract basis above and cash close-only basis below. 14-Sep’s 1.3917 larger-degree corrective high remains intact as our key long-term bear risk parameter this market still has to break to, in fact, break Jun-Sep’s major downtrend. This level and condition is reinforced by the past week’s shorter-term weakness and rejection of this area.
Overall, price action dating back to 20-Jul’s 1.3573 low is an bloody aimless, whipsaw mess. And to be sure, this mess has identified and maintained lows and support ranging from 1.3568 to 1.3412 that the market still has to break below to resurrect a long-term bearish count, so traders remain advised to acknowledge this rangey condition that warrants a more conservative approach to risk assumption. Such an approach places an emphasis on tight but objective risk parameters like 1.3833 and stunts directional expectations. The odds of hitting a trendy home run in this environment are about the same as a Chicago Cubs hitter in this year’s World Series.
These issues considered, a bearish policy remains advised for longer-term institutional players with a recovery above 1.3833 required to threaten this call enough to warrant paring or neutralizing exposure. Shorter-term traders are advised to consider cautious bearish exposure on a recovery to suspected resistance around the 1.3735-area with a recovery above 1.3833 required to negate this call and warrant its cover. In lieu of such 1.3833+ strength, we anticipate further lateral-to-lower prices in the period ahead with a break below 1.3568 exposing an assault on 29-Sep’s key 1.3412 low.