I have been hesitant to talk about a bounce in EUR/USD for the simple reason that everybody seems to be looking for one. I suppose if we are going to get one, this week is a good enough time as there is a fairly decent confluence of near-term timing relationships. The noteworthy ones are the 50% retracement in time of the March low and the August high, the 50% extension in time of the August and October highs and a 261.8% time projection of the August – September decline measured from the October high. Nothing really spectacular individually from a timing aspect, but altogether it is certainly important enough to pay a little extra attention.
Reading the technical tea leaves, there are a few things supporting a potential counter-trend move like DSI. The DSI fell into the mid-single digit levels of bullishness this week which is usually a fairly reliable contrarian indicator. The other thing worth pointing out is the potential inverse head & shoulders pattern on the intraday charts. Rally attempts this week have all stalled at a convergence of the 9th square root relationship of the August high and the 3rd square root relationship of the year’s low around 1.0780 (purple and black horizontal lines) leaving a fairly clear potential reversal pattern. All things considered, traction over 1.0780 could prompt a decent counter trend pop, but the burden of proof looks to be squarely on the bulls given the bigger picture technical dynamics. A failure to get over 1.0780 by the end of the week or a daily close under 1.0675 would invalidate the bullish timing aspect here and warn another leg lower is looming.
(Click on image to enlarge)
Comments
Log in or sign up to join the conversation.