EUR/USD – New breakdown

Recommendation: HOLD SHORT/ADD TO SHORTS

Current Trend: Short-term down. Med-term sideways. Long-term sideways to up.

Strategy: Continue to hold current short position/one can still add to shorts now.

Chart Setup: A significant development is taking place right now, with euro breaking down below line 3 to confirm a large head and shoulders (S-H-S). It is nearing its downside target from a smaller H/Sh in Sep. More downside is to be expected.

• Its short-term Stochastic is nearing its oversold region, but will remain oversold for a while if the downtrend continues (as I'm expecting). 

Strategy Details: Continue to hold the currency short. And one can still sell short if not in, or add to shorts if desired, based on the new breakdown of line 3.

Target: Its initial target is to 1.1600/1.1595, based on the small H/Sh pattern, and it has almost been reached.  But the larger target now is 1.1300/1.1295, and my suggestion is to keep holding for that larger target.

Stop-loss: A close above line 2 (1.1880). Keep it there to give it room to move down. From 1.1410 bring the stop down to breakeven. And from 1.1350 lower it to a breaking of its prior two day high.

USD/ZAR – More rand weakness to come

Recommendation: HOLD SHORT RANDS/SELL SHORT PULLBACKS

Current Trend: Short- and med-term rand weakness. Long-term sideways.

• The rand has a minimum target still to 14.50, based on a breakout of a large symmetrical triangle (lines 1 and 2). Resistance beyond there at 14.64-14.74 (going back to Aug 2016).
• Notable is that it’s broken decisively back above its 200-day moving ave for the first time in about 18-months, which is bearish.
• Its short-term Stochastic is overbought for the dollar so a temporary pullback is very likely.
• Hold the current rand short (via rand ETNs).

• If not in, a reversal day up from 13.95-13.86 (line 3) is for shorting or adding to rand shorts.
• But probably the best strategy overall, is to take partial profits on a one day low (if in) and maintain a med-term core rand short position. Add to the shorts again on that pullback.
• Med-term stop a close below 13.50.

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