1800 didn’t provide the support needed on EU, as I posted in my last analysis. I didn’t want to make new forecasts, until the chart was more clear to me. Now after FED and strong bottoming around 1700, along with strong bottoming on GU and Gold, I think we have found our spot to finally bounce from. On wednesday, Powell again mentioned tapering and market jumped right on it, with buying the dollar some more…but I knew that the move would be short lived. Too many people jumped on it, even though nothing he said was really hawkish. And you don’t even need to read between the lines to see that. He used phrases as “IF PROGRESS CONTINUES, TAPER MAY SOON BE WARRANTED.” So he couldn’t even confirm tapering was a done deal, if the numbers keep getting better. What do you think will happen if they get worse? FED is just looking for excuses for real tapering to start, not to create a big mess on the markets. I don’t think any tapering will happen this year, next meeting should be about new excuses why it can’t happen yet. But even if they did start…november is still far away and that should help dollar bears to get into better positions until then. On the other hand, BOE meeting was hawkish, with another member voting for tapering, so there we have some real decisions, not just talk. Pound turned bullish and looking at the daily chart, we have a strong tripple bottom in place! Unless the current lows break, GU is on its way back towards 3845-3900. Gold was also strongly bearish the last couple of days, but bulls managed to protect 1750, so I am expecting another run towards 1800 and higher, along with the expected dollar weakness in the coming weeks.
This week was weird. Initially, both EU and GU did what they were “supposed to” and that was going down until mid week. I expected a bounce there, which only came for GU…EU kept struggling between 1810-50, mainly because the NY guys were fighting with every London’s upmove. But now with ECB and US inflation numbers behind us and bulls still protecting 1800, next week might turn things around. I wouldn’t buy GU at this point, even though when EU goes up, GU will most likely go up, too. But it might be at a different “speed”. GU is limited by a very strong resistance around 3900, it can’t break upwards for quite some time now. And it might still struggle early in the week, so I prefer a long on EG, which should go towards 8570-80, at least. Once pound bulls break 3900, its going to be a bull party and that should help EU bulls to break their biggest enemy, the 1900 level. These levels will be important to break, if bulls want to turn this around and start a new uptrend. EU bulls now have a tougher job, since they are at 1810, so we need to take it step by step…on the hourly chart, my target is 1850, on the H4 chart its 1890…and beyond that…lets see. But this coming week the magic might happen.
EU formed a nice bullish engulfing pattern this week and to me EU is still bullish and about finding good spots to buy. All you hear lately is about tapering and how EU is supposed to be dumped once FED finally starts with it. But people are forgetting that the talk about it is going on for months now…and it seems to be fully priced in, anyway. And the funny thing is…it might not even start so soon…so all this taper hype might fade very quickly and leave EU bears trapped for weeks or months to come. Next week is important for several reasons, its the end of the month on tuesday and we’ll have big US news on friday, some on wednesday, too. So it might be good to wait for the monthly close, to have a better idea whats going on and what are the good spots to enter a trade. If you are bullish or bearish, first 2 days of the week might be tricky to trade. The safest bet will be to wait until friday, when the chart will be surely much easier to read. But I expect a support zone to form around 1750-60 on EU. 1800 is a very important resistance to break…it opens up the way towards 1900.
Gold keeps to be bullish as expected and its very near 1830, which is a big resistance, which failed to break many times in the past few weeks. Once it breaks…it opens up a way towards 1900.
Last week I posted a big demand zone on EU above 1700 and on GU between 3750-3800, both demand zones were hit and produced a nice bounce of almost 100 pips. For next week and beyond I am staying bullish on EU, but a little less on GU, since EG can spike up anytime now, which would mean that euro bulls will be stronger than pound bulls, so I will stick with buying EU and EG. When it comes to EU, the week closed below 1800, spiked through previous small resistance of 1750-60, which could turn into a support area now. So thats where I would look to add more longs next week, if bears manage to re-visit the area early next week. GU closed at 3870 and should re-visit 3830 or less next week…I can see even 3800 re-visited, so EG could finally spike towards 8550 or higher, as bulls managed to close the week above 8500, after struggling to break above 8480 all week.
The most interresting pair this week, which helped EU and GU bears early in the week, was GOLD. Right after the week started, there was a big flash crash on gold for almost 1000 pips and it was before Tokyo even, so during very low liquidity. This was a big stop loss hunt and many big boys probably used it to enter long positions. All week after that gold was recovering and while retail kept selling it, it just kept going up and it might be only starting. So I would be very careful with selling, as this week’s move might easily take gold above 1900 or even 2000 again. The first hurdle will be 1800 and then we have a big resistance at 1830, BUT the flash crash this week might help with that area next time we are there. I can imagine all retail world to go short at 1830 big, which might push the price above and beyond. Lets see…
This week was going according to my plan first, ranging between 1840-1900 and I was waiting if 1908 breaks to the upside, but bulls didn’t have enough power to do it, they barely managed to touch 1900. On thursday and early friday I saw a nice long setup before NFP, market was expecting bad numbers, obviously and preparing for a spike up from 1800. But the numbers were surprisingly “green” and we saw a further drop. But there is no reason to panic for bulls…the old support at 1750 did hold and week closed above 1760. Beyond this support, there is another big one around 1700, which is not too far. This area is a big demand zone for bulls and I think we will see them coming back to life next week. 1830 will need to be re-tested, anyway, no matter if EU is bearish or not. Possibly 1850+, too…and thats when the game might change and bulls could do what nobody expects at this moment…to break 1908 and create a strongly bullish pattern. Monday will give us a clue as how high bulls can bring it during the first correction up and then what London and NY do with it. It will be an important day to follow through all sessions, from Tokyo into London and NY. If bears get exhausted, bulls should take over during the week, with a bullish weekly close. The risk to reward ratio is better for longs at the moment, as a major support is only about 60 pips away, another one is only 10-20 pips away and bull targets can be 100 pips away and more.
When it comes to GU, all the demand zones are below the weekly close…the nearest one is between 3750-3800, which is 100 pips way from friday’s close…so if I was going to buy GU, I would rather wait if it keeps dropping and how far it drops. EG is at a big demand zone and can easily spike above 8500, towards 8600 even…so even if GU dropped 100 pips, it might not affect EU that much. If the current area holds for EG, it should be good for buying the dips through the week.
Last week worked out very nicely, with EU bouncing off 1760, as planned. On friday we hit 1908, where bulls got tired and couldn’t take it any higher anymore. But the important thing was the NY session and the London fix, the last one in july, with heavy bottoming above 1850, from where we got a bounce towards 1875 before the day ended. So this are will be important next week, too. Last week, we had a strong support at 1760 and this week we might have created a new support at 1850. The key area next week will be 1908. Bulls need to break it to go towards new targets, which for me are 1960-2000. The biggest events are on thursday and friday, first a meeting of Bank of England and on friday big US news. So if bulls take over early in the week, I am curious how high they can take it before the news days. The best trade of the week seems to be EG again, with heavy bottoming above 8500, 8640 is a safe target with a good profit to risk ratio. USDCHF is another pair to watch, as it is close to 9000 again, which might be a good buy area, if bulls manage to protect the area for the first days of the week. In the past few weeks, EUR and CHF were out of sync…normally they are equally strong or weak, but while CHF was very strong most of july, EURO was stuck in a tight range and only broke out of it after FED this week. So it will be interresting to watch both currencies and how they perform. If for example EU spikes up towards my target of 1960-2000 and UCHF manages to protect 9000 at the same time, it will be a good indicator to start buying. And even if 9000 breaks, the 8800-8900 is still a good spot to buy for medium to long term targets. Other than that, market will be more clear by thursday, so by then good entries should be easy for both BOE and NFP on friday.
All I hear lately is how bearish EU is between 1750-1800…all analysts talk about 1500 or 1600 and most traders I check are short…I think the opposite and with everyone being bearish, it makes it even easier for me to be bullish at these levels. While 1800 might seem like a big resistance, this area between 1750-1800 looks like a big bottoming zone to me. Eventually, when enough people are convinced to short…price will spike up like there is no tomorrow. Next week we have FED on wednesday, which could fuel the move. What do you think everyone will expect? That FED will create another EU dump like last time…well, by that time, EU was topping, the dump was technical also…this time it might be the exact opposite. This week we had an ECB meeting on thursday, it was a very dovish meeting and yet, EU again failed to break 1750…the 1750-60 area is a strong support and demand zone. Even if it breaks before or during FED next week, I think it will be just a SL hunt and not a real longlasting move. So either way…I am staying bullish on EU, even though I feel like its me against everyone else. But I prefer it that way. 😉
p.s. We have a 2nd bullish cypher this week.
Apart from EU, all other pairs worked out very well this week. UJ and UCHF dropped hard…GU printed a strong bullish candle, too, only euro was not as strong compared to other currencies against the dollar. But that can easily change next week…and EU can make up for this week with a re-test of 1970-80 next week. Easiest trade of the week might be EG, as it is back below 8550, which is a strong demand zone. EU bottomed nicely during London on friday and then created a new support zone above 1850 during NY. This zone should be re-tested next week and if bulls can stay above it, then a break of 1880 upwards is inevitable. As for GU, its NY support zone was 3825-35, created during London fix, which makes it significant. So, if both pairs would re-test their newly created support zones, EG would go up towards 8580-8600, at least. So early next week I expect EU and GU to be bearish, to re-test their support areas, where they should turn back to bullish. But EG still remains the easiest trade into next week, as GU’s bull move on friday was fairly overstreched, so the correction should help EG to attack the 8600 area again. Medium to long term, I am bullish on EG into 8700 and possibly more, so buying the dips is not a bad idea either way.
From a fundamental standpoint, USD might be in trouble due to a debt ceiling deadline. Long story short, the US is out of money to spend…with a weekly spending around 50 billion and 400 billions left to spend…its only a matter of weeks until the money runs out, if the debt ceiling isn’t increased. And this happening during summer holidays doesn’t make it easier to solve. As we know, politicians are hard working individuals, who need to work many minutes every week, so they need to take a break over the summer, to gain new strength, because nobody suffers as much as them. Of course they will make a deal in the end, otherwise government would need to shut down again for a while, like it did in the past already. And once more money can be borrowed, more money will need to be printed again…which will increase the inflation and devaluates the dollar for a while. I would like to see the USDx to re-test the 90 area again…to see if it manages to stay above, despite all the printing…and if it does, then start buying it again. But its too early to buy now, above 92.
This week, we had another re-test of 1850 on EU, even below and market still made it above before the close. This area is very important for 2 weeks now…and like I said then, I still think the USD will become weaker. This week, EU was the weakest pair…because all other majors, such as GU, AU, NU were dropping, but not as hard as EU did…and it was the most obvious on friday, before NFP, when EU just kept dropping from London start. I was very suspicious about this move, when I saw other pairs holding it well and Gold even being bullish by that time already. I thought EU has to join the gang after NFP, which it did. We had a quick fake drop below 1820 and it was obvious some big money is buying it there, which was probably the reason why it stayed down there for so long. All the other pairs found their buyers already and euro did during NFP, too. I am staying bullish on EU into next week, even though this trade is not as easy as was selling it above 2200 few weeks back, but that trade was way too easy, anyway. When it comes to EU, bulls have a few hurdles to overcome and july being a non-event month, might help there. First big hurdle is 1900, so bulls need to stay safely above…then we can re-test 1975 and if bulls manage to stay there or higher into next week’s close…then finally my bull targets will come into play. The first big one is 2060, second would be 2120 and after that…lets see what happens. Looking on the daily chart on EU, GU, AU, NU, UJ and UCHF…all currencies are looking for new gains against the dollar. And Gold might have started a new uptrend, too, with the first hurdle of 1800 on the way…
Even though last week worked out exactly as planned, the way it happened, was not exactly technically correct. If you look at daily and weekly charts of EU or GU, it seems very bearish, BUT the price action starting on wednesday, makes me think, euro and pound bulls are not done yet. Since the move was a bit surprising on thursday and friday, without any proper corrections, I had to analyze it on the tick chart, which was time consuming, but I hope it will be worth it in the coming weeks. I will start with Gold, as mainly euro is highly correlated with it. The way gold reacted to the fed meeting was extensive. It simply overreacted! So on thursday I was watching the tick chart before and after London fix and noticed a “big long entry” at 1768…this is not exact science, so I might be wrong, but there are things I have seen in the past and they keep repeating themself. So, I saw some big boys entering longs there…and really, gold started climbing up, without breaking this barrier later in the day. Then on friday, EU and GU continued with the bearish action and mainly the US session was one-sided and took them both down…so gold went down, too…but again managed to protect the 1768 area, no matter how much dollar was gaining. The only thing that kind of messed up this number was the last hour of trading, well 62 minutes before market close or so…when gold broke that barrier and quickly went down to 1760, to slowly bounce up towards 1764 by the end of the day. The break was not big, so I do not think much of it, but still, it would have been nicer, if 1768 stayed protected. Anyway, looking at the weekly chart, gold is still bullish long term and this whole move this week only looks like a correction, rather than a trend change. And when gold goes up, it will help both EU and GU to go up, too, because friday’s US session was so one-sided, it almost didn’t make any sense. Technically, moves like this make me always suspicious…and looking at the weekly chart, it would make sense, if next week was bullish on both EU and GU…and the week after that on wednesday, is the month’s end. I expect both pairs to go up until the end of the month.