The Euro has broken down below 1.25 pretty much to the 5=1 1.2495 objective.
It has therefore now provided a window for reversal for 3 reasons.
First, the similarity with synthetic price action 16 years ago that provided a 10% corrective recovery from a false break such as this. Also the similarity with the 1.2625 consolidation bottom last January is striking.
Second is the extreme bearish sentiment with record net speculative shorts suggesting the downside is limited at least in the short term.
Thirdly the price action itself as having spiked and reversed from the 5=1 objective of 1.2495 the Euro has completed at least the short term downtrend from 1.2825 potentially 1.3285.
So despite the failure at the previous 1.2625 low, this should represent the first leg of a major recovery in a still somewhat contrived head and shoulders which targets 1.2750 but with potential clearly for 1.2825 again. We have been buying dips and reducing longs on rallies within the pivotal 1.2495-1.2625 range. until now...We are now staying long and looking to add on a break soon 1.2625-40 to confirm and accelerate. It is tempting to raise stops to 1.2495, although new lows would suggest an irregular correction ended at 1.2625 projecting merely a new 5=1 of 1.2440. Only a loss then of the 1.236 support at 1.2425 really threatens acceleration.
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