Thursday November 12, 2009 - 18:27:47 GMT
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Foreign Exchange Analytics - www.fxa.com
Nov 11 Eur/$ Outlook
David Solin FXA November 10, 2009
No change in the longer term view in eur/$, as the market is seen in the process of forming a potentially major top near the ceiling of the year long bullish channel (and upside level initially discussed last March with the market just above the Oct 2008 low at 1.2335), currently at 1.5050/00. This bigger picture topping scenario suggests eventual declines toward 1.4025/50 (38% from the 1.2335 low), the base of the channel (currently at 1.2725), and potentially below. Also, the market has likely completed (or nearly) the 5 wave rally from the March low at 1.2460 (wave V, see numbering on weekly chart below), adding weight to this topping view. Note however, that there is some risk for another few weeks (or more) of ranging/topping, even with some potential for marginal new highs before the substantial downside begins (see â€śidealâ€ť scenario in red on weekly chart below). Switched the longer term bias to the bearish side on Nov 2nd at 1.4825, but understanding that there could be an extended period of topping, and even marginal new highs, before turning significantly lower.
Nearer term, the market has bounced from the Oct 29th low at 1.4690 but the upside pattern from that low does not appear to be â€ścompleteâ€ť (currently within wave 4, see also scrolling commentary at www.fxa.com/solin/comments.htm ), and suggests another near term push higher before completing a more important top (wave 5, see numbering and â€śidealâ€ť scenario in red on daily chart below). Note too that longer term, important resistance remains in the 1.5050/00 area (Oct high, top of the year long bullish channel and the rising trendline since June), and adds weight to the view that another near term push upward would likely be part of a larger topping. However, there is always risk for a push above this resistance (would likely trigger at least some stops). So for now, instead of just shorting an approach of that resistance, would wait for a break below the multi-week bullish trendline (currently at 1.4900/15), as it would increase the likelihood that a top is in place. Would also short on an intraday break (versus waiting for the close) as it could trigger a downside acceleration, and donâ€™t want to be shorting at significantly lower levels if that does indeed occur. Note, only a few days of weakness and a 220 tick fall on the Oct 26th short at 1.4910, before stopping on yesterdayâ€™s close above 1.4965.
Partner, Foreign Exchange Analytics
E-mail [email protected], (860) 767-9102
*See intraday scrolling tech blog at www.fxa.com/solin/comments.htm , Reuters FXAFX31 (does not include charts) and Telerate 57031. Previously emailed charts at
David Solin FXA November 10, 2009
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