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Currencies

Tighten S-T Euro Bear Risk “Down Here”

Posted 01/25/2019 8:03AM CT | RJO Market Insights

Yesterday’s break below lows and support ranging from Tue’s 1.1389 low to 14-Dec’s 1.1362 low in the MARCH CONTRACT obviously reaffirm the downtrend from 10-Jan’s 1.1633 high and our bearish count fostered since 11-Jan’s momentum failure.  The very important by-product of this resumed weakness is the market’s definition of Wed’s 1.1447 high as the latest smaller-degree corrective high this market is now required to sustain losses below to maintain a more immediate bearish count.  in this regard this 1.1447 level is considered our new short-term risk parameter from which a still-advised bearish policy and exposure can be objectively rebased and managed.

Euro FX Mar '19 240 Min Chart

 

Euro FX Mar '19 Daily Chart

Again, basis the MARCH CONTRACT shown in the daily chart above, the market has broken to a new low for the major bear trend from Feb’18’s 1.2929 high.  However, based on the cash euro shown in the daily chart below, the market remains more than a full figure away from 12-Nov’s obviously key 1.1215 low.  And this cash perspective shows how many times over the past two months the lower-quarter of the 1.1215-to-1.1571-range has repelled sell-off attempts.  Indeed, if there’s a time and place to be watchful for another such intra-range rebound OR resuscitation of a much broader base/reversal threat, it is here and now.  And we will gauge such a rebound around Wed’s 1.1447 high specifically.

Euro/USD Daily Chart

 

Contributing to that much longer-term base/reversal threat are two key technical elements shown in the weekly active-continuation chart below:

  1. downside momentum that has been waning for months and
  2. historically bearish levels in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC.

Because of the government shutdown the weekly Commitments of Traders data has not been updated for over a month, but we doubt much of a rebound in this contrary opinion indicator given flagging-to-lower prices during this time.

These issues considered, a bearish policy remains advised but traders are also advised to take some profits on recent shorts and pare exposure to more conservative levels given what we believe is a slippery slope for bear’s “down here”.  Furthermore, the market’s failure to sustain levels below 1.1447 will threaten this bearish count enough to warrant neutralizing all remaining bearish exposure and even move to a cautious bullish stance with protective sell-stops below whatever low is left in the wake of that bullish divergence in short-term momentum.  In lieu of such 1.1447+ strength, further losses should not surprise.

Euro FX Weekly Chart

RJO Market Insights