International Trading: Eur/$, near term weakness but still longer term bull.....

Eur/$, near term weakness but still longer term bull.....

Saturday, August 21, 2010 , Posted by Usman Ali Minhas at 10:35 AM

International Trading

View in the eur/$ remains unchanged, as the Aug 6th high at 1.3335 high completed the 5 wave rally from the June 7th low at 1.1880 (see numbering on daily chart below). Though this suggests an eventual resumption of the longer term gains, at least another few weeks of ranging/correcting lower is likely first. Note too that the daily macd remains in sell mode (see bottom of daily chart below), while the nearer term downside pattern is not "complete", and with both adding to view of at least some further downside ahead. Currently, the market is heavy after the earlier break below the bullish trendline from June at 1.2775 as well as last week 's low at 1.2735, on way toward 1.2605/15 (50% from the June low at 1.1880) next. For now, want to be short and would sell here (currently at 1.2710). However, further downside may be a period of ranging lower so will want to use an aggressive trailing stop on a close above the multi-week bearish trendline (currently at 1.2845/60).

Longer term, also no change as the market is seen completing an important bottom in June at 1.1880, with eventual gains toward 1.3450/75 (38% from the July 2008 high at 1.6035), 1.3940/65, and even the bearish trendline from that high (currently at 1.4700/25) still favored over the next number of months. However as been warning, risk was rising for at least a few weeks/month of correcting lower along the bigger picture way higher, and we are currently within that pullback/correction (see "ideal" scenario in red on weekly chart/2nd chart below). Switched the longer term bias to neutral on May 25th at 1.2260 (from bearish that was put in place on Nov 2nd at 1.4825). For now, would maintain that neutral bias, but with the expectation of switching to the bullish side a few weeks ahead (on better signs that the correction from 1.3335 is "complete").