RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Euro FX Jun '19 240 Min Chart

The market’s recovery this morning above our short-term risk parameter defined by 01-Apr’s 1.1323 minor corrective high stems the past couple weeks’ slide at yesterday’s 1.1255 low.  Per such this 1.1255 level becomes our new short-term risk parameter from which any non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed by shorter-term traders with tighter risk profiles.

Against the backdrop of the broader downtrend shown in the daily chart below, this morning’s bullish divergence in momentum is obviously of an insufficient scale to conclude anything more than another interim corrective rebound within the broader bear trend.  Indeed, 20-Mar’s 1.1535 next larger-degree corrective high remains intact as our key long-term risk parameter the market needs to recoup to break the long-term downtrend.

However, this daily chart also shows the 2-steps-down-1-step-up, “falling-wedge” nature of the broader downtrend that should not now surprise with a steeper corrective rebound OR broader base/reversal threat.  t has been our observation over many years that such falling-wedge patterns mean one of two things:

  1. waning momentum ahead of a trend reversal or
  2. a sort of “coiling-up” before the trend accelerates sharply.

Euro FX Jun '19 Daily Chart

Euro/USD Weekly Chart

The weekly close-only chart of the cash euro above shows that this falling-wedge behavior dates back to 3Q18 and could be the completing C-Wave of a major BULL MARKET CORRECTION within a multi-year base/reversal process.  This weekly chart as well as the monthly log chart below of the most active futures contract show the past 14-month decline thus far meeting its exact 61.8% retrace of Dec’16 – Feb’18’s major rally.  This current long-term view also shows waning downside momentum amidst historically bearish levels in our RJO Bullish Sentiment Index typical of major base/reversal environments.

Again, one cannot conclude a major reversal count following proof of just minor strength like this morning’s bullish divergence in short-term momentum shows.  But given this ancillary evidence of historic bearishness and the market’s exact 61.8% retrace of 2016-18’s rally that we believe is just the (initial A- or 1st-Wave) of a major, multi-year base/reversal process, traders are advised not to ignore the prospect that today’s rebound could be the embryonic stage of what would be a shocker move higher in the euro in the quarters ahead.

These issues considered, shorter-term traders have been advised to neutralize all bearish exposure to circumvent the heights unknown of a correction or reversal higher.  Long-term players are advised to pare bearish exposure to more conservative levels and jettison the altogether on commensurately larger-degree strength above 1.1535.  Even if this morning’s mo failure s only going to produce another interim corrective hiccup, there’s a lot of green between yesterday’s 1.1255 low and 20-Mar’s 1.1535 high for such a correction to unfold, and it’s length is indeterminable.  But the RISK of managing one’s position to deal with this rebound is specific and objective at 1.1255.

Euro FX Monthly Chart

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.