Basically we have a very short term intraday positive in the Euro (1 min), when going out to about 5 mins the Euro has a negative divergence, the Dollar a positive. These are in my view the exaspirating timeframes, they typically have little to do with the larger trend, but they create exaspirating volatility or noise. When going out to the timeframes that tend to represent the most likely trend (taking away intraday and day to day noise), the Euro is not only positive and dollar negative, but these trends are intensifying.
There is no fundamental reason for the Euro to rally, but there's a technical reason, it is at or near historical highs in short interest. I use to ask my students what Wall Street manufactures, what is it that they sell? While they do sell services (I'd love to do a post showing how many calls Goldman Sachs has made and traded against their own clients), they make their money in a zero sum game. For one person to make money, another has to lose it and when everyone is piled up on one side of the boat, it represents a technical opportunity for Wall Street to make money as no one in their right mind can make a reasonable case for a bullish Europe.
From my latest sentiment reports, the Twitter-verse is expaspirated for the very reasons I've been pointing out, everything they expect to happen has gone the other way, case in point...
When the market broke down as we suspected it would , from the bear flag/pennant, traders expected the next leg down, we expected a move higher. Even before that when we were building short positions as early as March, traders were expecting higher prices.
As for the Dollar/Euro
Intraday over the last couple of days the dollar in green and the Euro in white.
This is the $USD 5 min chart, it looks like it wants to pop, but this is still only a 5 min chart, this doesn't represent a major trend.
The Euro 5 min, the opposite, a negative divergence.
Very short term, today's 1 min chart showing a positive and the Euro moving up from there.
Now the timeframes that matter, the 15 min $USD leading negative
The 15 min Euro leading positive. The 30 and 60 min charts show the same trend. It looks like more near term noise, however it's very hard to ignore these 15-60 min charts (6 between the Euro and $USD) that all confirm each other and suggest the Euro moves quite a bit higher, which of course would almost certainly pull the market higher and really annoy shorts.
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