Bonds Still Friendly to the Bulls; Currencies Are Close, but Not Quite There Yet
Bulls are claiming victory in certain of our key tells, but the game isn't quite over yet.
The euro has been a big tailwind for risk assets over the last couple of weeks – will it continue?
The euro / US dollar cross (EURUSD) ran right up to short-term resistance – dual resistance in fact – created by the peak on 11/26 and the 100% Fibonacci price projection line for what appears to me to be an "abc" correction on the 10-minute chart below. Only a close above the 1.30082 to 1.30124 range will negate this rather bearish set-up and open up more upside in the short-term.
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The daily chart below gives us a bird's eye view of where we are with the EURUSD. Based on what I am seeing here, it looks like the most recent upside in the EURUSD was just a corrective second wave higher. If I am correct on that point, then we should see the EURUSD commence a pretty nasty little third wave move to the downside with a target of 1.24254. There are plenty of hurdles for the bears to clear on this trade, however – the first being support at 1.28128.
Any close in the EURUSD above the 1.30124 level will open up more upside potential – perhaps up to the October intra-day peak at 1.31386.
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The Aussie dollar / US dollar cross nearing key resistance after clawing its way higher since October.
The AUDUSD is running right into the upper edge of a pennant formation on the daily chart below. There is certainly more resistance above the blue downtrend line – namely the longer-term red downtrend line. However, the cross is clearly having to struggle to get through even the lower blue downtrend line. A failure here (which I would be able to call if the cross closed below 1.04164) will likely lead to a test of the blue uptrend line on the chart in short order.
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