July 27, 2012; 7:10am
While yesterday's pop in the Euro above last week's 1.2324 high detailed in the 240-min chart below indicates strength on only the smallest of technical scales and is grossly insufficient to threaten any long-term bearish counts, longer-term traders are nonetheless advised to pare bearish policy and exposure to a more conservative level due to a confluence of technical factors that warn of a base/reversal threat and while Tue's 1.2042 low remains intact as support and a short-term risk parameter.
The technical factors that threaten the risk/reward merits of a bearish policy that we have advised for most of the past year include:
This is an impressive list of technical threats to the clear and present downtrend with only one thing remaining for these to warrant a policy change to the bull side- THE EURO'S GOTTA STOP GOING DOWN. For until or unless this market confirms a bullish divergence in momentum of a scale sufficient to break the major but simple downtrend pattern of lower lows and lower highs, none of these "threats" to the bear matter.
Indeed, the bullish divergence in momentum in daily momentum shown in the daily log chart below is another bullish factor that contributes to a base/reversal threat that could be major in scope. But only a glance at this chart is needed to see that, relative to the magnitude of this year's major bear trend, this week's pop is grossly insufficient thus far to be considered as anything but another corrective hiccup within the major slide. Even after this divergence, the market remains below a month's worth of former support-turned-resistance from the 1.23-handle and well below 20-Jun's 1.2707 next larger-degree corrective high this market really needs to recoup to expose a Euro reversal of more Olympic proportions.
These issues considered, shorter-term traders with tighter risk profiles have been advised to move to a neutral/sideline policy as a result of yesterday's poke above our short-term risk parameter of 1.2324. Weakness below Tue's rejected/defined 1.2042 low and new short-term risk parameter is required to negate this call and resurrect a bearish policy. And while this week's recovery is grossly insufficient to suggest anything but a slightly larger-degree correction within the long-term downtrend, the technical factors listed above that warn of a broader base/reversal threat warrant paring bearish exposure to a more conservative level for longer-term players. Strength above at least the 1.23-handle and certainly 20-Jun's 1.2707 corrective high are required to warrant further paring or reversal of a long-term bearish policy. Needless to say, a break below Tue's 1.2042 low will mitigate this immediate threat, reinstate the major bear, and expose potentially significant losses thereafter, including a run at Jun'10's major 1.1876 low.
RJO Market Research and Trading (RJO MRT) brings you the latest research on commodities and futures. They specialize in technical and fundamental analysis on all your major markets including: financial, agricultural, energy, foreign exchange, soft and metal markets.
As a hub for information, RJO MRT offers several forms of delivery to meet the needs of a vast audience. They strive to stay at the front of the markets by providing their followers with everything from market insight to trade strategies.
RJO MRT prides itself with using a combination of technical conditions and fundamental inputs such as economic or crop reports to help guide their viewers towards driving price discovery.