Two possibilities exist for the terrain ahead, one for the continuation or one for the breakdown. This very much amusing position from a markets perspective stems from the initial Eurobonds positional play.
The position is reached as a touchstone for the fact in the thesis. We have already covered the macro and explained the fundamentals in play so we shall now cover that here today. Instead we shall consider the bear case and understand the conditions in play, namely:
(a) the presence of a breakdown (b) a monetary vocal defence from Lagarde which could be directly attacked as weakness in the currency
Our swings so far have played out favourably. Although this time the decision is more challenging, the weaknesses Lagarde sent has opened up the downside and sellers can now threaten a retest of support levels at 1.15 - 1.14. Just a threat, the diagonal support breach is toying with the idea and it is quite understandable, in such a short period of time and the risks are no longer idiosyncratic to the US as cases sky rocket in Europe.
Buyers have shown up but for the time being I am going to bring things closer to home and pull back on the bullish euro view. We are at the edge of the board and a continuation although is technically in play towards 1.225x - 1.250x it will be hard to manoeuvre with a round of risk-off. Combining a pullback and leveraging continuation at 1.14 / 1.15 would be the winning move.
Consider selling a breakdown next week or trailing longs very aggressively. Logical analysis concludes that a pullback is in play as there is definitive weakness on the monetary side in Europe.
As usual thanks for keeping the feedback coming 👍 or 👎
Comment
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Keeping a very close eye here today, FED will either provide the catalyst for a breakdown or continuation. Good luck all trading G10 FX today.
As always your Fundamental analysis is in-depth and on point, I would like to give further insight for this period using purely technical analysis ...
ridethepig
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@Tradesy1, an excellent call!!
DollarHouseCapital
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I agree with the count and will be on the short side with you all the way. ECB worries = Macro driver. 1.14650 is looking good for a target if 1.1640 doesn't hold.