Watch for over extension after the big moves

Hi

Thursday was another quiet day and while we got a reversal off our resistance area, the reversal pattern was weak and I didn't trade it. We stated in the blog we needed both an aggressive move, a retracement to the level and a strong price action signal, which we didn't get.

Context
NFP on Friday provided for some dollar strength and a decent push down in the EURO. The market will still have those figures, as well as tomorrows’ Presidential race in mind today. Any Poll suggesting a Romney victory could see a further push down for EUR/USD.

The market has broken down and looks weak, but is also well oversold at this point. At this stage there is no sign of the expected bailout request coming from Spain. At any time supportive news on the Spanish bailout could spike price otherwise I am expecting a slow probably downwards day.

Technical Analysis;  We have beautifully aligned bearish pivots but the move down has already come. The market looks oversold and is due a pull-back before it looks any further short. 100 pips from DP is extended on the EUR and 120 is over extension. After the big Move on Friday I am expecting a little support around this level.

The Day Ahead –   We are bearish but extended
Bias- I think the market may stay ranging but we have nice space to trade into if it does move, and I will be watching for such a move. And expect a pull back before any more down.
 NO TRADE:  I won’t trade between and Daily Pivot  and Weekly Pivot.
BEST Short entry; I need Pull back to resistance, and then a strong reversal signal short. The previous low would be an obvious point for possible reversal.
 BEST Long Entry;  If we get a high, and then a higher low I will look at a long here.

Other Entries;
 RED NEWS Today
3:00pm USD ISM Non-Manufacturing PMI
If you have any questions you can submit them here or email me at paul@paulbotterill.com
All the best
PBT