EURUSD - UPDATED VIEW

The tragic events of recent days, have led to some incredible volatile markets (this always seem so trivial looking at this in terms of markets when so many have and are suffering, I only hope matters do not deteriorate and the suffering is lessened as much as possible). The EURUSD continues to gyrate wildly just below key resistance in the low 1.4000s.

With regard to my recent calls, any number of options remain open, I have highlighted these on the chart below. Currently I see four potential scenarios at present. I have listed these below in order of what I currently consider most likely.

1) A 'Cup and Handle' pattern has formed over the past months. This pattern has the potential to produce a swift move higher in the EURUSD towards the high 1.4000s. - This view I consider the most likely currently (Note : the little caveat on account of markets being mad right now).

2) A new addition to my recent views, is that we are still forming of have formed the 'Cup' of a possible larger 'Cup and Handle' pattern. - One argument in favour of this is how much lower the right lip of the cup is than the left on the above scenario. ( Note: It is not unusual for the the right-lip to be below, or sometimes even above, the left lip of the cup).   If the Cup is still forming or nearly formed, then it is quite possible we get a dip to around 1.34/1.36, over the next month or so. (The recent bearish divergence on momentum suggests this is possible.)

3) Neither of the above, however as the strong downward pressure from the resistance at 1.4050, and the possible resistance line at around 1.4250 combined with the prior high around 1.4280, battles against the recent strong upward trend, a wide range forms with no real direction. I do not favour this scenario, but can see it possibly unfolding, eventually most likely followed by a clear upward break once the overbought diverging momentum has unwound.

4)  None of the above, but strong downward pressure from the 2008 - present down-trend caps this Euro at either 1.4050 or 1.4250, and sends the market lower,eventually leading to much lower levels. I think this is the least favoured scenario, but not out of the question. (Note: It could occur after a break higher which fails to hold)

With regard to the past couple of day's price action. On the face of it, these support the bullish argument; two sharp moves lower but in both cases the moves lower rejected (at least as I write).

However, the diverging daily bearish momentum I mentioned in a recent posts still overhangs this, and the potential rising wedge pattern, now appearing to have formed, both warrant caution, particularly with the overhanging downtrend resistance.  

For what its worth, my own hunch is that this is very close to take-off. The bears failed to win-out last week, and over the past two days twice they failed to win out. If this can make a sustained break through 1.4050 then I fancy a strong run up to the high 1.4000s over the next 4 - 6 weeks. On the other hand a break back below 1.3850 (for more than a few hours) and particularly 1.3800 would once again throw this view into doubt.