BarroMetrics Views: The EURUSD 2010-08-11 II
Opps! The market beat me to the punch: I thought we’d see another day of sideways activity before seeing a sell-off. So for today, rather than look for a place to enter, let’s assume, I missed yesterday’s move and I am now faced with the following:
- Spit chips, whine and do nothing?
- Look to go long?
- Look to go short?
I take the view that yesterday’s EURUSD ‘Context’ has been partially validated. So, I’d look to go short for my time frame. Given the severity of the sell-off, a bounce is likely but I would prefer not to play the long side of the market.
Before I begin, let me just say that writing a ‘forecast scenario’ in the current environment is not easy - given the momentum, the market is likely to invalidate the analysis as soon as I post my thoughts. To combat this, I’ll lay out the parameters that will invalidate the picture I present.
Figure 1 is the Daily. It shows the EURUSD may be at support. If that is true, then the most likely resistance is 1.2917. Figure 2 is the 60-minute. If I am to enter on a shallow pullback, this is the most likely time frame that will provide a setup. I’ll use the 15-minute to enter.
60-Minute Analysis
- If we see two closes below 1.2789 and one of the closes is a bearish-conviction bar, we have acceptance below the Maximum Extension. This invalidates the analysis.
- If the EURUSD continues the correction without accepting below 1.2789, then it is likely to be forming either a Running Correction (if so 1.2932 will hold) or an Irregular Correction.
- I believe that the Irregular is the more likely and I have drawn in the zones. The maximum pullback is seen in Figure 3: the 38.2 at 1.2994.
- The preferred zone (my preference expecting a setup) is the 1.2917 (Daily resistance) to 1.2945 (60-minute resistance).
- I would also like to see the red MIDAS line within the resistance band at the time the setup occurs.
My entry bar will be a bearish-conviction bar on the 15-minutes; my stop will be above 1.2994.
FIGURE 1 Daily
FIGURE 2 60-minute
FIGURE 3 60-minute
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