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The late hour epiphany....

As discussed yesterday the Detma model is gradually getting itself short USD.  Cutting my short AUDUSD position and going long AUDUSD and EURUSD may have been a late night epiphany, or just the meanderings of a tired mind, but somehow when I woke up this morning it didn't feel that bad.

In reading the scuttlebutt this morning it seemed that overnight the maws of hell were about to open up and swallow the world.  However at 11.30 pm Sydney time last night (9.30 am NY), the EURUSD was around 1.2200 and this morning in Sydney it was 1.2190, having dipped to 1.2150 overnight.  By all accounts a tight range on the EURUSD but I'm sure that for those trading it it didn't feel that way.  The chart at right shows an inverted SHS formation on the EURUSD.  It also shows, that using a generic trend indicator such as a 13/21 day oscillator, that the pressure is approaching the buy side. 

By all accounts the EUR is oversold against everything - the CHF, GBP, AUD - you name it.  I'm backing long EURUSD for now. 

The AUDUSD was more problematic.  From the .8550 area when the epiphany struck it was heavily sold down to a low of .8460.  However the way the EUR was holding lent strength to the AUD long scenario and so I managed to hang in and improved the average this morning.  The chart at left shows what a bullish EWT count on the AUDUSD would look like.  This .8460 is the Fibonacci 50% retracement of the rise from .8080 to .8860.  The 50% retracement is a good one for wave 2 retracements.  So who knows?  I could be barking up the wrong tree entirely but as I say above I'm punting that the model is getting the short USD scenario right and I'm keeping my positions small enough for now so as not to cause too much damage.

Frank


Disclosure: Long EURUSD and AUDUSD