Euro

With Friday's upthrust, the futures vaulted a formidable external peak at 1.2759, raising some vexatious questions about the euro's fate. Although the weight of technical evidence has grown considerably more bullish with last week's rally, it beggars belief to think that the euro is about to supplant the U.S. dollar, for  more than a short while, as an ostensible safe haven for cash.  At best, with the recent  open commitment by the ECB to buy sovereign debt in whatever quantities are necessary to hold rates down, the euro should be merely hold its own against the dollar.  That's why I expect the former to go sideways once this short-squeeze subsides in perhaps a week or two.  Until then, we have a 1.2885 rally target that we can use, or perhaps 1.2898 if any higher. Basis the December contract, those targets lie, respectively, at either 1.2888 or 1.2902.

The rally from late July's low near $1.20 has gone almost as far as it can go without achieving anything of significance on the daily chart. Notice how the recent high at 1.2640 fell a tad shy of an 'external' peak at 1.2703 whose breach would have created a bullish impulse leg.  Even if buyers succeed this time, it will have taken three tries, implying that deep-down, they are lacking in confidence. Such a rally would nonetheless be tradable via camouflage from the long side, especially following a 'b-c' pullback from just above 1.2703.

The Euro currency has been flirting with a large bearish pattern during its volatile two-week uptrend and would confirm a new version of the pattern with only a modest decline from its present level.  The currency markets were buffeted by acronyms last week (specifically FOMC, ECB, and NFP), with the result that an earlier version this Euro pattern was confirmed and negated at least once.  The new 'X' point for the September futures contract is at 1.2287, less than 1% below the current price.  The jagged chart since the July 24 low presents challenges to a Hidden Pivot analyst, but a continuation of the uptrend is not ruled out.  A print at 1.2287, however, might foretell some spoiled Eurocrat vacations and an eventful autumn season.  (Posted by Doug “harry” McLagan)

It is on days like yesterday that we get a finely calibrated sense of how unfathomably stupid are the forces that move the markets.  Draghi said the central bank would do whatever it takes to defend the euro-zone, and the markets took flight.  Does anyone actually believe that quantitative easing will rescue the region that, in the throes of deepening recession, is sliding toward bankruptcy? No matter.  Corporate earnings took a back seat to Obama-style "hope and change," triggering a short-covering rampage in the euro and in stocks around the world. From a technical standpoint the move in the euro was strongly impulsive on the hourly chart, and so any weakness in the days ahead should be viewed as prelude to a follow-through bull leg.  We'll watch closely to see how that second leg interacts with the 'p' midpoint of a pattern like the one shown. Traders should stay tuned, since I will put out an intraday alert if a low-risk opportunity to get short should develop. To receive such alerts, you need only check the E-Mail Notifications box on the My Account page.  Want to learn how to nail swing highs and lows yourself? Click here for details about next week’s Hidden Pivot Webinar.

The September contract broke to new lows after having held above a Hidden Pivot support  at 1.2225 for most of a day.  This is bearish on its face and suggests more downside to as low as 1.2073 over the near term.  There are numerous other, lesser patterns, but if you're looking to bottom-fish I'd suggest using “camouflage” for all but the one noted above, which can be bought with a stop-loss as tight as eight ticks. _______ UPDATE (July 16, 12:36 p.m. EDT):  The target is still valid, but because an upward correction begun on 6/13 has made it less attractive as a place to try bottom-fishing, I am no longer suggesting it.  The bigger picture remains bearish because of the breach of 1.2225 noted above.  ______ UPDATE (July 26, 10:12 p.m. EDT):  The futures have in fact continued to plunge -- most recently, to a 1.2051 low that exceeded my target by 0.0021 cents. This is bearish on its face, and the upward correction so far looks somewhat timid because of its failure to breach an 'external' peak at 1.2190 recorded July 20 (60m) on the way down.

The September Euro looks like it will be trading a penny lower before it summons the energy for a dead-cat bounce. The elongated C-D segment leaves something to be desired aesthetically, but it should serve nonetheless to provide us with a decent place to go bottom-fishing.  Camouflage is a must in this case, and so I'll suggest looking for it on the lesser charts if and when the decline hits 1.2242.  That's 17 ticks above the actual Hidden Pivot support, but there's nothing to lose by being alert to a possible turn at that point.  _______ UPDATE (July 12, 1:05 a.m. EDT):  The futures have made a fragile bottom three ticks from the 1.2225 Hidden Pivot implied above.  There have been no handholds on the lesser charts for a camo entry, so I'll assume nothing done.  However, if you used my target to buy near the low on your own initiative, I'd suggest taking off half the position at current levels of around 1.2253 and stopping the rest so that no loss is possible.  Please note that bulls won't be in the clear until such time as this vehicle leaps the 1.2295 'external' peak made yesterday on the way down.

It's impossible to predict how much more mileage the spinmeisters will get from Spain's "problem" and the anticipated bailout thereof, but from a technical standpoint the euro still has room to rally. Specifically, the two 'D' targets shown should be used as minimum price objectives for the near term.  Camouflageurs can try getting short at either of these Hidden Pivots, but my hunch is that the higher would be the less risky play. _______ UPDATE [June 17, 8:47 p.m. EDT) Sunday's gap-up opening topped to-the-exact-tick at the 1.2759 target shown. If you shorted there, cover half the position now at around 1.2721 and tie the rest to a 1.2752 atop-loss.  If I hear from any traders in the chat room who did the trade, I'll establish a tracking position four your further guidance.

It looks like the dam is about to break, sending the June euro plummeting to the 1.1946 target of the pattern shown.  The good news -- for Europe, anyway, although perhaps not for long -- is that a period of respite seems likely, given the prospect of a rebound in the currency.  It's difficult to imagine what sort of headlines will drive the presumptive dead-cat bounce, although one suspects that it will not cause Greeks to dance in the streets.  Calling the turns confidently while dramatically reducing the risk of trading are easier than you might think.  Want to learn how? Click here for information concerning the upcoming Hidden Pivot Webinar on June 6-7.

Although 'everyone' supposedly is short the euro right now, the technical signs indicate that it could continue to plummet nonetheless.  Take a gander at the chart included with today's tout to see just how low it could fall this summer.