So, markets are getting relief across the board after tough few sessions. Short-term bears are out and replacing with shor-term bulls. GBP shows more extended pullback as it has hurt stronger compares to other assets.
On EUR we see that market mostly stands in the same area. Currently I would treat any suggestion of reversal with caution. To get the real reversal we need the change of the background - but we do not have it. Fed has to stop rate rising and/or announce QE to shift situation back. But somehow I suggest that they do not let market now easily sell USD and go out of US bonds. This is the suicide for them. Thus, once new "bull trap" will be ready - everything should turn down again.
Our setup on EUR is twofold. First is, we agree that upside bounce might be in excess of daily K-resistance area, just because EUR is going out from weekly oversold. But before 2nd upside leg starts - EUR should show response to daily resistance in a way of some pullback:
That's why here I suppose, we could keep going with our trading plan. Now price is forming butterfly pattern, that potentially could trigger the downside reaction on daily resistance level. If you want to buy EUR - it would be better to do a bit later, when pullback happens:
You probably have signed that liquidity surprisingly has appeared on the markets just from nowhere. It was just few days ago when everybody were running and screaming, searching for the free $$, selling everything that they could. And now - bing! miracle safe, so that everybody have a lot of money to buy stocks. What has happened?
Elections guys... it is three week until US elections. Fed start preparing markets, calming down the households, providing liquidity and turning stocks up. IT so-called pre-elections rally that always happens. Democrats needs to make visual effect at least, and at least for the short term that situation is under control that they are resolving problems and markets once again has turned up - "Vote us!"
Thus, this recent reversal could last for 3-4 weeks and EUR also could climb higher. As market stands above daily K-area and overbought, we should recall weekly resistance that it could try to reach - 1.0280-1.0310. We've talked about it in weekly report.
Meantime, if we would have 3-4 day time frame, instead of daily one, we probably get huge bullish engulfing pattern - take a look at this V-shape reversal:
This leads me to idea that we could watch for pullback and then consider long entry, counting on potential upside extension in a way of AB-CD pattern. For example, if pullback comes to K-support area.
On 4H chart market hits XOP but no interesting reaction has happened yet.
Now, I would say that we should wait for pullback to consider long position. Currently as market is overextended, it is not comfortable to do. For scalp short it is also too early, as no bearish reaction has been formed...
So, the first stage of our plan is done well. Once pullback has started - market hits our 0.9820-0.9835 K-area on 1H chart. So, its time to move stops to breakeven at least, or even to book some part of result.
Because on daily chart the pullback is not recognizable enough, which means that it might be a bit deeper:
Particularly speaking, we could get downside AB-CD pattern with OP around 0.9760 that perfectly agrees with 50% Fib support level. It is not shown here, but it is EUR favorite one. Maybe NFP data somehow will be supportive to this performance.
We also have Agreement with COP around the K-area, but this level is already tested. If price returns back to it, then breakout chances increase. That's why we either should keep existed yesterday's long position, or wait for OP area: