Indeed, market whipsaw as expected within the defined range ("Patience..." 6 Nov Tue). First, it was the Obama victory rally to 1.2876 and then subsequently plummeted on the comment by Mario Draghi. Heard an investment bank sold more than a yard worth of E$ tripping stops down to 1.2736 low (see chart, Fibonacci 38.2% retracement level) only to be met with bids from Asian sovereign name and some corporate demand.
Yesterday's price action took many by surprise as it flushed stops either way and left many bruised. That set me thinking of the worst case or most vicious and frustrating scenario from here to mentally prepare myself in case it really materialize i.e. a sharp rally from here to break yesterday's high and rally towards 1.29ish before it falls all the way back to 1.26ish by next week. That will flush the stop loss orders residing around the 1.2885 and 1.2890/00 area first.
This morning, Australia once again surprised market on the upside with its much stronger set of employment number of +10.7k jobs and rate at 5.4% vs expectation of +0.2K and 5.5% respectively. Obviously it sent the A$ flying and that supported E$ but with EURAUD lower.
Market focus is now turned to China's power transfer (but that should not have any surprises) and the woes in Europe (which market has reacted and built in the negatives for now).
Technically, bullish divergence has emerged and E$ does look like it has formed a temporary base at 1.2730/40 for a rebound to 1.2820/30 (first resistance). If the above scenario pans out, 1.2950/60 may be the ultimate target on the top end. Bearing in mind that on a weekly basis, the E$ remains bearish for 1.2610/50. Though there is 2 way opportunities, but for the conservatives, fading the rally above 1.2900 would appeal.
All the best!!
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| E$ 8-hourly chart - Initial bounce off 38.2% |
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