Euro

The euro has collapsed after rallying to within 0.0025 points of 1.4018 target I proffered here earlier.  Yesterday's low coyly missed taking out an important bottom at 1.3644 recorded on February 27 (see inset), but it seems doubtful that this structural support will endure.  Even so, a rally followed by a 'b-c' pullback from just above the 1.3773 peak I've highlighted could yield a low-risk buying opportunity, camouflage-style.  We'll have a better idea whether bears are serious when we've seen how the C-D follow-through leg of the big pattern performs. ______ UPDATE (June 2, 11:10 a.m. ET): The plunge begun on May 8 from 1.3993 has a little further to go before this brick feels any lift. My downside target is 1.3560, the midpoint pivot of the pattern shown. It is not as attractive for purposes of bottom-fishing as the target I've proffered in the Swissie because it coincides with a key low recorded in early February. _______ UPDATE (June 6, 12:10 a.m.): The Whoopee Cushion bounce from yesterday's low was nasty, but until such time as it tops 1.3734, a bearish target at 1.3386 will stand. _______ UPDATE (June 10, 1:20 a.m.): Interpolating for the SEPTEMBER contract, my minimum downside projection for the near term is 1.3396. If it's decisively breached, however, I'd infer more downside to as low as 1.3198 is coming.

Now that Portugal has been removed from the respirator, Europe's 'recovery' is ostensibly complete -- even if there are still no jobs to be had in all of Iberia for college grads. Regardless, the euro has a bit of rally room in the days ahead, since an unfulfilled Hidden Pivot target at 1.4018 beckons just above (see inset). Although there would appear to be almost zero chance the June contract won't get there, getting past it is by no means a done deal. In fact, price action centered on the midpoint pivot (i.e., the red line) over the last four months has been sufficiently precise that we should expect the pivot's 1.4018 'sibling' to be precisely shortable. That said, an easy move through it would imply there is still some buyer power left to drive this vehicle even higher. But it would take no less than a print at 1.4241 (see inset) to suggest that the aging uptrend from mid-2012's low has been more than a mere a bear rally.

In the chat room yesterday, a hawk-eyed Pivoteer flagged an interesting opportunity in the euro, of all things. The bullish pattern is shown in the chart, and although the futures are obviously having trouble getting airborne, the target itself at 1.3742 will remain viable -- and tradable -- unless the point 'C' low at 1.3664 is violated.  Camouflageurs will be in store for a nice Christmas gift if there's a rally to just above 'external' peak #2 followed by a shallow B-C pullback.  The subsequent follow-through (C-D) rally would generate the kind of 'x' entry signal that can be worth waiting for. _______ UPDATE (January 6): The euro broke down last week -- badly -- so this one was a non-starter.

I stopped short here yesterday of predicting the dollar's next move as it approaches a critical support. However, the euro looks like a good bet to continue higher, at least to the 1.4027 target shown.  If so, this would imply a bout of weakness for the dollar.  The euro could still pull back to the Hidden Pivot midpoint (red line) without changing any of that.  In fact, it would be an enticing buy on a retracement to the 1.3660 pivot.

Although there was a flurry of buying initially on news of a deal in Cyprus, the enthusiasm for euros seems to be tapering off in the wee hours. It seems unlikely that the rally will get very far, and so we should look for the pattern that I've highlighted to relapse into a c-d follow-through to the downside.  Strictly speaking, it would take a rally to 1.3298 -- well above these levels -- to correct the downtrend sufficiently to prepare it for another leg down. This is shown in the elongated k-A segment labeled in the chart.  ________ UPDATE (1:03 p.m. EDT):  The heights achieved by Sunday night's psychotic opening bar proved fleeting indeed, and now the euro has done what it ought to have done to begin with -- i.e., relapsed to a low beneath last week's 1.2852 bottom. Still-lower prices impend.

The bullish trend swung to a 'duel' between bulls and bears Friday with the creation of the bearish impulse leg I've highlighted in red. My hunch is that the news from Cyprus will arrest the selloff via a resumption of the dominant uptrend. If you're looking to catch a ride, I'd suggest leveraging camouflage opportunities to be found at 'x' on charts of 15-minute degree or less.  If the next stab takes out the labeled peak at 83.51, bulls will gain locomotive force. ________ UPDATE (March 25):  The vicious chop of the last two weeks looks to be a consolidation for a test of August's highs near 84. Any impulsive thrust that clears August 2's 83.51 peak will imply that bulls are likely to surpass those highs without much trouble.

With Europe's problems getting pushed off the front page lately by all manner of sensational news, it's not surprising to see that those running the show, most particularly the ECB, have used the lull in coverage to push the euro as high as possible.  Think of them as squirreling away nuts for the winter.  And you had better believe they're going to need every one of those nuts when the world's attention turns once again to the sordid details of deals buttressing the illusion of a stabilized Greece, Spain and Italy. Meanwhile, from a technical standpoint, we needn't even work the numbers to infer that the futures are on their way up to 134+ to test copious supply left there last spring.

What I've been calling a dead-cat bounce is looking less so by the day as buyers clamor for the "ultrasafe" paper of a supposedly resurgent Europe.  This is the stupidest trend we've seen in the financial sector in a while, but we'll have to let it run its course rather than gawk in disbelief that it could happen at all.  From a technical standpoint, the 1.3145 midpoint pivot of the pattern shown can serve as a minimum upside target for now.  Anything above it, however, would portend more upside to the 'D' sibling at 1.3476. Camouflageurs shouldn't let the perfect little impulse leg at the right-hand edge of this chart go to waste, since it promises a low-risk, picture-perfect entry opportunity on a chart of lesser degree.  Want to learn how to use the Hidden Pivot Method to reduce trading risks? Click here for information concerning the upcoming webinar on November 6-7 and a $50 discount.

The euro charts give us several well-defined patterns and numerous possible trades.  Since late July, the larger trend has been bullish, and at the moment the two strongest patterns give us twin pivots at 1.3137 and 1.3144, an area which might resist the euro should it rally from here.  A short sale of that double-pivot should use a stop-loss not below 1.3152.  In between here and there is a midpoint pivot at 1.3041.  The larger of the two patterns projects as high as 1.3476.  In the event that the euro heads down, there is a midpoint pivot at 1.2895 which might be a buy.  The stop should be below 1.2890.  (Posted by Doug “harry” McLagan)