Uncategorized

We had an all week buying of both Euro and Pound until finally on friday, dollar bulls showed some strength, after 2 weeks!! Now the question remains, if it was just a “last day of the month” correction, after closing orders from the whole month or a first reversal sign. We will find out very soon. To me, both EU and GU are due for a correction. Statistically august is the 2nd worst month of the year for the pound(may is the worst), 9 out of 10 times, it goes down. I expect it to correct towards 2800, at least. Since EURGBP looks very bearish now, EU should drop more than GU, when dollar goes up. So for EU I would look for 1500-1550 as the first big stop…and if 1500 breaks, 1300 is my final target for now. UCHF is EU reversed, so same applies to it, as seen on the charts below. August might be a slow month compared to july, with less volatility, so not expecting anything as crazy as we have seen in july. And in september, markets should slowly go back to normal, with banks and other big players coming back “from vacation”.

Even if I am right with the above, there should still be a retrace upwards on monday, EU should go towards 1820 and GU towards 3130, at least. Doesn’t have to…but if you are into shorts, better to wait through asian session and wait for better short entries during Frankfurt or London.

To be honest, I am still analyzing what went wrong last week, since my analysis was completely wrong. The technicals and fundamentals did not match, not even a little! So its time to consider both scenarios…that EU has turned bullish or that this is simply a trap, to get as many people bullish as possible. Looking at the COT reports, I am having a hard time believing that the banks will just accept the loss and move on.

But even if the trend has turned bullish, there is no point to buy the current top, obviously. We need a healthy retrace, profit taking, to take place. The area to look for longs is clearly visible on the chart below. But there is no point to make detailed analysis after a week we just had, we need another weekly candle to know more. So next weekend the situation will be more clear, I hope.

For USDCHF bulls, the situation looks a little better, because while EU broke out of the daily range upwards, uchf is still in the strong demand zone and fundamentally, a strong Franc is hurting the Swiss economy, so there is a good chance of SNB starting to intervene heavily and weaken the Franc a bit. Swiss economy is export driven, 2/3 of the GDP is from exports. On top of that, Franc has a negative interrest rate, so there is no logic in buying it for longterm gain, especially at these levels, against the SNB. The safe haven argument doesn’t hold this week either, as UJ didn’t drop as much as UCHF did. So lets see if next week there is a healthy correction upwards.

They don’t want to give up, but eventually they will have to…last week might have been their last effort to go close to 1.15. There will be either a reversal soon or just a correction, if bulls want to keep pushing this up. The correction might go as far as 1180-1220, if it breaks below, its a reversal then. Now lets look at the COT data, banks(dealers) are now more short than they were when EURUSD was at 1.25, just think about that for a second…:)

Of course, banks can withstand more drawdown than us retailers can…for them 100-200 pips doesn’t matter much, but we are at a zone which would be very dangerous to long, so short is the only way to look right now, even if just for a correction, as I mentioned above.

Asset managers(hedge funds, etc) are on the opposite side, heavily long…and its not good to follow them, because they are very often wrong. If you look at the chart below, when EU was at 1.25, they were heavily buying, while banks were heavily selling. Just think about it next time when you want a fund to manage your money. Anyone seen Wolf of Wall Street? 🙂

Now look at all this from the EURUSD perspective. Better to take it slow this week and set small and realistic targets. So from looking at the H1 chart, we have a clear triple top, so 1370-80 would be the first area to look for when being short.

If this area breaks is yet to see, but if this does, we can move towards target number 2, on the H4 chart. Target 2 is 1280-1305, which was a strong support zone before last week’s upmove. Beyond that we probably don’t need to look this coming week, but we never know…all I know is not to go long at any of these levels, other than for a scalp. Long and hold, no thanks.

There might be another good opportunity at EURGBP this week, to start building medium term positions for a 400 pip downmove, with a SL above 9200. But the SL is still 100 pips away, so better to watch and evaluate during the week first. EG can be unpredictable short term.

Good luck to everyone next week!

Last week analysis for EURUSD is still valid, 1370 was hit for a nice short and this coming week, the bearish move should resume. I will explain why I am even more bearish on the pair now. There is strong bottoming on the USDx chart, easily for a 300-400 pip upmove, but it might be more, if dollar starts the upmove. SL is visible on the chart, for EURUSD its above 1420 or better 1450.

Like I mentioned earlier during the week on Twitter, asset managers are strongly bullish on EURUSD and those guys are more often wrong than right, or at least buy and sell at the worst possible times, kind of like small retailers. They can wait out their positions, even if wrong, with the amount of capital they have, but can you?

Banks are starting to buy the dollar heavily…actually the most since 2014 and banks are the ones to follow, they are the “smart money” on the market. Below on the charts, you can see how the dealers are positioned. I would start buying USDx now, even if it dropped some more, we are at a good spot to start building medium term positions. My first target would be 100 for USDx, which is the equivalent of 950-1000 on the EURUSD chart.

This is just my opinion and trading plan, I might be wrong, of course.

I am still not longing it. Even though there are strong bottoming zones around and below 1200 and it may go up to 1370 or possibly higher, I am not going to long it. At this point, I feel safer with waiting for the highs to short scalp them, as the opposite. Because eventually this will break below 1200 and won’t come back so soon. At least that is my opinion and that is what I will be trading towards.

EURGBP is still above 9000, even though it did a quick move below 9000 just few minutes before market closed today. But that was a spread move, not a real move. On all brokers, EG’s spread was about 20 pips by that time, so it might have been a SL hunt or simply the fact that we have a slow day due to a national holiday weekend coming up in the US. So I am not taking this move seriously, until we have a clean break of 9000. If it doesn’t break, we should still go towards 9100 or higher.

EU was stuck in a small range between 1190 and 1240 on friday and will most probably stay in the range on monday, too. If it breaks out, it is more likely to break out to the upside, towards 1280, but a SL below 1190 is a safe thing to do, because it can also break to the downside anytime now. Since tuesday is the last day of the month, anything can happen, so it may be safe to stay out until wednesday-thursday. The only safe trade of the week is EG to me, with an easy target of 50 pips. Short around 9100 and get out around 9050. Other than that, we can only wait and see where the market wants to go and then follow the money.

The amount of confident bears in the retail market makes me a little nervous. There is still a possibility of last week’s second entry zone, which would hit current bears very hard and then the downmove could resume. Something to think about…

Here is the chart posted last week. Still valid.

I will keep it simple for next week. If you read the analysis I made last week, everything worked out as planned and next week should be simply a continuation, with the same targets. All we need to look for are new entries. I think the pictures below are pretty self-explanatory. All we need to consider for the moves to work out is where to put the SL. For EU, it would be above 1260, ideally above 1300. For GU its tougher, because it tends to do bigger moves than the euro, so just to be sure, above 2550 would be a good spot. And when it comes to UJ, the old SL below 105.90 is still valid, I would watch the monday price action very closely, for potential false breaks down for good buy opportunities. The area of 106.50-80 is a good long area, even if it broke to the downside real quick. The targets are safe, all the work will be with finding the perfect entry,

This week worked out as planned, but friday, by the end of the day, might have give a clue for next week. I am still bearish on EU and GU, BUT there might be some upmoves next week, to get rid of some retail shorts. We had a strong “London fix” today, with a probably false break below afterwards. I was watching retail last week…and most were long and buying every dip, which I didn’t understand, but well…then later thursday, we finally broke down, after all week topping out. Retail was still long biased and buying the drop…then we had a late friday drop and it was obvious retail switched to shorts heavily and is still short. But the market is not a free candy store…if something looks too good to be true, it mostly isn’t. 😉 If retail keeps selling this next week, I rather won’t. Not right away, at least. From watching and analyzing the EU chart on one minute scale, alongside the news that were being posted, I felt like 1215-18 was a trap to trap as many shorts as possible. I may be wrong on this one…but I think we will resume this bear move when most of retail is out of their trades, either margin called or long biased again. There is no point to short 1250 on EU and 2540 on GU, which were the closing prices today. We will likely go higher first. If I am wrong, no gain, if I am right, no loss, so either way better to stay out first. I am not recommending to go long, though! I would start looking for shorts on EU above 1300 again and for GU above 2650-2700. Ideally we will go even higher, or possibly re-test or break 1420 to get rid of current shorts. That would be an ideal short next week. So my advice is, stay out, watch the charts and wait for an opportunity. Long term nothing has changed, targets are still bearish, but short term, no need to be in a big drawdown until it happens.

And EG still “hates” to stay above 9000 or close to it, so still an easy short from that area. Long term target is still 8400, but the tight range might be here for a while.

Since last week didn’t work out as planned and we shot above the resistance line without any stops or retraces, shorts will be an easier trade next week. But I am working with 2 possible scenarios. The images below explain them better than words. We’ll either re-visit the important resistance zones from friday, 1320 and 1340, and start the short move on monday or we’ll break above 1380 and keep going up or topping until wednesday’s FED meeting. The first scenario should generate a retrace back towards a strong demand zone of 1200 and from then on we will see what happens. The second scenario, there is a large demand around the 1500 area, which could lead to a bigger drop, towards 1000-1060 minimum, during the next few weeks.