Good morning, all. The markets should get no help from across the pond today. Though Moodys’ downgrade of France was not exactly news, it should serve to remind investors of the structural issues facing the euro-mess.
The EURUSD completed a well-formed Gartley Pattern early this morning, reacting off the .786 of the latest move down. More importantly, though, the pair is bumping up against three significant channel lines. The Gartley is visible here as the small pattern in purple.
The dashed, yellow line is the midline of one channel, and the solid purple line is the 25% line of another channel. They’re both easier to see from further out, and are basically two different ways of viewing the rally from this past July (which happens to exactly parallel the last one from earlier in the year.)
Note that the pair has also come back to its Point X of a recently completed Crab Pattern that came up a little short of the 1.618 (or overshot the 1.272.) It’s the small red pattern on the above charts.
The third channel I referred to above is the daily RSI channel. The pair broke down from the rising purple channel around Nov 1 while establishing another falling white channel parallel to the last one from Feb-May.
It’s now back-testing the purple channel — which should ultimately provide resistance that should send the pair down by no later than December 5. Note this time frame fits with the intersecting price channels as well.
Bottom line, while the rally could extend a little further after this interim resistance, the next big leg is down. My money’s on the white .886 at 1.2169 around the end of the year in a plunge reminiscent of the May 2012 move.
In the meantime, keep an eye on the rising wedge and RSI channels on the 60-min chart. While the wedge hasn’t yet broken, the yellow RSI channel has. After a back-test, there is downside exposure with the falling white channel.
The Big Picture:
EURUSD completed a Bat Pattern (purple D) at its .886 in July — also the bottom of the falling purple channel. This was also a Crab Pattern completion (the small purple grid.) Many times Bat Patterns go on to become Crabs, meaning the ultimate target of this decline could be .9982. But, my intermediate-term target is 1.10-1.13 by May of 2013.
- bottom of the big red channel
- intersection of the red and purple channels
- white Crab Pattern completion at 1.618 (1.1342)
- .618 tag of largest white pattern
- bottom of large rising yellow and purple channels