A bit of snoozer today in the currency markets, aside from some good old fashioned Yen-buying (EUR/JPY, USD/JPY selling) early in the New York session. This was in reaction to a powerful move higher in the bond markets, and a move lower in the equity markets, as investors are coming to terms with the reality that credit spreads remain at dangerous levels. Without credit conditions loosening, borrowers cannot continue spending, which would halt the economic recovery dead in its tracks. The established trends of commodities lower and the dollar higher are a result of the “economic recovery“. But the market's renewed risk aversion expressed through lower global interest rates and equity markets as a result of wide credit spreads have traders and investors beginning to question a broad-based dollar rally

EUR/USD and Crude oil have been bouncing around their respective daily support zones of 1.4600-1.4900 and 111-115, respectively. The lack of any clear direction or purpose is highly suggestive of a wave-4 environment. 4th waves are notoriously the most difficult waves to count or trade. So, with that being said, I am purposing 2 possible wave counts for the EUR/USD. Both are bearish the in medium term, but have opposing views in the near term.

The first is my alternate count which is bullish in the near-term. The focus is a break of key resistance at 1.4825 in a second A-B-C targeting 1.4950. The level is 75 pts above the current market, so will likely not come into play tonight. If it does by chance, I will look to get long on a move through 1.4825 with 25 point stop losses and our usual risk management strategy.



The second count is quite bearish in the near term and purposes we have already completed the wave 4 at 1.4910, and wave 5 down is currently ongoing. A break of trendline support at 1.4710 will indicate this count is likely correct. Should we see the 1.4910 break tonight, the minimum target of wave III is equality compared to wave I at 1.4591. I will be looking to short the 1.4710 break with 30 points stops. I will not employ your normal money management strategies. Instead, my take profits levels are pure technical levels at 1.4630 and 1.4591, and will try to leave a small piece in the event of a meltdown.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.