Euro

A particularly slow day in a seemingly interminable stretch of slow weeks allowed us to focus on some subtle technical points that might otherwise have gone unremarked. On the technical premise of a strong dollar, we scrutinized the euro’s charts, which paradoxically looked strong but which on further inspection revealed some small but possibly significant signs of weakness. We then shifted our attention to the E-Mini S&P charts, turning them inside out to ferret out a tradable nuance. So that you can share in the suspense we felt poring over the charts, I’ll leave the outcome undivulged.

So lame is Europe’s latest attempt at spin control that Americans could view it as comic relief from our own worries about the U.S. economy’s accelerating death spiral. Creating a global diversion was doubtless a goal of the exercise, which featured Sarkozy and Merkel, president and chancellor, respectively, of France and Germany, posing for the photo-op unveiling of a scheme – sorry, no details at this time –  to put Greece and the rest of the PIIGS on sound financial footing. Never mind that France itself starts to look like a financial basket case if one scrutinizes their books too closely; or that the German people, if not yet their leaders, have lost their appetite for bailing out the rest of Europe. And never mind either that, rather than describing their supposed plan, Merkel and Sarkozy have merely promised to tell us more about it in the fullness of time – reportedly at a November meeting of Euroland’s potentates, wizards and feather merchants. To their dubious credit, and perhaps owing to an understandable desire to avoid the derision of the world, the two leaders did not refer to a “secret plan” when they deliberately left it under wraps; no, they alluded merely to “a plan, ” and we can only surmise that they were fearful of raising the public’s expectations by implying that something new or unexpected was about to be tried. Better instead to maintain and nurture the low-grade cynicism with which most of us have come to regard these announcements.  That cynicism seems manageable, at least – presumably until market forces cause the whole shoddy edifice to crumble. In the meantime, Sarkozy and Merkel have bought perhaps a month’s time for the hopeless illusion that political Europe will remain united under a single currency.  Sustaining the endgame for

From our globetrotting friend Jonathan Auerbach, here's an excerpt from Auerbach & Grayson's latest report: "The resounding reversal in the primary trend of the US Dollar is the cornerstone of a bearish litany of technical evidence which resonates with the ominous plangency of 2008, and strongly reinforces our longstanding belief that significant downside remains for risky assets. Importantly, the resurgence of the US Dollar is not simply a function of the Euro’s failings, but rather a global phenomenon which should provide another significant headwind for equities and dollar denominated commodities if historical economic relationships hold. Finally, our analysis of many of the major macro proxies for risk, including Copper, China (H-shares), and the Australian Dollar, suggests that the selling may just be getting started."   For the full report, click here.

The futures have gone bullishly impulsive on the hourly chart, hinting of  a possible end to the tedious chop that has dominated since May. The key price on the chart is the 1.4551 Hidden Pivot midpoint resistance that amply contained late July's rally. If it is breached on a closing basis for two consecutive days, I'd infer that more upside impends to its 'D' sibling at 1.5291.

The hourly chart suggests neither particular strength nor weakness in the weeks ahead. However, given the range the euro could traverse and still be within the confines of the last few months' price action, there is ample room to stoke the rumor mill as it pertains to Europe's inevitable financial decline and fall. The currency got a reprieve last week when Germany eased somewhat on bailout terms for Greece, but no one could actually believe that this will prove to be more than a stopgap.  Such considerations will tend to limit upside on the euro, but it will also temper the aggressiveness of euro bears, since an actual collapse, inevitable though it may be, has been forestalled yet again.

The futures have pushed above two resistance peaks without drawing a breath, suggesting that any pullback lasting more than two days is likely to be a consolidation and possible buying opportunity.  The chart shows why the move is not quite impulsive, however, since the peak labeled #2 is not an actual peak (i.e., it is  not preceded by a stick-down low). Even so, the rally looks to have enough power behind it to imply that the U.S. dollar will remain under pressure.

A whole week's worth of upward ratcheting has failed to exceed even the lowest of several key peaks on hourly chart, implying the euro is under distribution.  A print today exceeding a high at 1.4413 recorded on May 10 would change that, but otherwise we should expect to see buyers give up the ghost as early as next week.

The June contract is approaching a somewhat muddy Hidden Pivot support at 1.4187. Although I am not recommending bottom-fishing there because it is equal to an April 19 structural support, we should monitor the bounce thereof -- or perhaps lack of one -- for signs of power and of exactitude.  A resurgence of strength in the euro would of course diminish the odds that the US dollar has embarked on a major rally.

A 1.4093 Hidden Pivot given here yesterday remains an unorthodox spot to try bottom-fishing with a very tight stop-loss. I've included a chart that shows the provenance of the target.  This interpretation was inspired mainly by my fetish for a sequence of single-bar coordinates here that is as unintuitively abc-like as tradable patterns come. _______ UPDATE (April 21, 10:53 a.m. EDT): Tracking the little sonofabitch diligently may be more trouble than it's worth, since the euro moves precisely to its targets when most people I know, including me, are sleeping.  It has just done so again, hitting a high this morning at 1.4631 that lies just 0.0006 points from the 'D' target of this in-your-face pattern on the hourly chart: A=1.4000, B=1.4500, and C=1.4137.