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Since the Euro's breakdown from 142 May of 2011 to 126 in January of 2012, we saw the market turn after breaking its downward channel which gave the signal for shorts to cover any last remaining. Since this turn mid January, we have seen the Euro reverse through the January 2012 highs of 13085 which has turned the level into support. This supported the market to continue its short covering as the market ran into its next major resistance being the highs from December coming in at 13550. The market's bulls were not quite ready to take out this range as it provided a great deal of resistance and we have seen the market come in to retest its year support and lows of 12975 from February. This retest put in a low of 13004 on the 15th of March, almost 1 month from that Febrauary 16th 12975 low, and the market has once again gone into short covering and buyers have picked up the market to break out of this downard channel it has been in since the February highs. This turn has come just as the March contract rolled into the June contract. What this has done is trap shorts who were looking for those lows to break and slowly squeezing them out with the contract roll being the catalyst. If you recall in the bond market, it was the contract roll that broke the bulls back and dropped the 30 year into 135. In the Euro here the contract roll is trying to catch these late comer shorts who most likely missed last years move and have been trying to short the market this year. This has not worked, as we see since the January lows the market has trended higher and been consolidating its short squeeze in attempt to build a base and continue the squeeze to try and retrace into where it broke down from last year being the 138/142 level. Going forward support should be met down to 131 giving buyers a level to defend off that February low of 12975, looking to continue this new squeeze. Moving through this resistance gives way to complete the move to 13800 by using the shorts coming in this year for the squeeze. Shorts need failure at the13360 level and for the market to break 12975 followed by a break of the January lows of 12627 to regain control.
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In contrast the USD we saw complete an inverted h/s from last November into 8100. This extended to highs of 82045 before rolling over and taking out the 2012 lows of 79830 which broke its upward trendline from those October lows. Since then this market trade down into testing its major support of 7800 which was the neckline of that h/s pattern. This was heavily defended as the market turned on February 29th with lows of 7812 and has gone through another run up to squeeze out weak shorts. This squeeze retraced the market right into where it broke down from this year at 80700-82045 to retest the year highs. Thus far we have seen this test fail and the market back off these highs and break its upward channel from the February lows. Going forward the shake of weak shorts was done and a move lower now catches longs off guard which gives the momentum needed to break below 7800 and began toward the October lows of 74860. A move past 8100 is needed to regain the bull momentum to retest the year highs and gain control.
