Euro Forex Pro weekly 24-28, May, 2010

Sive Morten

Special Consultant to the FPA
Messages
12,862
Fundamentals
Although it seems on the surface that crisis is past it's peak, there are many undercurrents still. I think that risk aversion will continue in nearest future and it will remain a dominate driver of trade. USD and JPY will be in favor compared to other currencies. But what is a more important for us is that trading will become more choppy and unpredictable due to possible Central Banks interventions.
I think that great reassessment of the global recovery is underway – we all see how commodity currencies were hit and those who associate them with recovery (commodity prices should grow when the economy recovers, so should commodity currencies) and investing in them will have to revaluates their positions and may be even to capitulate. To my mind this cloudless optimism about the world economic recovery that was spreading in the air a month ago has disappeared. So, let’s talk about Europe. What are the positive signs? Germany has approved its stake in he Euro rescue package; it shows somehow that probably EU leaders really what to preserve EUR and EU itself. The population, in general, supports austerity measures. Maybe due permanent short term successes we even will see some upward bounces on EUR/USD. But what is on the other side? First, we can forget about previous estimations of ECB tightening and EU economic recovery pace. I expect that there will be some release for the EUR while investors will switch their attention from the EU crisis impact on the world economy to impact on EU countries themselves. And when this switching will be finished, fundamentals will take a lead. I do not await any positives from this switching. The EUR should go down further. There will be no panic, it will be a gradual strong pressing move downwards. And I will not be very surprised if I’ll see ECB interventions in the near term. The SNB has made it absolutely public, ECB can join to SNB, or it can act alone, this is not the point. The point is that I expect that we’ll see it. EU officials have more concern with the pace of decline of the EUR rather than its real value. BoJ also can return to this practice because Japan's economy is a pure export one and exporters are already starting to grumble.
And what are the possible consequences for other countries? First, it’s obvious that we can’t escape the second leg of the recession. It’s underway now. Second, the current EU crisis can lead to scrutiny assessment of other countries that have solid Debt/GDP ratios. When this assessment will be done, this crisis can spread like a fire in the forest. I think that the UK is the next country. The US will be the last country. Meantime, US has to pay on debts of about 2 trln. in 2010 only. But the USD is a world reserve currency, US in fact has no currency risk, because they issue USD and formally can print as many as they need. The whole world depends on USD, it uses it in international trading etc. At the same time, possible banking reforms in the US and EU can lead to serious negative impact on banking development, credits and loans etc. But all this stuff is too long-term to talk about it right now.
As a conclusion I what to say following thoughts:
- I expect possible ECB interventions in foreseeable future;
- Fundamentals will take a lead role and will start to gradually press on th EUR, while the first shock has passed;
- Investors will switch their attention from the World economy to particular countries that are in the epicenter of a crisis. Starting to do this, it can lead to scrutiny analysis of other countries with large Debt/GDP ratio and possibly the next currency under this scrutiny will be the GBP.

Technical
Monthly
This is a monthly chart. The trend is still bearish. I’ve told everyone a million of times, that although market is extremely oversold, it should go lower and clear stops below 1.2330. Finally we saw this and the market has started to show some signs of retracement higher. Surely we do not see it on monthly chart, because it rather long-term, but we can see that market has bounced from Fib support level at 1.2197 and extreme oversold level. So, long term traders can look for Buy signals on lower-term frames. In fact, this huge move down was not a simple down trend, it was and it is still run into quality and it becomes calmer because starting panic has lost its pace. But if we’ll look at the previous pullback – it was very strong and potentially, we can see similar picture – retracement as far as to 1.35 level. But for now it’s just an assumption that is based on quality of down move and its fundamentals.

Weekly
This is a weekly chart. We have strong bearish trend. The market has bounced up from Fib support after previous lows were Washed and Rinsed. So, this is potentially a bullish sign. There are two strong resistances on the weekly chart, that can be achieved in nearest couple of weeks 1.2780 area, Fib resistance and monthly support 2 level and, stronger one – 1.3070-1.31 Fib confluence resistance and Pivot support 1 level. At the same time, it is worth noting here that the previous move down was strong and I will not be very surprised if the market will show new lows after small retracements. I do not want to tell that it will be anyway, but it happens very often.

Daily
This is a daily chart. The trend turns bullish. Although I do not see any particular signal at monthly and weekly, but daily gives us some possibility to trade. First of all, we see a strong upwards move, but for now I do not want to buy. There are three reasons for this. First, the market is at daily overbought and Fib resistance at 1.2600. Second, the weekly Pivot for the current week is at 1.2467 level and as I’ve said many times, pivot points are traded during the period with solid probability. And third, from a tactical point of view, I do not buy the first pull back, because market mechanics tells me that during first pullback new shorts will be entering the market. That’s why I will try to sell in the beginning of the week, in fact I already have short position that I’ve opened on Friday. At the same time there is a risk, associated with this. Usually, when market is extremely oversold on weekly and monthly time frames, it can show stronger pull backs up before new down move. Although I’ve sold already from 1. 2550 area when market has moved below the weekly pivot at 1.2613 and made not bad thrust down on Friday, it can still reach 1.2730-1.2780 area and only after that can restart the down move. The possible target for that move is 1.2355-1.2370 area. The final target depends on the level from which the down move will start.
That’s being said – no buy on Monday, even may be on Tuesday, sell from current levels, if market will renew down move. If it will go upper 1.2620, then sell from 1.2730-1.2780 area. Target 1.2350-1.2400 area. The real buy signal should appear at the end of the week, or even during the next one.

4-Hour
This time frame adds some details for Monday possible action. I’ve marked 1.2350 area when I’ve sold on Friday. I do not want to tell that I was right, especially now, because the market does not show any down move development. Anyway, I just want to attract your attention to some moments. Fist, the 1.2470 level looks strong – Confluence support and weekly Pivot point. If the market will not pass through it on Monday, then an up reversal and move to 1.2730-1.2780 will be very probable. In this case, a down move can start from this area – 1.2730-1.2780. Here are daily confluence resistance, XOP target and weekly Pivot resistance 1.
As conclusion – if the market will move below 1.2470 target at 1.2355 will be probably achieved. If not – I’ll be waiting for move to 1. 2750-1.2780 and wait for sell signals there.
 

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jim deblasio

Recruit
Messages
17
EURUSD 4 Hour Bearish Divergence

Hello,

I've attached a EURUSD 4 Hour chart that shows Bearish Divergence
on an Oscillator and RSI. I know were oversold and a rally is evident
soon but I hope it makes another push down.
 

Attachments

Rubin Hood

Private
Messages
29
Sive, when you say "we can't escape the second leg of recession", do you mean we'll likely take out the March 2009 lows, or will this be a larger (38-62% perhaps?) correction of the uptrend that started in March 2009?
 

zarni

Recruit
Messages
91
Hello,

I've attached a EURUSD 4 Hour chart that shows Bearish Divergence
on an Oscillator and RSI. I know were oversold and a rally is evident
soon but I hope it makes another push down.
question is would anybody care about the bearish divergence. these indicators only matter if somebody acts on them. this is is a fundamental's driven market.
 

crstone97

Recruit
Messages
4
Divergence

Hello,

I've attached a EURUSD 4 Hour chart that shows Bearish Divergence
on an Oscillator and RSI. I know were oversold and a rally is evident
soon but I hope it makes another push down.
Nice chart, but take a moment to look at your RSI low on May 4th, then with a new lower leg by ERUUS on May 18 gives a great picture of Bullish divergence....what you are showing to me is a weaking signal and not true bearish divergence as you have no new low to come before the next high...just MHO
 

crstone97

Recruit
Messages
4
Your Technical analysis

Fundamentals
Although it seems on the surface that crisis peak is gone but there are many flows underwater still. I think that risk aversion will continue in nearest future and it will remain a dominate driver of trade. USD and JPY will be in favor compare to other currencies. But what is a more important for us, is that trading will become more choppy and unpredictable due to possible Central Banks interventions.
I think that great reassessment of global recovery is underway – we all see how commodity currencies were hit and those who associates them with recovery (commodity should grow when economy recovers, so as commodity currencies) and invest in them will have to revaluates their positions and may be even capitulate. To my mind those cloudless optimism about world economy recovery that just was spread in the air month ago disappeared. So, let’s talk about a Europe. What are the positive signs? Germany has approved its stake in Euro rescue package; it shows somehow that probably EU leaders really what to preserve EUR and EU itself. Population, in general, supports austerity measures. Maybe due permanent short term successes we even will see some up bounces on EUR/USD. But what is from the other side? First, we can forget about previous estimations of ECB tighten and EU economy recovery pace. I expect that there will be some release for EUR while investors will switch their attention from EU crisis impact on world economy to impact on EU countries themselves. And when this switching will be finished – fundamentals will take a lead. I do not wait any positives from this switching. EUR should go down further. There will be no panic, it will be gradual strong pressing move down. And I will not be very surprised if I’ll see ECB interventions in near term. SNB has made it absolutely public, ECB can join to SNB, or it can act alone, this is not the point. The point is that I expect that we’ll see it. EU officials more concern with the pace of decline of EUR rather than its real value. BoJ also can return to this practice because Japan economy is a pure export one and exporters are already starting to grumble.
And what are possible consequences can be for other countries? First, it’s obvious that we can’t escape the second leg of recession. It’s underway now. Second, current EU crisis can lead to scrutiny assessment of other countries that has solid Debt/GDP ratio. When this assessment will be done this crisis can spread like a fire in the forest. I think that UK is the next country. US will be the last country. Meantime, US have to pay in debts about 2 trln. in 2010 only. But, USD is a world reserve currency, US in fact have no currency risk, because they issue USD and formally can print as many as they need. The whole world depends from USD, it uses in international trading etc. At the same time possible banking reform in US and EU can lead to serious negative impact on banking development, credits and loans etc. But all this stuff is too long-term to talk about it right now.
As a conclusion I what to say following thoughts:
- I expect possible ECB interventions in foreseeable future;
- Fundamentals will take a lead role and will start gradually press on EUR, while first shock has passed;
- Investors will switch their attention from World economy to particular countries that are in epicenter of a crisis. Starting to do this, it can lead to scrutiny analysis of other countries with large Debt/GDP ratio and possibly next currency will become GBP.

Technical
Monthly
This is a monthly chart. Trend is still bearish. I’ve told a million of times, that although market is extremely oversold, it should go lower and clear stops below 1.2330. Finally we had saw this and market has started to show some signs of retracement higher. Surely we do not see it on monthly chart, because it rather long-term, but we can see that market has bounced from Fib support level at 1.2197 and extreme oversold level. So, long term traders can look for Buy signals on lower-term frames. In fact, this huge move down was not a simple down trend, it was and it is still run into quality and it becomes calmer because starting panic has lost its pace. But if we’ll look at previous pullback – it was very strong and potentially, we can see similar picture – retracement as far as to 1.35 level. But for now it’s just an assumption that is based on quality of down move and its fundamentals.

Weekly
This is a weekly chart. We have strong bearish trend. Market has bounced up from Fib support after previous lows were Washed and Rinsed. So, this is potentially bullish sign. There are two strong resistances at weekly chart, that can be achieved in nearest couple of weeks 1.2780 area, Fib resistance and monthly support 2 level and, stronger one – 1.3070-1.31 Fib confluence resistance and Pivot support 1 level. At the same time, it worth noting here that previous move down was strong and I will not be very surprised if market will show new lows after small retracements. I do not want to tell that it will be anyway, but it happens very often.

Daily
This is a daily chart. Trend turns bullish. Although I do not see any particular signal at monthly and weekly, but daily gives us some possibility to trade. First of all, we see strong up move, but for now I do not want to buy. There are three reasons for this. Fist, market at daily overbought and Fib resistance at 1.2600. Second, weekly Pivot for current week at 1.2467 level and as I’ve said many times, pivot points are traded during the period with solid probability. And third, from tactical point of view, I do not buy the first pull back, because market mechanics tells me that during first pullback new shorts will be enter market. That’s why I will try to sell in the beginning of the week, in fact I already have short position that I’ve opened on Friday. At the same time there is a risk, associated with this. Usually, when market is extremely oversold on weekly and monthly time frames, it can show stronger pull backs up before new down move. Although I’ve sold already from 1. 2550 area when market has moved below weekly pivot at 1.2613 and made not bad thrust down on Friday, it can still reach 1.2730-1.2780 area and only after that can restart down move. The possible target for that move is 1.2355-1.2370 area. The final target depends on the level from which down move will start.
That’s being said – no buy on Monday, even may be on Tuesday, sell from current levels, if market will renew down move. If it will go upper 1.2620, then sell from 1.2730-1.2780 area. Target 1.2350-1.2400 area. The real buy signal should appear at the end of the week, or even during the next one.

4-Hour
This time frame adds some details for Monday possible action. I’ve marked 1.2350 area when I’ve sold on Friday. I do not want to tell that I was right, especially now, because market do not show any down move development. Anyway, I just want to attract your attention to some moments. Fist, 1.2470 level looks strong – Confluence support and weekly Pivot point. If market will not pass through it on Monday, then up reversal and move to 1.2730-1.2780 will be very probable. In this case, down move can start from this area – 1.2730-1.2780. Here are daily confluence resistance, XOP target and weekly Pivot resistance 1.
As conclusion – if market will move below 1.2470 target at 1.2355 will be probably achieved. If not – I’ll be waiting for move to 1. 2750-1.2780 and wait for sell signals there.
Sive, thanks for the great TA....I'll start paying attention,

Chuck
 

crstone97

Recruit
Messages
4
divergence correction

Nice chart, but take a moment to look at your RSI low on May 14th, then with a new lower leg by ERU/US on May 18 or 19 gives a great picture of Bullish divergence....what you are showing is a weaking signal and not true divergence as you have no new low to come before the next high...just MHO
based on my understanding of divergent signals....comments?
 

Dori

Private
Messages
10
Hi Sive,

What indicator you use to put those blue lines (which indicates overbought/sold zones) as in the dayly chart here?
I would like to put something like that in my charts too.
Thanks
 

jim deblasio

Recruit
Messages
17
Nice chart, but take a moment to look at your RSI low on May 4th, then with a new lower leg by ERUUS on May 18 gives a great picture of Bullish divergence....what you are showing to me is a weaking signal and not true bearish divergence as you have no new low to come before the next high...just MHO
Yes, this is a weakening signal.

The difference between the current time and the May 4th time is the May 4th RSI is well below the oversold line of 30 which indicates the pricing trend can continue downward - no entry up. May 4th marked with a limegreen vertical line (see attached), when pricing begins to move above the RSI 30 line and aligns with the histogram coming above the line on the indicator called OsMa, with a cross of the purple (MA5) line and the yellow (MA3) line is my entry for an upward move.

In the current time the RSI has already begun to turn down below the RSI overbought line of 70, the OsMa is turning down and I'm waiting for a cross down in the 5MA and the 3MA. Pricing could very well continue up for now. Sive has warned us to watch on Monday.

Sive: "I’ve marked 1.2350 area when I’ve sold on Friday. I do not want to tell that I was right, especially now, because market do not show any down move development. Anyway, I just want to attract your attention to some moments. Fist, 1.2470 level looks strong – Confluence support and weekly Pivot point. If market will not pass through it on Monday, then up reversal and move to 1.2730-1.2780 will be very probable. In this case, down move can start from this area – 1.2730-1.2780. Here are daily confluence resistance, XOP target and weekly Pivot resistance 1.

As conclusion – if market will move below 1.2470 target at 1.2355 will be probably achieved. If not – I’ll be waiting for move to 1. 2750-1.2780 and wait for sell signals there."


Over these past six months, at different points, a coutertrend has been discussed in analysis I read. But the pullback against the trend has not been very strong. But we must be mindful that the EURUSD has dropped a long way from 1.51 and might be due for a big coutertrend before continuing downward again.

I just started with Sive this week and he's talking to it perfectly.
:)
 

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Sive Morten

Special Consultant to the FPA
Messages
12,862
Sive, when you say "we can't escape the second leg of recession", do you mean we'll likely take out the March 2009 lows, or will this be a larger (38-62% perhaps?) correction of the uptrend that started in March 2009?
Hi, Rubin
Well, This statement in Fundamental part of research, so I have not thought about second leg in technical view. But, a couple researches ago I've told that i expect that market will reach an OP at 1.15 - 1.16 area.

Hi Sive,
What indicator you use to put those blue lines (which indicates overbought/sold zones) as in the dayly chart here?
I would like to put something like that in my charts too.
Thanks
Hi, Dori
This is DiNapoli Oscillator Predictor. It consists of two lines. Upper bound shows price for 1 period ahead when market will be overbought, lower bound -oversold.
This indicator is a derrivative from simple oscillator = close - 7period SMA.
When this oscillator reached maximum - market is overbought, minimum - oversold. Other words, price crosses line of the predictor ocsillator when simple oscillator reaches maximum or minimum.
Sometime ago, I use simple Oscillator (You can see it in my early researches), then I've bought DiNapoli pack for CQG. It's really powerfull and helps me much.

Sive
 
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