Currently the market is focused on the bullish breakout potential. The Classic breakout potential is easily defined on the 1hr and larger time compression; I also maintain a sell entry outlook from the corner of my eye. This is the scenario should the bearish movement unfold:
Should the euro again break down the 2767/53/41 level and hold below 2770 level through the balance of the day then the potential has increased to sell the euro at 1.2717 with a stop of 1.2773 targeting 1.2644 but likely 1.2544 and then possibly 1.2437 or less.
If the above levels (2770/50/39) form new resistance on the 15 minute and below, or a larger compression through today — and if I trade short at 1.2717, I will not hesitate to rapidly tighten the stop if there is not a straight burst of 1.2700 or at least a new low below 1.2687 and beyond. I will tighten to the above new resistance levels that need to be formed if I enter at 2717. If I get knocked by no more than 11 pips of those levels, and IF the bearish cycle starts again, I may reenter back towards 2700 and play the game again for tight 15 pip risks to see if a bear move can get legs. THIS level could become key support again for a bullish move.
If the market starts rushing down once below 2769-55 level again I may choose to enter early towards low 2700′s to see if the momentum maintains itself. This study is against other bullish breakout opportunities but THUS FAR the bullish break option has failed and is stalling. The possibility remains that my sell level plans may turn into support — which if they do — surely it will be obvious such as occurred earlier today and that should be a good development for a bullish move. Right now the market is congested again — so I will remain patient and willing to consider either direction based on the above. Obviously above 1.2857-79 the bull break opportunity could occur targeting 1.2921-47 and then 1.3131 or beyond. I think this euro structure is going to need some news to put legs into either event. Not just ordinary economic news!
If this scenario fails to go bear with speed but new support is formed again at the above levels OR IF NEW support forms at 1.2827-34 to 44-55 level — the bullish scenario may develop. Right now I have solid views for either possibility and the euro stall at today’s resistance is confusing and may leave resistance below the 2860′s into the NY close. The range is still wide with tremendous noise locked within. I don’t typically trade breakouts against the immediate and recent trend but I will consider the event.
Britt Maras
Senior Currency Strategist
Thank you for your help!