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.
This week, USDx finally took off from 90, closing the week at 90.50. But since all of the move happened on friday, I expect bears to fight back a little, early next week. Last week I was talking about the 2150-60 area on EU as a strong support zone and it was acting like that all week. Now that we broke below, it might act as resistance. Next week we have FED on wednesday, so very likely another ranging week for the first few days…and this 2150-60 area is very important for the euro, it seems, so I wouldn’t be surprised if it was re-visited. I will look for short opportunities before or during FED, if we indeed keep ranging early in the week. My EU short targets didn’t change, just need to look for good entries next week. Monday will give a clue, as how high EU bulls are able to take it…closing price was 2107, so 2130+ should be doable for Asian session and London will give more clues after that. But wednesday-friday will be the most important days of the week, anyway, so taking a break until then isn’t a bad idea either. 😉
Not much happened this week, USDx still stuck in the same range, which favors dollar bulls, as the longer we stay in this range, the higher it will spike, once it breaks out. USDx bulls moved a little bit higher again this week, created a higher high and higher low and looking at weekly, after 3 strong bottoming candles, its ready for the big move. BUT next week is an ECB week, so anything is possible ahead of thursday…euro can start falling on monday or can be ranging until thursday or try to break higher, above 2200 again. But if it breaks higher, it should be only a good short opportunity, it shouldn’t be very comfortable there, as it wasn’t comfortable above 2200 this week. Euro bulls are clearly exhausted, so whatever happens before ECB, my medium term targets are still 2060, 1980 and finally 1830. But as for monday, 2150-60 will be important for bears to break. It is very near the closing price, but strong bottoming was happening there during London fix and after, until market close. Once that fight is done and bears have won, it should re-visit the 2100-2110 area again…and if 2100 breaks, it should be over for euro bulls, for now.
Not much has changed this week, dollar bulls keep fighting over 90 and again won the fight and defended the strong support. Two fridays in a row, London fix was in favor of dollar bulls into next week, but I am still waiting for a the strong upmove, without much of correction on the way. FED keeps talking about tapering, everyone is talking about insane inflation, so to me its just a waiting game, even though its frustrating. But everytime before a reversal, there is a lot of tight range play, frustrating for swing traders. If we look at all the main USD related pairs, in every one of them a strong reversal or correction is just waiting to happen. Even USDJPY, which is sitting below 110 and looks like a good short, would be a very dangerous short, looking at the weekly chart setup. 110 is a big psychological barrier…but it still feels like its going to break next week…and the area between 111-112.50 might be tested. That area might be a good short, but only if it holds…if not and it breaks, there is a lot of room to the upside. Even USDCAD looks like a perfect long setup, even though I don’t trade CAD, as its too risky. But its painting a picture towards other pairs, so it might be useful. When it comes to EURUSD, 2200 is the equivalent of 90 on USDx…and it is a strong barrier, where many fights happened this week. Once the fight is over, we will see who wins…
This week, we had a tough fight at 90 again, howering below until friday, when dovish ECB finally made it spike above and London fix did hold it above, too. It might seem minor, but its actually a big fight at this level and when the fight is over, dollar should appreciate towards 93+. FED kept talking about tapering, well, mainly Kaplan again…and ECB started talking about not tapering anytime soon, so all this should transform into the chart soon. Technically, EU is now turning bearish and USDx bullish, fundementally its been like that for quite some time. But thats normal, fundamentals always need some time to be “displayed” on the chart. So, unless something surprising happens next week, USDx should turn bullish. I am expecting retail to start building longs on EU next week, as it drops, which should help accelerate the down move.
Last week we had nice bullish action on USDx with a drop on friday, after a miss in retail sales. But in reality the sales weren’t as bad…they just didn’t grow compared to last month, where the growth was over 10%, so the figure isn’t as bad, which the market realized, too. From the moment the sales number was released, EU bulls only managed to go up by 20 pips…and couldn’t go higher all day, which leads me to believe they are “tired” below 2150. There is a nice hanging man candle on EU and also USDx, which suggests the end of EU uptrend is near. Inflation in the US might play a part in this…the figures last week were the worst since 2008! Inflation is through the roof mainly due to the economy opening up in high speed and thus demand being way bigger than the supply, which creates pressure on prices. Unlike EU, which goes from one lockdown to another, US seems be to on the right track, but FED will need to step up to push inflation closer to 2%, which is their longterm goal. I am not expecting any surprise rate hike, but they will definitely start talking about it and mostly about tapering, which should also put pressure on stocks and help dollar to gain some value. Considering the massive stimulus and money printing in the past few months, its surprising how resilient dollar was to all this new money. To me this means that a big upmove is around the corner…I am a dollar bull for the weeks, possibly months to come. Next week will be important for EU and the 2150-80 area needs to be watched. This week I saw some big short entries at 2180…the question is if they were satisfied with the drop towards 2050-60 or not. From my experience, when big money joins the game, they are in for 300 pips or more. I might be wrong on this…but my gut tells me 1830 is still on the table. As unrealistic as it sounds to many people at the moment. 😉
This, among other things, gives USD bulls still hope into the next few weeks. The other thing is that friday’s London fix played in their favor, too. We saw strong topping at EURUSD, GBPUSD and every other major USD related pair. EU now touched the old bullish trendline for the 3rd time…first and second time we got good pullbacks…so considering the PA and chart setup, we should see a 3rd pullback. The question is how deep it will go. I am still having the same bear target on EU, which is 1830. Friday’s NFP move didn’t change it, just gave me an opportunity to get better entries. GBPUSD again tested the 1.40 area, as so many times in the past few weeks, since february, and was rejected every time before…and again today. And since “all good things come in threes”, we have USDCHF re-testing the 9000 area again, which is a very strong support! All these things considered…shorting dollar from this point on is very risky and offers a very bad risk to reward ratio.
This week worked out nicely, with the reversal starting on thursday, after FED. USD bulls can’t celebrate yet, because friday was the last day of the month, so that might have played a role in the spike, too. Next week, I expect some correction and then looking for good entries will be the key. EU should re-visit 2050-2080 and GU probably 3850-3900, but the market has to decide on that. My targets are unchanged from last week. If you follow my twitter or telegram, you saw me posting the reversal points on thursday. My USD target is still 93+.
EU bears have been suffering for a while. 2 weeks ago, it was expected…one week ago, it was expected…but this week, I didn’t expect it at all! Technically, this week made no sense and it can be best illustrated by the fact that the biggest hourly candle happened during the FIRST London hour of the week! We had an ECB week, along with fundamental data…and yet, the first hour of the week made the biggest candle, without a re-test of 1975 whatsoever. Something is not right with this move…and I am expecting it to correct very soon…and after that, it might do another crazy thing and drop even more when people start buying it lower. Because in my experience, a “crazy” move in euro is mostly followed by even a crazier one. And right now, we have an uptrend of 400 pips with ZERO correction on the daily chart, so without any profit taking. Here is the interresting part…MAY is many times a reversal month and whatever direction starts in may, in many cases goes on until the end of the year. Next week will give me a first clue in this, as its the last week of april, with a FED meeting in between. Since 1980 was easily broken to the upside this week, my analysis from 2 weeks ago comes to play now. I expected the high to be between 2050-2150, which I think will stay as the high and the correction should start from this area. And like I predicted, I already read some “analysts” talking about 1.30 and higher this week. 🙂
Other USD pairs are showing strong bearish signs on bigger time frames, so this should all help dollar to gain some next week or to reverse alltogether. AUD, NZD and GBP are all bearish into may…
Last 2 weeks worked out well, with my bearish USD bias, but now I am looking towards longs again. Look at EU…2 weeks ago, when it looked super bearish below 1750, all analysts were bearish, retail was super bearish…and then every little jump up, people were selling. 1840 was shorted heavily, 1900 even heavier…and now? We are at a possible triple top at 1980 and people seem to be buying. Can you believe that? Selling the lows and buying the tops is a neverending retail story, it seems. I am not saying we can’t break 2000…and if we do, it will most likely go towards 2100, but the chances are way better for a short right now, especially when you see retailers and analysts turning long. Because if this 1950-1990 area doesn’t break upwards, it will create a TRIPLE top on the daily chart! And that can be very nasty for bulls…with a possible downmove of 300-400 pips. Next week we have ECB on thursday, so its hard to predict what will happen before that…if the market keeps ranging or if it starts a trend before the meeting, but either way, I think the 1880-1920 area will be reached next week.
Another reason for EU bears are other correlated USD pairs. GU is close to a good short area now…it might even be there now, but even if it goes 50-100 pips higher in some quick move, its still a short in the medium term, 3560-3600 is still a number I am waiting for to be re-tested. GU closed at 3840 on friday and I expect a retracement towards 3760-80 minimum early next week and from then on it depends if this area is defended or not…and if even 3680-3700 breaks, bulls might end up very badly. Monday will give a first clue…
UJ also worked out well this week, I had a target of 108.50 and 108.60 was hit, so I gladly got rid of all shorts, in case we’ll will keep ranging upwards again, for a while, but if we come close to 111 or even above 110, I might start looking for shorts again.