EUR/USD finally broke 1.4000 in very thin late NewYork trading following gold's impressive thrashing of 3.20%, as oil remains afloat on the $100 life raft. Prior to the 4:00 p.m. ET break in EUR/USD, the intermarket dynamics were quite odd to say the least. We saw heavy gold selling accompanied by equity selling, and a USD/JPY that was actually higher. It wasn't all yen selling today, because EUR/JPY was on the move lower with equities.

I am treading very lightly these days for three reasons. First, I think volumes still remain low as the summer season wears off. Second, we are so incredibly extended in this dollar move that I would break every rule in my trade book if I chased it. And lastly, this EUR/USD price structure has been very difficult to count until now.

It's very possible that this choppy, overlapping price structure is actually a big ending diagonal that began just under a month ago. If so, I have us counted in the final leg of the 5th wave. Would I try to pick the bottom of this -- not a chance. The final legs of a diagonal have the tendency to do a “throw over”, which in this thin market could mean a push down to 1.3900 before it reverses.

Now, we area sitting on top of a very significant monthly symmetry level that dates back to 2005 and 2006. The last significant pullback in EUR/USD was approximately 2050 pips. This current pullback is approaching 2050 pips. Symmetrical pullbacks are very common in trending markets.

I can't tell you when EUR/USD is going to come screaming back in a fury of short-covering, but trust me, it's coming.



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

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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.