Chart produced using Advanced GET End-of-Day

Earlier this month we suggested that the run-up in the euro was due for a breather, and we have gotten exactly that in a choppy downward correction ever since. But now we are approaching some critical support depicted here basis the March IMM euro-fx futures. The level we are focused on is .9106 -- a 38.2% retracement of the October-January advance. If this level can hold, and the market stabilize or bounces off of .9106 in the next few days, then .9106 also stands a chance of representing at 61.8% retracement level from an extrapolated high near 104.40 somewhere down the road. If .9106 can't hold, then much more work and range trading will be in the cards for this market.

Fundamentally, as mentioned in our Chart du Jours of January 21st and January 19th., we see increasing risk in the equity market once again, and we also respect the fine fundamental analysis of Ray Dalio on the U.S. dollar. Dalio believes that from a bigger picture perspective we may be entering the most bearish of environments for the U.S. dollar versus the euro (see The Street.com interview of Dalio from Dec 24th).

Picking up euro-fx near .9106-.9110 with a stop set at .9040 or so is likely now a great risk-reward trade.

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Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.