E$ chose to react to the negative news as it was ripe for a correction yesterday. I was expecting a move lower but I must admit, it fell more and faster than I expected within 2 trading sessions, touching a low of 1.3459 and took out at least 8 layers of stop loss orders!! That left many pondering if the euro bull trend has ended and we are in for a much deeper correction. I have attached 3 charts below, the daily, weekly and then monthly. On the daily chart, price action does look stretched against the moving averages and a quick reversion followed by some sideway consolidation will relieve the overbought situation. However, on the weekly and monthly chart, one would have realized that E$ is actually quite close to the moving averages which implies that price action is not stretched and a vicious mean reversion is not due yet. In fact, on the weekly chart, we are only in the early stage after the golden cross (see Weekly chart). Therefore, I maintain that the bull trend is very much intact and there is still mileage on the upside with 1.3820/30 being the first target.
London order book:
Stop loss: 1.3400/360, 1.3435/30 and
Limit: 1.3420, 1.3580 and 1.3635/40
Technically, this afternoon's rebound has unwound an extreme o/s condition and shorter intraday momentum has turned from down to consolidation, which at the lower level would signal further rebound. However, longer intraday momentum is still pointing lower at this hour but has indication that the past couple of hours's price action was a powerful move. Recapturing 1.3550 going into NY will be a mildly bullish technical signal and for a test of 1.3590/600. For today, a close above 1.3540 to 1.3590/600 is a mildly bullish signal. A close above 1.3600 will put 1.3710 back on the radar. Conversely, a close below 1.3500 would expose 1.3410/20 and subsequently 1.3370/80 for a more elaborate correction. For now, I place 60/40 probability that we see 1.3820/30 first rather than 1.3300. Let's see how the market close in NY today :)
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| E$ Daily chart - DMA21/50 and DMA100/200 crossovers |
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| E$ Weekly chart - WMA21/50 crossover |
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| E$ Monthly chart - Price around the mean |
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