We had mostly very positive US data lately, but the US Dollar didn’t make much of it and couldn’t even manage to break below 750 in the past few weeks. ECB was also bearish and every bear move was bought instantly or the next day. It kind of makes me think that EU wants to go higher and the bottoming might be over soon. Not that I would be a huge fan of indicators, but they kind of suggest the same and are thus aligned with price action. Early next week will give us a clue…if EU goes back above 820-850 and manages to stay there….then we can expect another attempt of breaking 900 and then potentially 1000.
After 2 easy trading weeks, when we were stuck in a range between 1.09 and 1.10, it looks like price will break either way soon. Bad thing is, it can break both ways and both ways would make sense technically. And even fundamentally…because FED is now talking clearly about rate cuts, but ECB started doing the same. And with both economies in trouble, its not about who will be a winner, but who will be a less of a loser. Probably best to wait for a break out and then if its going to be a fake breakout or a real one.
Last week went a little over the top during the ECB and BOE meetings, even though market was very logical up to that moment. Lagarde was dovish and yet, euro kept climbing without any corrections, so I was expecting friday’s US session to fix all that, which it did. Now we have interresting daily candles on both EU and GU, regular bearish divergence on GU and hidden bearish divergence on EU. At the same time we have USDCHF with a bounce after a strong bottoming and also strong bottoming on the DXY. It all looks in favor of the US Dollar into next week, so lets see if the market confirms it.
Euro did correct like I suggested in my last post and hit my first big correction target of 740-790. Now the question is, if it keeps dropping or if this was it for bears. Either way, I see this is as a good zone to start buying, even if it may drop some more. But PA suggests that the bottom is here or near. We had amazingly positive data from the US on friday and yet, euro bears didn’t manage to make much from it. After an initial whipsaw, price went back up and closed only around 15 pips lower than what it was before the news. This could give bulls an advantage into next week. We have major inflation news on tuesday and wednesday, but if there are no surprises there, EU should remain bullish until the FED meeting on wednesday. What happens after FED, is yet to see. And we also have ECB and BOE on thursday, so a busy week, with a lot of volatility. And probably the last volatile week of the year, as vacation time is near and the market will be slow between Christmas and New Years.
I don’t think it will stay there early next week, though. Friday’s move was a little overextended and one-sided, even after positive US news. But thats normal on fridays, once a direction is established during London, it mostly goes in the same direction for the rest of the day. Now on monday we should get some correction, so bulls can gain some power again. The question is, if its going to be a small correction only or if its going to be bigger and will last longer. Long term, euro is now bullish, no question about that, but on a weekly basis, it will go both up and down. I see 2 options…first is a correction towards 740-790 and new longs from there or a deeper correction to re-test the previous FED levels at 550-590. Either way bears should get some relief, if bulls don’t manage to stay above 900 early next week. We have FED minutes on tuesday, not wednesday, as most of the time. so that will give us a clue. It never makes a big move, but it mostly decides a direction for the rest of the week, so whatever direction there will be after FED on wednesday, should stay until the end of the week.
Last week, both EU and GU finally broke above some medium term resistance zones and turned bullish. Friday was a bit one sided, so a correction is expected early next week. The question is how long the correction will last and how deep will it go. If the week starts with a drop, I would wait until tuesday-wednesday, to see where new support zones develop, to buy EU or GU. EU could easily correct 50-100 pips first and GU even more than 100 pips. There are no major news until wednesday, anyway. As always, anything can happen, but a correction would make sense for bulls, too.
EU has now been bearish 11 weeks in a row. Thats something new, as this didn’t happen since the inception of the currency. The candles aren’t that big really, so a big bullish move can come any moment now. The longer this fundamental and technical non-sense goes on, the higher my bullish target will be. Right now, the first bullish target I see is 1.08, then 1.10 will be the “make or break” level. If it stays above, we should have a nice long bull run. Same goes for bitcoin, which has been bottoming long enough now…time to add up longs!
US Dollar had another bullish week and both EU and GU have been suffering. But the more they stay in the current range, the higher my final target will be for the upcoming bullish move. Initially, I was looking at 1.12, now I am considering 1.15+ even, possibly higher. US dollar is overstreched and Powell’s speech on friday might have been the final nail on its coffin. Even though Powell was slightly hawkish, US Dollar stayed in the daily range and started dropping after London fix. So EU is still trading around 1.08 after all those hits it has been getting over the past few weeks. Now should be the time for a move up. Gold already did its bottoming and turned bullish on a weekly reversal, which should help EU, too.
Last week we had a hidden bullish divergence on both, EU and GU, but after a dip we ended up where we started. We got rid of some weak bulls…and now the hidden divergence turned into a regular bullish divergence. There are no fundamentals to support dollar until thursday/friday, when we have inflation news, so EU/GU bulls might want to try to break some resistance barriers until then. There is an important resistance of 1050 on EU, which if broken, could turn into new support for bulls. EURCHF is also in a good buy area, long term, which helps the euro case, too.
One more day and this month is over…finally…for a summer month, it was very hard to trade. When we learned something this month, its that when FED raised rates, USD immediately dropped…then ECB raised rates and EU dropped…and next week BoE is supposed to raise rates, you know what will probably follow. And now imagine, if BoE doesn’t raise rates…wouldn’t want to be long on GU after that. But that is on thursday, long time for bulls before then. If GU managed to get towards the 3050-3150 range before the BoE meeting on thursday, it would be a good short, rate raise or not, doesn’t matter. Either for a scalp, before US news on friday or for a swing trade. Both EU and GU are showing a hidden bullish divergence on the chart, but looking at EG, back in the heavy demand zone, I would prefer EU over GU longs next week. Most of the time when EG goes up, its because pound is dropping, not because both EU and GU are strong. And if nothing significant changes on the EG chart until thursday, it might spike up after the BoE meeting. But we have a lot of news next week, pretty much every day, so it should be scalper’s heaven. All starts with chinese manufacturing on monday, which will be important for EURO, as we Europeans are fully dependent on the commies, sadly. 😉