Great Graphic: Is the Euro's Consolidation a Base?

Speculators in the futures market are still net long the euro.  They have not been net short since May 2017.  In the spot market, the euro approached $1.15 in late-May and again in mid-June.  Last week's it dipped below $1.16 for the first time in July and Trump's criticism of Fed policy saw it recover.  Yesterday it reached $1.1750 before retreating.  On the pullback, it held the 61.8% retracement of the recovery (~$1.1640).  

Many frustrated dollar bears think the euro is basing and anticipate a breakout to the upside, spurring a recovery that leads to $1.20 by year-end.  The technical case is clear.  At $1.1850, seen in mid-June, the euro already retraced 38.2% of the decline that began in mid-April near $1.2415.  The 50% retracement is near $1.1960, and the 61.8% retracement is by $1.2070.  

The technical indicators, such as the Slow Stochastics and MACDs on the weekly charts are supportive.  

While this is possible, we see the technical position a bit differently.  The Great Graphic shows how the euro has been tracing a triangle or wedge pattern after the April-May leg down.  It is most often a continuation pattern.  A break to the downside would give measuring objective near $1.12.  However, it remains a few weeks from the apex, and this is consistent with continued range-bound activity.  

Regardless of one's views, a break from the triangle pattern will likely be among the first indications of a new trend.  Tomorrow, the top of the pattern is near $1.1750, and the bottom is found around $1.1580.  At the end of the month, in one week's time, the boundaries are $1.1600 and $1.1735.  

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