Price & Time: EUR/USD – To Bounce Or Not To Bounce

I have been hesitant to talk about a bounce in EUR/USD for the simple reason that everybody seems to be looking for one. I suppose if we are going to get one, this week is a good enough time as there is a fairly decent confluence of near-term timing relationships. The noteworthy ones are the 50% retracement in time of the March low and the August high, the 50% extension in time of the August and October highs and a 261.8% time projection of the August – September decline measured from the October high. Nothing really spectacular individually from a timing aspect, but altogether it is certainly important enough to pay a little extra attention.

Reading the technical tea leaves, there are a few things supporting a potential counter-trend move like DSI. The DSI fell into the mid-single digit levels of bullishness this week which is usually a fairly reliable contrarian indicator. The other thing worth pointing out is the potential inverse head & shoulders pattern on the intraday charts. Rally attempts this week have all stalled at a convergence of the 9th square root relationship of the August high and the 3rd square root relationship of the year’s low around 1.0780 (purple and black horizontal lines) leaving a fairly clear potential reversal pattern. All things considered, traction over 1.0780 could prompt a decent counter trend pop, but the burden of proof looks to be squarely on the bulls given the bigger picture technical dynamics. A failure to get over 1.0780 by the end of the week or a daily close under 1.0675 would invalidate the bullish timing aspect here and warn another leg lower is looming.