(EU) Beware Another Intra-Range Euro Pop While Key 1.30-Handle Holds

Technicals, April 11, 2012; 7:45am

As minor as this morning's poke above yesterday's 1.3146 high is, it could be the start of another recovery within the 1.30-to-1.3450-range that has contained this market for the past 2-1/2 months. By virtue of today's gains- and again, we must emphasize the minor degree of this strength- the 240-min chart below shows that the market has defined yesterday's 1.3055 low as a very tight but objective risk parameter, the failure below which is needed to stem the recovery attempt from Mon's 1.3034 low and render it a 3-wave and thus corrective affair that should then give way to a break of 15-Mars key 1.3003 low.

The market's position at the extreme lower recesses of the past 2-1/2-month range is clear in the daily log close-only chart below. While 14-Mar's 1,3033 low close remains intact, so does the prospects for either continued lateral range trade OR a longer-term bullish count that contends that the relapse from 28-Feb's 1.3459 high is a 3-wave and thus corrective structure within a major basing/reversal environment.

We continue to maintain a long-term bearish bias for two main reasons. First, the market has yet to break the long-term down-channel shown in the weekly log close-only chart below. The facts that Jan/Feb's recovery attempt acknowledged former 1.34-area support as new resistance and rejected the exact 38.2% retrace of Apr'11 - Jan'12's entire 1.4807 - 1.2679 decline reinforce this view and define 24-Feb's 1.3449 high weekly close as an excellent and objective risk parameter this market is required to break to negate this count.

Secondly, Jan/Feb's recovery attempt labeled in the daily close-only chart above is arguably only a 3-wave affair. Left unaltered by new highs above 28-Feb's 1.3459 high, this 3-wave structure is considered a corrective affair consistent with a broader downtrend that ultimately warns of new lows below 16-Jan's 1.2667 low daily close. Such weakness would likely come from resumed major economic threats from the Eurozone. And short-to-intermediate-term weakness below 1.3055 and 1.3003 would raise the odds of such a broader bearish fall-out.

In sum, shorter-term traders with tighter risk profiles are advised to beware of another intra-range recovery as a result of this morning's pop above yesterday's 1.3146 high. A failure below 1.3055 would mitigate this call, render the recovery attempt from last week's low a 3-wave and thus corrective structure, and re-expose the past couple weeks' developing slide and assault on 15-Mar's pivotal 1.3003 low. A neutral-to-cautious-bearish policy remains advised for long-term traders with strength above 1.3459 required to negate this call and expose a base/reversal threat that could be major in scope. This said, while the market remains within the 1.3033 - 1.3459-range, longer-term directional expectations should remain low as the market would still be prone to the lateral aimless trading range behavior that has dominated it for the past 2-1/2 months.

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