As you know, I’m a committed contrarian as I believe that markets always overshoot and when the rebound occurs, it will usually be sharp and nasty. Just a quick glance at the weekly chart will show you how far this pair has fallen and with a possible double-bottom forming, I’m starting to like the chances of a big bounce.
The neckline of the double bottom comes in near 127.20, which was close to the overnight lows. Added to this, the 38.2% retracement of the 5-wave rally from 117.30 to 133.45 also comes in near 127.20.
I’m long of this pair and will look to build further whilst it stays above 126.40 but if it breaks below there then I will have to start reducing.
