ECH10

There's an easy rally target at 1.3742 to use as a minimum upside objective for the near term, but it seems doubtful bulls won't go the extra inch to refresh themselves with a thrust above dot-like pockets of resistance visible in mid-March and mid-April.  If that's what happens, it'll be telegraphing yet more weakness in the U.S. dollar.

The Euro has been tracing out a bowl-shaped formation for more than a month, and it might now be poised to break out strongly to the upside.  Important prior highs are within reach, and the next two of them will be surpassed if the Euro hits a D target of 1.3756 shown in the attached chart.  Above that level is a cluster of prior highs ranging from 1.3789 to 1.3840.  The 1.3756 pivot has high credibility due to a large bounce off of its exact sibling midpoint of 1.3688.  A shallow pullback from the current level, perhaps to the 1.3688 midpoint area, would give rise to a camouflaged buying opportunity, as depicted in the chart.  Traders looking to short the 1.3756 pivot should not enter orders before the prior high of 1.3737 has been surpassed, as this might release a burst of upside energy.  For the same reason, traders with long positions should treat the 1.3756 pivot as a minimum upside objective and use trailing stops so as to remain long in case the market slices through the pivot.  (Posted by Doug McLagan)  _______ UPDATE (10:37 a.m. EST):  The Euro slightly surpassed both of the two priors marked in the chart and then pulled back to one pip below the midpoint pivot.  The ensuing rally indeed sliced through the D target and went as high as 1.3796, a move that was worth as much as $1,362 per contract.  The prior high of 1.3789 was surpassed, giving the Euro chart an increasingly bullish look.

The daily chart of the Euro futures gives us a sense of how far the euro might react in either direction to the non-farm payrolls report, which often sends markets scurrying one way or the other, or both.  One of the two patterns in question began more than a month ago with a compact but significant impulse wave that surpassed three prior lows back in the middle of 2009.  This D target is at 1.3398, and although the euro's recent decline affords other, lower pivots, let's take them one at a time.  The highest hidden pivot that recent trading can give us is at 1.3854, which will be in effect so long as 1.3550 holds.

There is a pivot on the 30-minute Euro chart at 1.3680, just above the session high so far, but it lies only four pips below an important prior high, and twelve pips below another one, at 1.3692.  A print above there would give a bullish signal.  A move to 1.3840 or higher would break two versions of a bearish daily pattern with targets at 1.3398 and 1.3344 and would indicate a reversal of the Euro's three-month decline.  _______ UPDATE (1:40 p.m. EST):  The Euro came within five pips of 1.3680 before falling more than fifty pips, but then it turned back up and easily surpassed the pivot and the two prior highs just above it.

After declining sharply since early December, the Euro has begun to turn sideways.  There is strong hidden pivot support just under the 2010 low, provided by D targets at 1.3398 and 1.3387.  The first of these is from a daily pattern that has remained active for almost three weeks.  The latter is from a 90-minute pattern which will be in effect so long as 1.3581 is not revisited.  Its sibling midpoint is at 1.3484.  Below all of these levels is another hidden pivot at 1.3344.  _______ UPDATE (5:24 p.m. EST):  The Euro traded through the 1.3484 midpoint and made a new 2010 low, but it reversed above our other targets and rallied far enough to cancel the 90-minute pattern.  Pivots at 1.3398 and 1.3344 will remain in effect so long as 1.3840 is not revisited.

The Euro has been frozen in a narrow range for the last half-day, as if gathering energy for a move.  It is hovering just below a cluster of external highs on the hourly chart, meaning that the already-bullish tone of this market could intensify quickly.  A print above the highest of these, at 1.3840, would not only be very bullish but would cancel two daily patterns with targets at 1.3398 and 1.3344.  Until and unless that happens, committed Euro bears have something to shoot for. ______ UPDATE (01:27 a.m. EST, Feb 18): Committed Euro bears carried the day. The beleaguered currency failed to take out any of its key hourly highs and instead plunged to a level near its low for the big move that began above $1.50.  The targets below $1.34 were not reached but remain in play.

If the futures continue lower, look for support around 1.3684,  the D target of a small but elegant daily pattern. Traders should bid 1.3690 with stops at 1.3678. (Posted by Harry) ______ UPDATE:  The support gave way easily, stopping us out for a theoretical loss of about $150.

Someone in the chat room mentioned the "possibility" (per Bloomberg) of the euro dropping to 1.380, so I thought I'd have a look myself, lest the useless notion of the merely possible gain traction among subscribers. Anything is possible, of course, but from a Hidden Pivot perspective the euro looks like a 3-to-2 bet to noodle around for the next week or two.  If the euro does fall anew relative to the dollar, however,  a tradable low at or near 1.4020 would not be unthinkable, provided its midpoint sibling at 1.4299 gets breached hard.  But the larger downtrend from early December's high appears to have chickened out  just shy of a supportive low  at 1.4200 recorded in September 2009.  This suggests that although the bear market has further to go, it will need more time in distribution before the next big leg down.