Why 125 - 126 ?

I have been predicting a rally in the eurocurrency into the 125-126 range. I thought you might be interested in the reasoning behind this projection.

In this post I explained why the eurocurrency would probably start a big rally. In the daily chart above for the September futures I have drawn the bear market boxes down from the 136.87 high of last December 31 in red. In purple I have drawn what I think will be the boxes controlling the rally from the recent 119.00 low.

The most basic idea is that the rally should be similar in extent to the last big rally which carried the market up 773 ticks from 127.37 to 135.10. Adding 773 to 119.00 we get 126.73, just below the February 7 low at 127.37 which is itself a natural resistance level. Note also that a halfway retracement of the drop from 135.10 to 119.00 would carry the market up to 127.05.

I estimate that the boxes for this rally are 387 ticks high. The top of the second box is therefore at 126.74, just a tick above the 126.73 projection described in the last paragraph. I think this is the upper limit on any rally.

But the drop from 125.10 to 119.00 was bigger than the first drop of the bear market from 136.87 to 127.37. So I would not expect this rally to go as far as the first 773 tick rally. If it doesn't then a logical stopping point would be the 1/2 division of the next higher rally box. This is the 124.80 level.

So I am confident that the market will move up at least to 124.80, probably past it, but the market will not reach the outer rally limit of 126.73. Thus 125-126 seems a good ballpark estimate to me.