"Reserve diversification" is again on the lips of forex traders and analysts. The last time this topic was hot, it turned out to be a red herring. But although you’re never supposed to say it in trading, this time things might be different. For two months this spring, new significant higher highs in the euro were interrupted by downward corrections lasting four or five days. So, when a corrective down move started on April 20, as shown by a lower low and a lower close than the day before, technical analysts could reasonably expect that this retracement also would last four or five days.

Instead, it lasted only two days after the significant high. The end of the move occurred on a Friday, and while the euro had already made a new low (as expected), it closed up on the day and then rocketed upward when the market opened Sunday night. The following Monday, the euro surpassed the previous significant high, and the corrective down move was decisively over.