Market continues to stay within the bullish channel but fell short of the baseline before it rallied on the back of a wire comment that Fitch's Riley said US AAA rating is at risk of downgrade by H1 2013. The squeeze took out some weak shorts but overall it still lacks conviction.
Order book remains boring with only stop, within the recent range, at 1.2525/20. Strong interest remains at 1.2450, 1.2470, 1.2590 and 1.2600.
Technically, intraday indicator is in o/b level (not extreme) but momentum is starting to turn higher which has increased the probability of an extended rally. Other technicals in support of potentially higher E$ include price trading above the daily Ichimoku cloud and a bullish reversal bar yesterday enveloping the past 2 days' range. Analyzing all available technical signals, I will not discount the possibility of E$ breaking higher towards 1.27ish first and then turning back sharply towards 1.24ish before it rallies again towards 1.3000. The weekly chart below indicates the lower lows which were countered by higher high momentum signal (bullish divergence) and that has increased the probability of an intermediate term bottom at 1.2042 being formed as mentioned in my earlier postings.
For today, a couple of opportunities I see.... a first test of 1.2590/600 and then falling back to low 1.25ish. Or if the low 1.25ish is tested first, then the possibility of taking out 1.2590/600 is much higher and extend towards 1.2700/10. Trade within 1.2500 to 1.2600 first but stay very nimble on the short side.
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| E$ Weekly chart - Bullish divergence |
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