Euro bulls have upper hand....

E$ remained well bid throughout yesterday's session with every dip meeting demand and closing Monday just off the high of 1.2900, forming an bullish engulfing candlestick. However, the resistance at 1.2900/10 proved to be formidable, at least for this round, as intraday indicator went into the o/b zone. Market is probably too quick to jump into the reversal story and this current sell-off should flush out the weak longs before it find first level of support around 1.2820/30 and stronger at 1.2780/900 for a rebound for the 1.2950-1.3000 area in the days ahead.

Europe order book:
Stop loss: 1.2750/35, 1.2905/15 and 1.2915/25
Limit: 1.2790/70

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Bullish for initial target 1.3000

Technically, intraday indicators have come off its highs and still have room on the downside based on current level of 1.2864. Intraday oscillator indicator suggest range consolidation and at this moment a base is also in the making. Given a bullish engulfing candlestick pattern, one has to be cautious getting overly bearish when nearer the lower band of the range. Expected range 1.2820/30 to 1.2930/40. Risk/reward still favours buying on dips.

E$ 4hourly chart - Bullish price action....

Near term turning point....

Indeed, E$ tested to a low of 1.2796 before rebounding and closed the week at around 1.2835. As I have mentioned in "Mixed signals...." (17 May Fri), the waning downside momentum, coupled with an extreme o/s condition resulted in a rejection in the 1.2800 area. At this point, bullish convergence has emerged and this has increased the probability of a near term base. A potential reversal within a full moon zone, which starts from this Wednesday and possibly into next Monday, will certainly makes things a whole lot more interesting and exciting.
Considering a 40% jump in the net euro short positions from the previous week, market does look more susceptible to shortcovering.

CFTC COT report: Speculator's account as of 14 May 2013
EUR: -46,921 vs -33,533
JPY:   -88,407 vs -78,560

Asia order book:
Stop loss: 1.2800/790 and 1.2890/900
Limit: 1.2950

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 is breached)
Minor trend: Bullish for 1.3000 (initial target)

Technically, shorter intraday indicator is getting into o/b level whereas the longer intraday/daily are still in o/s zone. Intraday oscillator indicator suggest range consolidation. Taking all available technical signals into consideration, I expect today's range from 1.2810/20 to 1.2890/900. Risk/reward favours buying on dips.

E$ 8hourly chart - Bullish convergence

Mixed signals.....

E$ managed to hold off the selling pressure with a low of 1.2846 against Wednesday's low of 1.2843 before shortcovering to a high of 1.2929. E$ then came off and closed Thursday at around 1.2883. Admittedly, we are very closed to critical level of 1.27447 where a break would change the intermediate trend picture to bearish and E$ can fall to 1.24/1.25 (as per H&S formation in the chart on 15 May, Tue). There is a mixed bag of technical signals with the bearish ones dominating for now, ie weekly momentum is still pointing lower. However, there are a few supporting signals for 1.2800 to hold for a rebound where one of them is the intraday and daily indicators are at extreme o/s zone. Currently, there are talks of a large option barrier at 1.2950 and this will provide market incentive for a deeper squeeze higher.

Europe order book:
Stop loss: 1.2800/790, 1.2850/40 and 1.2910/20
Limit: 1.2850/40 and 1.2950

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 breached)
Minor trend: Mildly bullish

Technically, intraday indicators are in o/s zone and I do not see any sell-off to be sustainable. As the range consolidation continues, the intraday oscillator indicator is starting to show waning downside momentum. As I have warned in the past 2 days, one should not get overly bearish when closer to 1.2800. The signals are stronger now. For today, I have still not discounted the possibility of a test at 1.2800/20 and therefore today's expected range is from 1.2800/20 to 1.2950/60.

E$ Weekly chart - Either way, E$ is expected to finish higher this year

Neckline in focus but wait.....

E$ broke through WMA50 at 1.2890 and close the day at 1.2886, further reinforcing the near term bearish tone. Selling came to a pause after stop loss orders were tripped at 1.2845, printing a low of 1.2843. Up till this point in time, the probability of the Head & Shoulder formation materializing is getting higher and the critical level to watch is 1.2745 (previous low) and 1.2760/70 (neckline). Eurozone CPI at 5pm (Sin/HK) and US Weekly Jobless Claims at 8:30pm (Sin/HK) should inject some life into the market.

Europe order book:
Stop loss: 1.2800/790, 1.2850 and 1.2900/05
Limit: 1.2950

Primary trend: Bullish
Intermediate trend: Bullish for 1.33/1.34 (unless 1.27447 is breached)
Minor trend: Mildly bearish (Up / Down market, can't get overly bearish when nearer 1.2790/1.2810)

Technically, intraday indicators are in o/s zone. Shorter intraday momentum indicator is suggesting consolidation but the longer intraday is still pointing firmly lower. In view of the mixed technical signals, I am mentally prepared for a squeeze higher before retesting yesterday low again. Strong resistance stands at 1.2940/50 with today's expected range 1.2910/20 to 1.2800/790.
Note: I will not get too bearish sub-1.2800 this round as the intraday indicators will be at extreme o/s levels by then.

E$ Weekly chart - Staying convincingly below WMA21 (red) and briefly below WMA50 (green)

Bears making their presence felt....

Tricky whipsaw price action yesterday, normally witnessed only during the full moon zone. I kind of anticipated that but it was really a combination of scenario 1&2. In hindsight, E$'s ability to only manage a high of 1.3029, way short of the DMA21 at 13065, indicates a powerful short term bear trend. It was confirmed by the subsequent sell-off to break 1.2935. Up till tis point in time, low had been 1.28916. Clearly the subtle USD resurgence has revealed itself. In view of that, one has to anticipate the possibility of E$'s price action in the months ahead.

Asia order book:
Stop loss: 1.2880/75 and 1.2845
Limit: Nil

Primary trend: Bullish
Intermediate trend: Bullish for 1.33/1.34 (unless 1.27447 breached...  this view is under threat now)
Minor trend: Bearish

Technically, intraday indicator are in o/s zone but intraday momentum indicators are all pointing firmly lower which has increased the probability of a trending market picking up steam. Expected range 1.2940/50 to 1.2800/30 (extended 1.2760/70).

E$ Daily chart - Staying below the DMA200 (Blue) again......

E$ Weekly chart - If H&S materializes, E$ is projected to fall towards 1.24/1.25

Mean reversion day?

Despite the strong downside momentum from last week's weak close, E$ managed to hold 1.29348 (last week's low) with a low of 1.29358 on Monday before rebounding to today's high of 1.3026. Given the last 24 hours' price action, it has increased the probability of a near term bottom with E$ gearing up to retest the DMA21 (1.3065) that it broke down from last Thursday. I am sure with the ongoing ECOFIN meeting and the German ZEW Economic Sentiment (5pm Sin/HK), there are more than enough stimulant to inject volatility into the market.
Interestingly, a subtle difference between the Asia and Europe order book has indicated the importance around the DMA21.

Asia order book:
Stop loss: 1.2845 and 1.3055
Limit: 1.2860/50, 1.2935 and 1.3040/50

Europe order book:
Stop loss: 1.2845 and 1.3035-50
Limit: 1.2860/50, 1.2935 and 1.3050-70

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Mildly bullish (Down / Up market)

Technically, shorter intraday indicator is near to o/b zone but the longer intraday one is still at the o/s level, which fits my other technical signals that the probability of a down/up market from here. Shorter intraday oscillator indicator is suggesting range consolidation with current price level being at the upper band. However, longer intraday momentum is a mixed bag. Putting everything together, I see 2 probable scenarios:
Scenario1: 1.3020/30 to cap with E$ falling back to 1.2950/60 before a rally for 1.3050/70
Scenario2: E$ holds 1.2980/90 and rally for 1.3050/70 before falling back to 1.2940/50.
I have to admit that at this point in time, I am leaning more towards Scenario1.
Stay nimble and don't be a slave to a single position!!

E$ Daily chart - Mean reversion to DMA21

E$ caught between tectonic plates again...

More signals are converging to affirm a USD resurgence, which concomitantly would also mean an end to the commodity cycle (AUD, XAU, etc....). In a situation as such, euro benefits from the stronger EURXXX but on a relative basis will still be weaker than the greenback. Being caught in between 2 tectonic plates, it will become trickier. My concern is the divergence between the currency market from the equity market. In 1987, the US treasury bonds and the equity market diverged for around 7/8 months before the equity market plummeted. Are we in the making of the same? If so, then there should a big correction in the equity market this year, probably in the Q3.
Back to the E$.... with the weak close last week at 1.2990, we are now trading below the DMA21, 50 and 200, which are bearish signals. Strong resistance stands at 1.2995/3010 and pivot at 1.3060/70. First support level is the 61.8% target (see chart) which the market had already bounced away on first test with the next stronger one at 1.2910/890.

CFTC COT report - Speculative accounts (as per May 7):
Net euro short -33,533 vs 30,149
Net short jpy   -78,560 vs -71,127

Europe order book:
Stop loss: 1.2845 and 1.3055
Limit: 1.2860/50, 1.2935 and 1.3040/50

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 breached)
Minor trend: Bearish (refrain from getting too bearish nearer 1.2900)

Technically, longer intraday indicators are in o/s zone. Shorter intraday momentum indicator is showing range consolidation but longer intraday momentum continues to point lower. I expect a trading range between 1.2890/3010 to 1.2990/3010. Overall technical signals favours selling E$ on rally.

E$ Daily chart - 61.8% corrected