I’ve been bearish on the euro (versus the dollar) since late July.
[Editor’s note: see Burba’s previous TraderPlanet stories on the euro July 29th and August 19th).
Key Points
Although there could be some more downside before the downtrend in this market ends, I feel less comfortable advising anyone to be short here. I base my stance on two points.
The first is the proximity to a substantial floor at 1.275, based on the lows in 2013. Granted, there’s a little way down to go from the current level before getting to that point. But selling pressure is already decelerating, bringing me to my second point.
EURUSD came to an extremely oversold condition in early September. You can see this on the chart in how far the fast RSI average dropped so far beneath the 30 oversold threshold. That signaled an extreme event, the type that often occurs before a turn in the market. Since then, the indicator has shot back above 30. And the long RSI average shows a small rounding bottom as well. Momentum tends to lead price. So while I don’t see sufficient reason to go long here, these developments are giving me that empty feeling in my intestines about being short (I confirmed that my kids aren’t sick before writing this to be sure it wasn’t just a stomach bug).
Bottom Line
I’m not ready to look two steps ahead in this market yet; there could be an opportunity to go short again after a rally, there could be an attractive long scenario after a base around 1.275. If you managed to be short this market over the past month or two, be satisfied with a pretty fantastic profit and do the right thing – protect it by getting out and doing that house project that has been in the back of your mind for a while.
Good trading, everyone.
