EURUSD has declined to within .0056 (1.0995 vs 1.0939) of our downside target from September’s forecast. It took a bit longer than anticipated, which wouldn’t much matter except that it means the pair departed from a well-defined trend channel.
In early September, it appeared that EURUSD was within a few days of reaching the .618 Fib at 1.0939. The pair was settling back down after spiking to the channel top (peak 1, below) to help SPX recover from its late-August correction.
But, rather than make the obvious tag, EURUSD suddenly reversed (the white arrow) and backtested the purple channel’s midline a second time. This had the desired effect of helping to prevent another leg lower for stocks, as can be seen in the SPX chart below. In a world where USDJPY is seemingly all that matters anymore, EURUSD did an admirable job of pinch-hitting.
But, as mentioned above, the delay had repercussions for EURUSD and, potentially, stocks as well.
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