Indeed, what will be the next step? The downside risk in EUR/USD has most certainly not found its low yet, so the question is whether it will extend losses or require a correction higher. With the exit polls – and now confirmation – of the anti-austerity party having won in the Greek election, this morning’s reaction on open to see a move back to Friday’s lows was always on the cards. However, I suspect much of this was discounted in the recent “step off the cliff edge” decline. I spent a long while trying to resolve the decline from 1.3993 to identify the structure. I have come to a conclusion that I was probably correct in calling a low way back at 1.3332 but had not considered such a shallow correction. This should imply that we’re approaching a low but also suspect that we’ll need a deeper correction before the final low. The problem is in identifying where the deeper correction will commence. I suspect it’s not too far off but at this point, neither 4-hour or hourly momentum are displaying any robust reversal indications. The structure is such that the process of identifying the correct targets is rather flimsy at present…
I do note that USD/CHF has decided to take the option of the deeper bullish correction. This will maintain a gradual process of allowing the market to settle following the extraordinarily large price adjustment – the largest I have seen in my 33 years in the market. GBP/USD has stalled above my support. There is potential for the upside to develop but, to be safe, we need a little more confirmation. Should it do so, it could suggest that EUR/USD could begin the deeper correction I have suggested above…
USD/JPY missed my resistance by 1 point on Friday – but then dropped below the expected support. This is a little puzzle. I’m not that keen on a direct reversal lower and suspect a period of consolidation. There are clear break levels – so watch those carefully. Equally, EUR/JPY tried out a mini bungee jump but this morning has slipped back to its lows. I feel this is also in a position where a correction higher is due but still with the risk of minor new lows first.
Overall, the market could be quite jittery today. If there is any sign of a correction higher in EUR/USD and EUR/JPY, in particular, then jump on it but take care and note the key resistance areas.
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