Round 1, bears won!!

Good morning and TGIF folks!!  Wow, what a way to start the new year as impulsive bulls were caught long and probably flushed when E$ fell in step fashion to 1.3019 low so far. I hope my update yesterday helped get someone out of trouble.

Having anticipated this potential sharp sell-off ("Christmas Special... Bears to pull the sleigh for now", 24 Dec 12), yesterday's move did not come as a surprise to me though it exceeded my expected range. Referring to the charts, one would have noticed that we are now at the yellow support band for the first stop and the next target is very likely to retest the trend line it broke up from. For this week if it comes, the trend line support stands at 1.2920/30 but I allow for a little overshooting which may land us at around 1.2870/900. Let's see if the US employment numbers this evening will provide that impetus.

For today, intraday indicators are obviously at o/s levels but momentum remains pointing down (albeit waning) implying scope for further probe to the downside. In a trending market move, it is still much safer to await for bullish divergence signals to emerge before one starts to contemplate buy calls. Meantime, I expect another dip which may find initial support at 1.2970/80 (look out for bullish divergence then) before a more elaborate sideways to slightly higher consolidation into the NY. Topside 1.3070/90 should provide strong resistance ahead of the US data.

A quick note on USDJPY.... if you dare not buy at this current level, don't try going short either. I expect a spike closer to Y88.50/89.00 before it turns back. Looking at Y85ish for long opportunity in the meantime. Will provide a more elaborate update when time is right.

All the best!!

E$ Weekly chart - Sitting on yellow band support and eyeing trend line