"It is pointless to bet against the euro, its pointless to go short on the euro because its here to stay and its irreversible", so says Draghi but not my bank account! :)
So did you witness and experience the full moon effect last evening? This is one great example of the kind of volatility one should be mentally prepared for.... smacked on the exact day itself. Not enough of action? we still have the US employment numbers tonight though I do not foresee a move of the same magnitude.
Let's recall the sequence of events..... E$ stayed firm throughout the session into ECB's rate announcement and reached 1.2300 on buying around the ECB fixing. It pushed further to 1.2330 ahead of Draghi press conference. E$ then spiked to touch 1.2406 high as Draghi hinted at bond buying. But on further analysis, market became uncomfortable with the "may buy" and very quickly sellers emerged and sold the E$ big time as it slid to 1.2173 within 30 minutes! Clearly, the pair was gunning for stop loss orders at 1.2180 and 1.2170. E$ subsequently hit the low of 1.2133 before it consolidates for the rest of the night.
On the stop loss orders, no updates yet as all were flushed yesterday. But it was really useful to learn that buy stop orders were lurking at 1.2310 and 1.2350 by late afternoon before the ECB announcement. That actually had me thinking if we may see a deeper 'B' wave and revert to Wednesday's resistance levels ('Mark time for FOMC', 1Aug). In detail, from 1.2390-1.2227-1.2336-1.2218 actually formed a-b-c (A wave) and a-b-c-d-e (Irregular B wave) and then from 1.2406-? (C wave).
Technically, we probably have seemed the completion of the 3rd wave of the 'C' and in the process of 4th before another dip for 5th wave to complete the corrective 'C' wave. Intraday indicators are in o/s levels though not extreme but this consolidation should unwind a little. Shorter intraday day momentum is still pointing lower but longer intraday ones are still suggesting range consolidation between 1.2050 to 1.2370 now. There are signs of mild bullish divergence and that probably reinforced the view that we are nearing a bottom from yesterday's sell-off. That being said, I must warned that I still have mixed signals because my weekly and monthly momentum indicator is still pointing firmly lower.
In short, risk/reward favors buying dips (provided 1.2220/30 is not seen first). 1.2100/10 to hold (1.2060/80 stronger support with 1.2042 being recent low) and 1.2220/30 first resistance and stronger at 1.2360/70. A break and close below 1.2042 would suggest a continuation of the bearish trend.
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| E$ 15min chart - Full moon effect |
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