E$ finally broke through 1.2200 and the option and stop loss orders were tripped on its way down to 1.2166 during the Europe/US session. As market nears first support at 1.2150 (read Battle of Thermopylae 12 Jul), it hastened some profit taking. The consolidation is still unwinding the o/s condition and price is holding steady despite Moody's decision to downgrade Italy.
Last heard was Asian sovereign name bidding at 1.2150 and stop loss orders at 1.2145, 1.2250/60, 1.2275, 1.2300, 1.2320 and 1.2340. An update later today should see most stops at the higher level moved to 1.22ish.
Technically, short term indicators have moved off its o/s levels but longer term has not really changed. But having said that, price can continue to fall further. Short term momentum has turned up already since last night but longer term is still pointing lower. Price action continue to look consolidative and is still hanging heavy. There is sign of slight bullish divergence in the longer term momentum though price action does not suggest a completion of 4-5 wave. However, all available signals cannot be ignored and still warrant special attention. Taking everything into consideration, bias should continue to be down and one should look to sell into rallies. The bullish divergence has increased the probability of a quick short squeeze before falling back and one has to be nimble to react.
Support band 1.2150/80 to hold on first test and subsequently 1.2120 for today. Topside 1.2240/50 to cap. A break and close above 1.2335 would reverse short term bearish technical picture.
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| E$ within bearish channel |
Update1: Be careful of further short squeeze as market is potentially targeting the stop loss orders above the 1.23 level. However, I do not see this as a trend changer as longer term momentum is still pointing firmly lower for now. Will assess the situation again on Monday.
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