The Jun Euro market’s recovery this morning above 28-May’s 1.1746 minor corrective high and our short-term risk parameter confirms a bullish divergence in short-term momentum. This mo failure defines 29-May’s 1.1526 low as one of developing importance and our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
Contributing to a least an interim base/correction/reversal count is the prospect that last week’s 1.1526 low completed a textbook 5-wave Elliott sequence down from 27-Mar’s 1.2554 high as labeled in the daily log chart above. And the Fibonacci fact that the past couple weeks’ low weekly closes (below) were only 20 pips away from the (1.1685) 38.2% retrace of 2016-18’s entire 1.0492 – 1.2490 rally would seem to reinforce a base/correction/reversal count.
Given the magnitude of the past 3-1/2-month decline, the past few days’ recovery is of too small a scale to conclude anything more than an interim corrective rebound at this juncture. But even a relatively minor corrective bounce could be nominally significant in the weeks ahead as, indeed, even a Fibonacci minimum 38.2% retrace of a suspected 3rd-Wave down from 27-Mar’s 1.2554 high doesn’t curt across until the 1.1900-area.
These issues considered, shorter-term traders have been advised to neutralize bearish exposure and are further advised to consider cautious bullish exposure from current 117.40-area prices OB with a failure below 1.1525 required to negate this call and warrant its cover. Longer-term players are OK to pare bearish exposure to more conservative levels to reduce some of the risk of an interim corrective bounce, but commensurately larger-degree strength above 01-Mar’s 1.2166 (suspected 1st-Wave) low and key long-term risk parameter remains required to negate our longer-term bearish count calling for still further major correction of the 2016-18 bull in the months ahead that we believe can reach the 1.14 to 1.12-area.