The market’s failure overnight to sustain recent losses below 22-Nov’s 1.0658 minor corrective high and our short-term risk parameter has confirmed a bullish divergence in momentum as detailed in the 240-min chart below. This defines last week’s 1.0518 low as one of developing importance and our new short-term parameter from which the risk of non-bearish decisions like short-covers can be objectively based and managed.
While the fact that this admittedly short-term momentum failure stems from the extreme lower recesses of the 2-YEAR range cannot be ignored as one that could lead to a more surprising rebound, we believe the magnitude of the past 7-month downtrend from 03-May’s 1.1617 high warrants first approaching any rebound as another correction within this downtrend ahead of an eventual resumption of it to new multi-year lows below Mar’15’s 1.0462 low. Indeed, the merely lateral price action from that 1.0462 low and fact that it retraced only a Fibonacci minimum 38.2% of 2014-15’s 1.3993 – 1.0462-portion of the secular bear is about as good an example of a correction/consolidation as one can find and warns of an eventual resumption of the secular downtrend that preceded it. The extent and impulsiveness of Oct-Nov’s slide would also seem to reinforce this bearish count.
These issues considered, shorter-term traders with tighter risk profiles have been advised to neutralize bearish exposure in order to circumvent the heights unknown of what we believe is only an interim corrective hiccup ahead of a resumption of the secular bear trend to eventual new lows below 2015’s 1.0462 low. A relapse below 1.0518 will confirm this call and expose a run at that key 1.0462 low and levels potentially well below it. Longer-term players remain advised to maintain a bearish policy and exposure with strength above at least former 1.08-handle-area support-turned-resistance and preferably 04-Nov’s 1.1140 larger-degree corrective high and key long-term risk parameter required to threaten or negate this call.