Forex Mind Games
Private, 1st Class
- Messages
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EURUSD in ABC correction?
There are 2 concepts to understand in trading. One, market is forward-looking. It always looks ahead. The pertinent question to ask in trading is not "What just happened?", The stock market usually looks ahead about 6 to 12 months. However, the forex market only looks ahead for the next 1 to 3 months. For example, the market has been looking ahead for ECB and FED to do 2 things since mid-July. EURUSD was expecting ECB to introduce some sort of bond buying for troubled countries like Spain. And for FED to unleash QE3 to help pull the US out of its doldrums. Both of these programs were unveiled in September, which gives the time lead of about 1.5 to 2 months. This explains why EURUSD formed an inverted head and shoulders and turn bullish on mid-July.
Two, because the market is forward-looking, the better question to ask is "What's happening next?" So what is happening next? What is the next BIG news that the market is anticipating for? The next BIG news is for Spain to request for an official bailout. So the ECB's OMT policy can be officially started. The market expectation for the bailout is a matter of when, not if. When is Spain going to ask for bailout? There is some news from the Obama Administration to delay the bailout request until after the US presidential election on 6th November. So it has to happen before or after the presidential election. From what i can gather, my best guess is either between 20-31st October or 12-16th November.
From the technicals point of view, EURUSD is in a possible ABC wave correction. The bailout request is consider to be bullish for euro. Watch for it to turn either at 1.2740-50 (38.2% retracement) or 1.2600-10 (50.0% retracement) BEFORE the bailout becomes front page news.
There are 2 concepts to understand in trading. One, market is forward-looking. It always looks ahead. The pertinent question to ask in trading is not "What just happened?", The stock market usually looks ahead about 6 to 12 months. However, the forex market only looks ahead for the next 1 to 3 months. For example, the market has been looking ahead for ECB and FED to do 2 things since mid-July. EURUSD was expecting ECB to introduce some sort of bond buying for troubled countries like Spain. And for FED to unleash QE3 to help pull the US out of its doldrums. Both of these programs were unveiled in September, which gives the time lead of about 1.5 to 2 months. This explains why EURUSD formed an inverted head and shoulders and turn bullish on mid-July.
Two, because the market is forward-looking, the better question to ask is "What's happening next?" So what is happening next? What is the next BIG news that the market is anticipating for? The next BIG news is for Spain to request for an official bailout. So the ECB's OMT policy can be officially started. The market expectation for the bailout is a matter of when, not if. When is Spain going to ask for bailout? There is some news from the Obama Administration to delay the bailout request until after the US presidential election on 6th November. So it has to happen before or after the presidential election. From what i can gather, my best guess is either between 20-31st October or 12-16th November.
From the technicals point of view, EURUSD is in a possible ABC wave correction. The bailout request is consider to be bullish for euro. Watch for it to turn either at 1.2740-50 (38.2% retracement) or 1.2600-10 (50.0% retracement) BEFORE the bailout becomes front page news.