We are long U.S. dollars against the euro now, to go along with our long dollar model portfolio position against the yen, which is a toe-dipping expedition ahead of what I think is an approaching period of lower gold prices, falling oil prices, and correcting equity prices...or in other words, a respite for the "risk-on" trade.

The two-week upmove in the euro/dollar from 1.2640 to 1.3440, or 6%, has the right look of a completed or nearly completed upmove, which we notice thrust above its channel resistance line earlier today, but has since pressed back beneath the line (1.3370).

Although the euro could loop up again and retest this morning's high at 1.3440, or even make new highs near 1.3500, the behavior around that upper channel line is warning me that the vast majority of the euro advance is behind us and that a top-building period is now in progress, which when complete should initiate a powerful directional reversal.

Between 1.3400 and 1.3500 I will look to add to our initial euro short model portfolio position in the ProShares UltraShort Euro (EUO).

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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