The last time this happened was early March, and it turned into a 1500+ pip rally with all the bells and whistles for multiple entries. Unfortunately, by the time some of us reluctantly gave up our “Bear status“, the most popular traded pair was hitting previous and major resistances considered a “No fly zone” by some of us die hard Bears. Again, it turned out to be a false barrier, as the newly self anointed bandwagon jumping Bulls help blow through it like Chuck Yeager breaking through the sound barrier. The Commitment of Traders paints a pretty picture of this history, as it shows how there was a Bull/Bear fight in April, ending in a clear Bull victory in May. The Bears mounted one last stand in early July, right before the 1.15 “No fly zone”, but by that time the Bulls had established themselves as the dominate force.
The Bulls do have their Kryptonite though, and his name is Draghi. He knows that the ECB is sitting on a keg of dynamite, and anything other than really vague and skewed hints towards pathetic “discussions” of maybe far in the future “possibility’s” of “some sort of” normalization in the Euro Zone could be dangerous…breath breath.. The ECB Chiefs are ‘all’ very aware of the hordes of antsy Bull’s ready to send the EURUSD to the 1.30 area, where Draghi & Co. have all expressed concerns, that a strong Euro will surely begin to erode the recent expansionary success the Euro zone has enjoyed during the Euro’s 3 years slide into ‘the troubled & weakened status’ territory.
Us traders all get the pleasure of experiencing all of this back and forth Brexit negotiation happening between the UK, and the Euro Zone….yaaawn….a whole bunch of Spain/Catalonian chaos…zzzzzz…and lets not forget about the Italian debt, the always chronic Greece economy…heavy snoring… and of course, the Iran nuclear agreement, North Korea, and last but not least Russia!! Oh, I’m awake now!!…not really.
If that’s not enough boring mumbo jumbo to reawaken the August Bears, I don’t know what is, and by the recent development of a perfect head and shoulder pattern on the Daily & 4hr chart, the EURUSD pair at the very least, looks to be experiencing a decent reversal pattern Bears could easily drive down to the $1.15 price range, or maybe even the $1.13 area if the ECB’s “negative Nellies” help strengthen some Bearish short lived momentum.
A break out one way or another from this 1.1650 – 1.1850 consolidation range should decide this Bull/Bear contest, but one thing is clear…this set up is hard to ignore both technically and fundamentally.