After spending almost 8 daily sessions of unwinding from the overbought condition, E$ has probably found a base after flushing out a bunch of sell stops to 1.2835 low overnight. It looked precarious when it was near the support trend line yesterday as momentum was all pointing down. 1.2800/20 ("Caught in between...", 26 Sep Wed) is crucial, as it is a pivot level and breaking and closing below could end all hopes for any meaningful rebound. I must admit that I felt uncomfortable because I still have the conviction to buy the E$ on dips for 1.3000 by this week. All I needed was for E$ to hold that line in the sand for several hours and the probability of a rebound would have increased significantly. A couple of technical signals kept my hope alive. They are the bullish divergence in the intraday momentum and the bullish cross between the MA21 & MA200 and MA50 & MA100 on the daily chart. The following economic data should trigger a whipsaw market allowing for opportunity to buy the dip; German Unemployment Change (1555hr Sin/HK), Eurozone Retail PMI (1610hr) and finally US Durable Goods + GDP (2030hr).
Stop loss orders can be found at 1.2780, 1.2800, 1.2825 & 1.2930/40 and large limit order at 1.2835.
Technically, intraday indicator is at o/b level as a result of the overnight rebound. Momentum has also reversed from down to consolidation with scope for a move higher. Lower TL support is at around 1.2840/50 and upper TL at 1.2925/30 (see chart below).
From here, I expect a possible sell-off from around current level of 1.2890 on the back of the european data and then market rebound off 1.2840/50 and test 1.2925/30 during the NY session. I will look to buy dip with risk to 1.2790 or 1.2760 for a break to 1.3000 by Friday.
All the best!!
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| E$ Daily chart - Supported on lower trend line |
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