As we head into a new week, I am continuing to watch for a new directional flow for the Euro currency. If you just use a commonsense look at this pair and many of the currencies, you can attribute the consolidations and lack of trend to uncertainty in the market. Our global central banks are at various stages of their monetary policies. Looking at the ECB...will they continue on their path of tightening? Or has vigilance escaped them for the moment. They don't know, so how should the market know? We just continue to focus on value since we have no control over the market direction. As many of you know, I watch the order flow on Euro Futures which are traded on the CME globex. I am usually able to see central bank and other large activity here. It has been noticeably absent in my opinion of some time.
If you recall on Friday, I had suspected we may see a buy extreme on a drop in value down near the 3063 level. Well the drop in value came and buyers emerged, but it was certainly not overwhelming. I remain long as we build value in the Transistion area and continue to focus on the 3063 level as my risk area. This area is eveident in the Monthly Price Distrubution Chart. I continued to add to my long positions on Thursday and Friday as the market gave me the opportunity at a good value.
Okay back to River Theory....
We closed on Friday under the Transition Level of 3132 and the River Level of 3142. The close was not significant in my opinion and only a few ticks under as we continue to resolve this key area. This close could be our first warning sign that a move is coming. Monday's price action should be key at determining the directional flow away from this level. Remember, our goal is capture the move away from this area. Ideally, we would like to take 100% of Zone 1. This would represent a move from 3132 to 3353 or 221 ticks.
If you are long stay long, using a close below 3063 as your risk. Traders can look to establish new longs on a move above River at 3142. Your short term risk level should be below the Transition Level at 3132. Targets are 3214, 3242 and 3353.
I do not recommend establishing shorts until the 3063 level is resolved. Again, refer to the Monthly Price Distribution Chart for guidance. If you are inclined to set up shorts, use the 3132 level as your key. Risk would be above the River Level at 3142. Downside targets are 3069, 3046 and 3007.
NEUTRAL UNTIL RIVER LEVEL OF 3142 IS RESOLVED
