Tag Archives: eurusd

Don’t Expect the News to Tell You Where EUR/USD Is Going Next

Retrospective explanations of market moves don’t keep you ahead of the trend

By Elliott Wave International

On December 27, EUR/USD shot up as high as $1.3283. Forex news headlines were quick to comment:

“Dec 27 – The euro slightly extended gains against the dollar after strong U.S. new home sales data last month further lifted the market’s appetite for riskier currencies.”

But after EUR/USD hit that high, it promptly reversed and fell back down to the $1.3200 level, where it had been stuck all week.

You may ask: What happened to that “appetite for riskier currencies”?

Good question, and here’s the answer: That explanation came after the EUR/USD rally, not before.

See, it’s easy to fit the news to market action after the fact: Just grab the news story that best “explains” the move. But retrospective explanations don’t keep you ahead of the trend. To win in forex, you need forward-looking analysis, and you need it before the market moves.

On December 26, the editor EWI’s forex-focused Currency Specialty Service, Jim Martens, posted this comment on his Twitter feed:

EWI Forex Insider: @FX_ElliottWave
Now that we got the EUR rise we expected, the double zigzag rise from 1.3158 to 1.3256 leaves EUR/USD vulnerable to a decline.

Then, on the morning of December 27, Jim updated his Currency Specialty Service subscribers via this intraday forecast (excerpt):

EURUSD (Intraday)
Posted On: Dec 27 2012 10:01AM ET / Dec 27 2012 3:01PM GMT
Last Price: 1.3269
The overlapping rise and possible double top near 1.3309 could lead to a larger correction. A flat or triangle would lead to weakness…

And here’s the decline EUR/USD saw shortly after:

Note that neither of these two forecasts mentioned the news. And for good reason: The December 27 euro-bullish news would have had you buying EUR/USD all the way into the top.

Instead of the news, we at EWI look at objective Elliott wave chart patterns. That, and not the news, is what helps us to forecast the markets before they move.

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This article was syndicated by Elliott Wave International and was originally published under the headline Don’t Expect the News to Tell You Where EUR/USD Is Going Next. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

EUR/USD: Falling on “Risk Aversion”? Let’s Look at the Timeline First

It’s not the “bad news” from Europe that has been pushing the euro lower
May 19, 2011

By Elliott Wave International

From the May 4 top near $1.4950, the EUR/USD (the euro-dollar exchange rate and the most actively-traded forex pair) has fallen as low as $1.4050 on May 16.

In other words, the dollar has gained 9 full cents on the euro in less than two weeks. That’s a huge move, and people want explanations. And what the media offers boils down to “risk aversion,” in light of “the bad news from Greece.” And that sounds good — until you check the timeline.

The latest wave of trouble in Europe started on May 3, when Portugal asked for a bailout. If you think that event is what pushed forex traders towards “risk aversion” — think again. The euro happily gained against the U.S. dollar the following day, May 4, pushing the exchange rate to that high near $1.50.

And if you think the trouble in Greece pushed the EUR/USD lower — again, please reconsider. Greece made a splash in the news on May 9, when its credit rating was downgraded. But by then the EUR/USD had already fallen some 700 pips, to the mid $1.42 range.

So, as good and logical as all the mainstream stories sound about “risk aversion” and “bad news from Europe,” the timing of events doesn’t fit. What then gave the dollar the strength — and at a time when almost everyone expected it to only fall further?

Believe it or not (and it’s easy to believe it, because, as this example shows, there’s no better explanation) the news doesn’t set broad trends in forex. Collective emotions of forex traders do. In early May, the majority was betting against the dollar. When everyone places their bets and there is no new money left to push the price further, it has no choice but to reverse.

That’s why it pays to be extra cautious in the financial markets when everyone takes the same side of a trade. True, markets can stay overbought or oversold for a while, but the reversal inevitably comes — and the stronger the one-sided conviction, the bigger the reversal.

The advantage Elliott wave analysis gives you is this: Wave patterns in forex charts track the collective mindset of the market players. By anticipating the price points where the Elliott wave pattern should end, you get a pretty good idea of where the trend should stop and reverse.
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This article was syndicated by Elliott Wave International and was originally published under the headline EUR/USD: Falling on “Risk Aversion”? Let’s Look at the Timeline First. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Short this Currency Now

euro

Back then, it took several billion to buy a loaf of bread. Another couple billion to purchase eggs, fabrics, sugar – basically anything you needed.

The price of everything was doubling almost every single day. Workers were paid three times a day to keep up with rising prices.

Inflation was rising by 29,500%…each month.

This was the reality in Germany, 1923. This traumatic event has gone down in history as one of the worst cases of hyperinflation ever. It also made the Germans almost paranoid about fighting inflation ever since.

No wonder the recent spike in commodity prices is already making Germans a little nervous.

And that has important consequences for the currency market. Monetary authorities in Europe are getting ready to fight inflation. For those of us who are ready, it will mean some killer opportunities in certain currencies.

An Economy Running on All Cylinders

The present-day Germany is booming. That’s the good news. The bad news is inflation is also on the rise.

Inflation measured by the Consumer Price Index is already higher than the European central bankers would like. It’s already above the European Central Bank (ECB) target. And official data actually underestimates the problem.

Unicredit Bank, one of the major banks in Europe, adjusted the official inflation by giving more weights to goods people buy most often, such as fuel, food and clothing.

This methodology makes perfect sense. It’s more likely to reflect the true level of inflation. The bad news is they concluded prices in Germany are rising almost twice as fast as the official rate.

Last month, the employment situation improved three times faster than the market expected. The unemployment rate is now reaching a two decade low.

German unions are already pushing for bigger wage increases. The country’s IG Metall union, for example, has asked for a 6% increase for workers at companies such as Volkswagen.

This demand for higher wages really scares the ECB. And the rising commodity prices don’t make things any easier for the central bank.

History is Likely to Repeat Itself

We’ve seen this before. So we can visualize how things will play out.

In 2008, there was a major rally in commodities, with oil spiking all the way to $140. At that time, the euro also surged on expectation of higher interest rates.

Higher oil prices increased the fear of inflation, forcing the ECB to hike rates in July. As you can see in the chart, it didn’t take too long for the euro to tumble.

Last Time ECB Hiked Rates, the Euro Took a Big Dive

Shortly after raising rates, the financial crisis escalated, forcing the ECB to cut rates to a record low. History may be about to repeat itself.

If commodities keep rising, the threat of inflation will escalate in Germany. The ECB may just make the same mistake it did in 2008, hiking rates at the wrong time.

While in 2008 the global financial crisis was behind the euro decline, this time I suspect internal imbalances will do the job.

Who Cares About the PIGS?

With prices of commodities skyrocketing, the inflationary pressures will only get worse.

That’s why the European Central Bank has already signaled it will raise interest rates if inflation fears escalate. And that’s what has been driving the euro higher recently.

Higher interest rates would be very appropriate for a booming Germany economy. But it’s certainly not appropriate for nations that are slumped in recession, such as Greece.

While employment in Germany keeps improving, the unemployment rate in countries like Greece and Spain has more than doubled in recent years.

But for the European Central Bank, it doesn’t really matter. They will always do whatever is best for Germany.

Higher rates will make the life of the PIGS (Portugal, Ireland, Greece, and Spain) a whole lot more complicated.

With austerity measures still biting, higher interest rates is the last thing those countries need. It may just send them into a very nasty deflationary environment.

Saving Germany Will Hurt the PIGS, and the Euro

That’s the problem when you have to use the same monetary policy to countries in very different situations.

It’s like giving the same insulin shot to two different patients, one diabetic and one healthy. The injection will do wonders for the diabetic, but it may just kill the otherwise healthy person.

So the European Central Bank has to decide between fighting inflation in Germany and saving the troubled nations. With rising commodity prices, a booming German economy, and the ECB’s natural inflation phobia, the Central Bank will most likely pick the first option.

That just confirms my view that the euro is going to fall from here. Be on the lookout for shorting opportunities.

Bottom line: Although higher rates will push the euro higher in the short-term, in the long-term, it will come back to bite the troubled nations. Stay short the euro!

Best Regards,


Evaldo Albuquerque
Editor, Exotic FX Alert
http://evaldo.worldcurrencywatch.com/

I closed my long EUR/USD positions

golden euro

Greetings fellow traders. Just an update on my previous trading journal post. I have decided – whether wrongly or correctly – to
close out my long EUR/USD positions. Friday the NFP report was coming and I was not sure in which direction this market will go so I figured the safe route is to close out all positions, take my profit and run – and that’s exactly what I did. Now it looks like eur/usd is just hanging about with no major movement after the NFP report. From a technical analysis point of view eur/usd is still in an uptrend, but come Monday the story may change – but I doubt it will to be honest. With the Federal Reserve talking of on a further quantitative easing spree I doubt traders will bid up the dollar. If some majorly bad news comes out of Europe then yeah the Euro will drop like a rock, but for now ti’s safe to say that the trend is still up and any positions one may enter should be in tune with that.

The two closed positions. By the way this is on a live MB Trading account.

989006 2010.09.13 17:31 buy 0.20 eurusd 1.28779 1.31000 0.00000 2010.10.04 19:47 1.36529 -0.16 0.00 -1.55 155.00
989186 2010.09.13 18:15 buy 0.20 eurusd 1.28754 1.31000 0.00000 2010.10.04 19:47 1.36538 -0.16 0.00 -1.55 155.68

Overall I made roughly 700 pips. I’m quite happy with that.

This coming week I’m going to be very busy with other affairs so I won’t have much time to trade manually, but I intend to turn this live account over to a new EA I got a hold of called Forex Demolition.

That does it for this post. I wish you all a great weekend.

Cheers,
Alan

Long EUR/USD – 400 Pips and Counting

euro us dollar

Hi everyone. Here is an update on my eur/usd long position I discussed in my previous trading journal update. So far so good I’m up 400 pips and counting. EUR/USD has taken a breather around the 1.3290 price area, but the European session is soon due to start so maybe the Europeans will push this baby further up. C’mon London, you can do it 🙂

So to recap. I entered long with two identical positions at 1.28750 and now price action is at 1.32920. Trade were taken on my live MB Trading account.

I want to show you a chart of eur/usd bouncing off the top of the H1 SHI Channels but I’m not in front of my computer at the moment so I can’t take a screenshot unfortunately.  Suffice it to say in my opinion entering long at this price level is a risky proposition. If price continues to break above resistance levels then it is a further confirmation that the uptrend is continuing to unfold, thus placing a long position (if you’re sort of ‘late to the party’) could be OK.

My long term profit level is 1.34xxx. I think the eur/usd will at least touch 1.33.

OK, that does it for this update. I wish you all many pips!

Cheers,

Alan

EUR/USD is on the move

Greetings. I was thinking of documenting my trades here on the blog in a sort of “trading journal” and this post shall be the first “beta test” of this new idea.

Ok, well, as you probably can see EUR/USD is on the move again. It looks like risk appetite is back in full swing and traders are pushing up the common currency past the 1.30 psychological number as I type. I was fortunate to get a piece of this trend at around 1.2875 with two separate lots – this is on a live account by the way, so I’m riding the money train for now. Here is my trade in action:

At the moment I am thinking that this is the beginning of a new short term uptrend, and higher highs are probably going to be tested. Thus I am trailing all my positions with a pretty loose trailing stop (90 pips.) I’ve already locked in some profits just in case there is a reversal. This is no sure move as I’m uncertain as to whether the 20 period MA will cross the 50 period MA on the daily chart (20 period EMA, 50 period SMA). It is very close to crossing over I may add, but just not quite there yet. Also the 100 period MA has not been crossed or touched by price yet, so as it stands I don’t think this is an established trend.

Let’s see what the next daily candle brings.

Until then, I wish you all profitable trading!

Cheers,

Alan

Europe Wants a Lower Euro

Hi everyone. I hope you’ve been paying attention to the events surrounding the Greece sovereign debt crisis. Things look to be in pretty bad shape for the European Union and as such if nothing is done the Euro could collapse as a viable currency if the debt contagion is not stopped. In relation to this subject I’ve posted a interesting article over at my finance blog that I think you will all enjoy. It’s written by Bryan Rich from Money and Markets and in this article Bryan argues that the ECB WANTS the Euro to lose value. This would explain why Jean Trichet refused to verbally prop up the Euro while its value on the international currency markets was falling.

I for one agree with Bryan’s assessment and see it as the only reasonable course the ECB can take for the short term. To me this basically screams SHORT EUR/USD without mercy, but we shall see how the market reacts tomorrow. I believe it will still continue to punish the Euro. But without further ado here is the link to the article:

http://alansfinanceblog.com/2010/05/08/europe-wants-a-lower-euro/

Enjoy!

Cheers,

Alan

http://alansforexblog.com

EUR/USD Breaks 1 Year Low as CDS Rises again on European Debt Fear

Well folks, it looks like the Euro is getting its but kicked by the USD. It seems the safe bet right now is to short the Euro – ie short eur/usd. Here is a forex news blurb from Action Forex that I believe explains this:

Euro drops sharply today and breaks through 1 year low of 1.3114 against dollar. In spite of the EUR 110b bailout packaged announced over the weekend, markets are still unconvinced that the fiscal debt crisis in Eurozone is solved. Investors are concerned that there are still a lot of obstacles ahead and there are still much risk of contagion spread. There are even rumors that Spain will be the next in line to apply for financial aids. CDS on Greece is back above 680 level today which implies over 40% probability of default over five years. CDS on Spain, Portugal, Ireland and Italy also rose back to above 180, 310, 200 and 140 respectively.

Notice that part about Spain? Spain has always been somewhat of a EU spendthrift and I would not be surprised if it is the next country to approach the ECB with open palms.

Now if you’ll excuse me I gotta get back on the “punish the Euro” bandwagon.

Cheers!

Alan

http://alansforexblog.com