By Christopher Diodato – TradersBase.com
I’m doing a complete cop out. I do not want to be lured into making an estimate of the report tomorrow, which will undoubtedly move the market! The most I will say is what I already said in my post yesterday after the close. So, instead I’ll blab about the Euro! Did anybody notice yesterday morning, with all the “good news” of monetary stimulus from Europe and China that borrowing costs surged for both Spain and Italy? Spanish bonds yields rose 37 basis points while Italian yields rose 21 basis points. While that happened, the Euro dropped nearly two percent. That is a huge daily move for a currency (the average move for the EUR/USD is 11/1000 of a cent per day). So what is in store for the currency in the future?
With classical methods, it looks like it’s getting very close to breaking below the lower part of a bearish double top, or a Frankenstein descending triangle. Either or, with that breakout, we have a minimum…ABSOLUTE MINIMUM price objective of $1.1177 in the currency pair. I would not be surprised if this level was violated too, since as the Euro continues to weaken, the dollar is looking to break out to the upside very soon!
Here’s the video with the analysis.
If you wanted to trade this, you could short futures on a breakdown below 1.225 with a tight stop, and then pyramid once the second low is broken.