The EURUSD thread

I open here a thread on EURUSD.

I've just seen some good research in the Crypt on USD : the UBS report on the USD is a good reading and the one of HSBC is pretty interesting as well. The latter argues that even if the prospects of a double dip recession drive the stocks down in a consequent correction, the USD will probably gain initially but ultimately, the market will focus back on the weak US economy and the USD could weaken as well. Mmmmh if the stocks go up the USD goes down, if the stocks go down the USD go down, sounds like the argument I had on gold no ?

Actually I've been betting on the break of 1.50 a couple of months ago. To play a range break I like to trade 1 at the support, 0.5 at the resistance and 0.5 when the range breaks.
I started a long EURUSD @1.4704 on 24 September before it "first" reached the 1.50. Then I couldn't resist to buy a bit below 1.50 when it reached the level and got burnt on this one as the break failed. Then the first test of the 1.50 failed on 11 november (it's a First Test First Failure pattern, it happens often, i rarely play the break at the first test) and the second test seems to have finally broken the level today, we'll see what will happen.

Playing the range break, I added on my position this afternoon, half of the first one @1.5064, my average purchase price is at 1.4816 which is decent : good start as I write a few hours later, the EURUSD jumped to around 1.5140 and I was in ! A promising position, we'll see

Any thoughts on the EURUSD guys ?

Me again, I forgot to mention: while I was getting ready to add on my long eurusd position today, I received that trade idea from Calyon, nothing really new but i found the timing with my execution good. Their target is at 1.55 and then they forecast medium term the EURUSD back to the 1.40s


Strategy
> Buy EUR/USD* on a break of 1.5060, target at 1.55, and stop-loss at 1.475.

Rationale

Little technical resistance above 1.5060
> EUR/USD has hovered around the 1.5000 level through much of November. A break above the 23 October high of 1.5060 opens the way for a rapid move higher.

Correlation with risk and equities
> EUR/USD is currently highly correlated with risk aversion and equity performance. A sustained S&P 500 index above 1100 should encouragea further move higher in EUR/USD.

Policy stimulus to remain in place, underpinning risk and equity markets
> G20 policymakers reiterated at the October meeting that they would maintain stimulus measures.
> Recent rhetoric from the Fed has confirmed that US rates will be low for an extended time.
> ECB rates are also likely to stay low, but the prospect of a spread being added to the 12 month tender in December may provide a “rate differential” boost for the EUR.

Interest rate outlook
>Risk remains the key driver for FX markets, but rate differentials are becoming more relevant. Hence, the prospect of European rates nudging higher should also support EUR/USD.

* Using USD15mn face value

Hi Sauros, I totally agree all your quotes, I want to take attention to another aspect, psychological aspect, usa reaction of constantly weakening usd. Now 1 usd is almost the same value of 1 cad and 1 chf. It wasn't a soft landing and takes people reaction. It is said crisis is almost over, but not for the average people, unemployment more than 10%, more about young people. And we are talking a developped country, sorry the most developped economy in the world. I'm an outsider, only that much I know. Crisis over only for "créme de la créme", "wall street, not the main street". Because of weakening usd, probably prices are going up or will be for sure. I red articles about "fed becomes the punching bag of the congress" and its independence from usa and from the control of the congress in under question.

Anyway my point is, weak probability but some sort of intervention may come from fed about usd.

http://www.forexblog.org/2009/11/strong-dollar-policy-is-a-joke.html

Wow, one step up and 2 steps down on the EURUSD further to the stress on Dubai.
It pulled back to my breakeven before the 50-SMA hold... I would say the drop on EURUSD was limited compared to the move on the stocks and today ended with what could be the beginning of a morning star. I keep confident on my long as I guess that the situation with Dubai will eventually be fixed on next week and the move resume.
Let's wait for next week when all the guys from the US have digested their turkey and come back with the ones from UAE. Have a good weekend Fellow traders and let's get ready for action: we could have fun on next week.

almbayrak66 wrote:

It is said crisis is almost over, but not for the average people, unemployment more than 10%, more about young people. And we are talking a developped country, sorry the most developped economy in the world. I'm an outsider, only that much I know. Crisis over only for "créme de la créme", "wall street, not the main street". Because of weakening usd, probably prices are going up or will be for sure.

Wall Street vs Main Street, you raise here the key point of what is currently happening. The economic data and the "real economy" have not really improved since last year, but the market rallied, supported by the central banks that pour money to bankers to let them speculate like they did before on stocks. The market is disconnected to what really happens and I think that can only ends badly. This said, for now, the central banks lead the dance and bring the markets where they want them to go and for the time being we, speculators, if we want to profit, need to bend and follow the trend : don't fight a central bank, just trade the FED. We know that it will ultimately crash, so get ready to pull out when needed, but not yet... "Follow the trend until it bends"

seems like this week eu will break 1.52 gold 1200 aud 0.94 my only headache is swiss fx customer sentiment index, I have respect these guys opinions. They are mostly short on eu and gbp ( but long on eur/jpy strange)

http://www.dukascopy.com/freeApplets/sentiment/?type=1&wide=1

wow thanks for opening this thread, I went AWOL from markets this past week, im trying to get back in, ill contribute here once i get a deeper look at my charts.

Well it looks like the EURUSD has some trouble to beat the 1.5144 high touched before the stress on Dubai.
It looks like also that the pair doesn't benefit from ECB announcing they're closer to the exit as the particpants might stress on the impact of a premature tightening.On the other side, I observed that the correlation of the pair with the stock indices (S&P 500) is still very strong.

I still sit on my long as I guess is either the "fundamental" prospects of a rate hike in ECB can ultimately drive it up particularly if the 1.5144 breaks or the stock market can heads up or both...

Sauros wrote:

Well it looks like the EURUSD has some trouble to beat the 1.5144 high touched before the stress on Dubai.
It looks like also that the pair doesn't benefit from ECB announcing they're closer to the exit as the particpants might stress on the impact of a premature tightening.On the other side, I observed that the correlation of the pair with the stock indices (S&P 500) is still very strong.

I still sit on my long as I guess is either the "fundamental" prospects of a rate hike in ECB can ultimately drive it up particularly if the 1.5144 breaks or the stock market can heads up or both...

are we looking at a decreasing correlation from 1 or and increasing correlation to 1?

Snapman wrote:

Sauros wrote:

Well it looks like the EURUSD has some trouble to beat the 1.5144 high touched before the stress on Dubai.
It looks like also that the pair doesn't benefit from ECB announcing they're closer to the exit as the particpants might stress on the impact of a premature tightening.On the other side, I observed that the correlation of the pair with the stock indices (S&P 500) is still very strong.

I still sit on my long as I guess is either the "fundamental" prospects of a rate hike in ECB can ultimately drive it up particularly if the 1.5144 breaks or the stock market can heads up or both...

are we looking at a decreasing correlation from 1 or and increasing correlation to 1?

Well what's happening now is pretty interesting... as the US just post less job cuts than expected 5-11k vs -126 expected), the S&P futures are jumping and the EURUSD fell from 1.5080 to below 1.4940 as I write... Long time we've not seen this kind of correlation... Is it the end of the risk aversion play on USD and are we back to time when strong economy means strong currency ? To be followed very very closely...
Maybe there's an opportunity to go long eurusd now...

Sauros wrote:

Snapman wrote:

Sauros wrote:

Well it looks like the EURUSD has some trouble to beat the 1.5144 high touched before the stress on Dubai.
It looks like also that the pair doesn't benefit from ECB announcing they're closer to the exit as the particpants might stress on the impact of a premature tightening.On the other side, I observed that the correlation of the pair with the stock indices (S&P 500) is still very strong.

I still sit on my long as I guess is either the "fundamental" prospects of a rate hike in ECB can ultimately drive it up particularly if the 1.5144 breaks or the stock market can heads up or both...

are we looking at a decreasing correlation from 1 or and increasing correlation to 1?

Well what's happening now is pretty interesting... as the US just post less job cuts than expected 5-11k vs -126 expected), the S&P futures are jumping and the EURUSD fell from 1.5080 to below 1.4940 as I write... Long time we've not seen this kind of correlation... Is it the end of the risk aversion play on USD and are we back to time when strong economy means strong currency ? To be followed very very closely...
Maybe there's an opportunity to go long eurusd now...

no, i wouldn't jump the gun IMHO, jobs always get revised. check out this summation i found:

"The boost in service-providing jobs was mainly in professional &
business services, up 86,000 with most of that coming from temporary
help services, up 52,000. Education & health services and
government components also posted increases. However, declines were
seen in trade & transportation, leisure & hospitality, and
financial activities."

temporary help services only is a big component, and the financials are still down, and we know how much bad assets they still have. if they take another huge hit on write downs we will see more cost cutting probably. Also, for unemployment its mentioned easing, but don't forget that when calculated there are many people who have been no accounted for via definition. Just a technical correction probably (though I haven't looked at the charts).

Though, who knows, maybe if we see a few more events like this, perhaps it can be a change in trend coming... ill leave that up to you to decide ;-)

bloomberg wrote:

Improvement in November payroll numbers was due both to a less negative
goods-producing sector and a gain in jobs in the service-providing
sector. Goods-producing jobs declined 69,000 in November, following a
113,000 drop the month before. Construction jobs decreased 27,000 while
manufacturing decreased 41,000 and mining slipped 1,000.

hmm, still fundamentally not too good on the housing side with the construction side. Though interestingly the service side picked up, if this pattern can continue maybe we will see a revival in the demand story that has been lacking the past year or so

Snapman wrote:

Sauros wrote:

Snapman wrote:

Sauros wrote:

Well it looks like the EURUSD has some trouble to beat the 1.5144 high touched before the stress on Dubai.
It looks like also that the pair doesn't benefit from ECB announcing they're closer to the exit as the particpants might stress on the impact of a premature tightening.On the other side, I observed that the correlation of the pair with the stock indices (S&P 500) is still very strong.

I still sit on my long as I guess is either the "fundamental" prospects of a rate hike in ECB can ultimately drive it up particularly if the 1.5144 breaks or the stock market can heads up or both...

are we looking at a decreasing correlation from 1 or and increasing correlation to 1?

Well what's happening now is pretty interesting... as the US just post less job cuts than expected 5-11k vs -126 expected), the S&P futures are jumping and the EURUSD fell from 1.5080 to below 1.4940 as I write... Long time we've not seen this kind of correlation... Is it the end of the risk aversion play on USD and are we back to time when strong economy means strong currency ? To be followed very very closely...
Maybe there's an opportunity to go long eurusd now...

no, i wouldn't jump the gun IMHO, jobs always get revised. check out this summation i found:

"The boost in service-providing jobs was mainly in professional &
business services, up 86,000 with most of that coming from temporary
help services, up 52,000. Education & health services and
government components also posted increases. However, declines were
seen in trade & transportation, leisure & hospitality, and
financial activities."

temporary help services only is a big component, and the financials are still down, and we know how much bad assets they still have. if they take another huge hit on write downs we will see more cost cutting probably. Also, for unemployment its mentioned easing, but don't forget that when calculated there are many people who have been no accounted for via definition. Just a technical correction probably (though I haven't looked at the charts).

Though, who knows, maybe if we see a few more events like this, perhaps it can be a change in trend coming... ill leave that up to you to decide ;-)

1.49 now. while the SPX heads up, I just wonder if one will give...

a fellow trader just highlighted to me it looks like after today's data the market prices that the FED will increase the rates on May rather than August yesterday (FFIP on bbg)

The other thing: the SMA(50) hold since March and we're on it as I write !

Hi, Sauros sma50 is broken, can it be a sign for reversal in trend or it is early to say that.

almbayrak66 wrote:

Hi, Sauros sma50 is broken, can it be a sign for reversal in trend or it is early to say that.

Hey almayrak66, yes the SMA50 broke today apparently for "good" after a consequent battle yesterday to defend it (the hammer we can see on the chart landscape). I got burnt on my long EURUSD position fortunately a minor loss as the base of my position was taken 3 months ago at around 1.47.

- As I wrote before, the SMA 50 has supported the pair since March and to me it was a strong support
- The move from 1.52 to 1.47 is pretty strong and powerful as it just took a couple of days.
Considering those two points, I may have jumped the gun and traded far too soon once again but I reversed my position and am now short EURUSD. It is a short term purely technical play the time for me to assess the fundamental situation and (try to) understand what is happening... It's a bit a "trade first and investigate later" deal and if i gain the conviction that the rally of USD can sustain, I will hold the position longer and add to it.

It might be a reversal not only on the spot price but also in the risk aversion/appetite we have seen the past 9 months: when a news was positive and fed the risk appetite, it triggered the USD weakness. What happened on Friday was the opposite as the positive job figure led to its strength: it looks like the markets anticipated the FED will tighten its monetary policy earlier than expected. Maybe we're back to the pre-crisis old good days, when we purchased USD on good news in anticipation the FED will increase the rates.

We might be in the following situation:
- If there are good news on the US economy, the market anticipates the FED will tighten their policy and the USD goes up
- It there are ad news and the markets drop, the USD is a safe haven and the USD goes up as well

In other words: the USD could go up whether the markets go up or down
In such a case, it could make sense to go short EURUSD for a longer term.

a last thing: i believe if there's no reversal the EURUSD will jump up very soon and be back quickly to 1.50 (in a similar way as thanksgiving stress on Dubai). In such a case, I would be killed twice and will e hit rwice by the same saloon door, I need to stay cautious and ready to jump out from my short, particularly if it seems that the break of the SMA(50) finally fail...

Early to say that, just thinking at loud, maybe it is something related year end, closing some positions, or if correlation is broke with SPX, again it may be an early sign about stocks future. lets wait and see. Even if it is a trend reversal I dont expect a free fall.

Wow, a second consequent drop of the EURUSD today from 1.475 to 1.46 in a couple of hours after postive figures on both the US retail sales and consumer confidence. This time i'm on board!
Second time in a week that we could see both stocks and USD jumping (while the stocks tend to drop while I speak), will discuss later, I'm still in the action now
BTW, I received this alert this afternoon as it happened, I dunno what it worth

MARKET PULSE - EUR/USD

11 Dec 14:28 GMT Talk of UKRAINE's own struggles may well be the source of the extra bearish run in Eur/Usd with the rumour mill suggesting that there may be an appeal to the IMF for funds (Usd 2bln), needed to meet external obligations. This pure rumour at the present, but as with Dec markets in general, poor liquidity allowing a stop hunt lower. We would assume that sovereigns could easily win out with their presence once more noted on the bid. Not forgetting 1.4650 and 1.4600 barrier defence.

Sauros wrote:

Wow, a second consequent drop of the EURUSD today from 1.475 to 1.46 in a couple of hours after postive figures on both the US retail sales and consumer confidence. This time i'm on board!
Second time in a week that we could see both stocks and USD jumping (while the stocks tend to drop while I speak), will discuss later, I'm still in the action now
BTW, I received this alert this afternoon as it happened, I dunno what it worth

MARKET PULSE - EUR/USD

11 Dec 14:28 GMT Talk of UKRAINE's own struggles may well be the source of the extra bearish run in Eur/Usd with the rumour mill suggesting that there may be an appeal to the IMF for funds (Usd 2bln), needed to meet external obligations. This pure rumour at the present, but as with Dec markets in general, poor liquidity allowing a stop hunt lower. We would assume that sovereigns could easily win out with their presence once more noted on the bid. Not forgetting 1.4650 and 1.4600 barrier defence.

can anyone explain this terrible drop fundamentally? Im in the action too but on the wrong side -_-

on the the FXE etf im getting 145.91 *sigh

Snapman wrote:

can anyone explain this terrible drop fundamentally? Im in the action too but on the wrong side -_-

Fundamentally, it seems to me that :
- For the past 9 months, the FED printed fresh USD which drove it down and supported to a large extent the stock rally : so weak dollar was associated to strong markets. At that time when we had bad US economy news, the markets seemed to anticipate that the FED would support even more and it pushed the USD even more down.
- The last week for the first time in a while, with the much better than expected payrolls figures, we could see the opposite: good economic news drove the USD up as it looks like the market anticipated the FED will increase the rates sooner than what was initially expected.
- Today, i would say that what happened last week happened again : good US economic news (Us retail sales) drove the USD up, maybe for the same reason (anticipation of FED's tightening of its policy). It comes at a time when we have a strong pressure on Europe on the other side (Ireland, Greece, Spain...), maybe we're back to the times when we were playing with a pair a differential between two countries in a long-short way. The drop in the US treasuries might have impacted too as it might be an opportunity to get some US treasuries (in USD) but I'm bit speculating for this last point and i've no serious ground)

Back to this summer when I understood that the FED's intervention would feed the rally (and it looks like I was right, a bit late but early enough to make money ) maybe we're now in a turning point of the dynamics(maybe it's too early to speak about reversal of the EURUSD yet) that link the stock and FX markets: before the weak USD drove the stock market up, now good news may drive the USD up too. What is absolutely intersting is that the USD is a safe haven: if the stock markets drop, the USD goes up too.

As I wrote before, we might be in a situation where whether the stocks go up or down, the USD go up : so we need to monitor very closely the "stock up USD up" part.

Today I saw a fellow trader of mine very badly hurt on the EURUSD and he still sticks to his long position while I advised him to get the hell out asap (not easy to advise someone to take a huge loss), I think that technically the move of the EURUSD down is soo strong that's it's very dangerous to be against. This said, if the EURUSD is to go up again in the short term, i think it will do it very strongly.

Again a good day for my short EURUSD, the fights were close to 1.45, it looks like the move down today was triggered by the bad german ZEW and the US Producer Prices that rose more than expected later definitely didn't help as it increased the inflation concerns and speculation of an earlier FED rate rise. The more the things unfold the more the hypothesis about the end of the "risk aversion play" seems to make sense to me. On another hand, it looks like we may be in a long US short Europe situation that drives the EURUSD down.

In the shorter term and technically, the chart landscape still looks pretty bearish for the EURUSD to me the next main obstacle i can see at south is the SMA(200), if it reaches this, it's gonna have hard battles aournd (probably without me as I would take my profits there). But there's still a looong way...

Few things I noticed on the Technical side:
- Generally, when you have such a powerful move, either it reverses strongly and quickly after or it holds, hesitates and stays around and the move often resume : the 2 dojis (open=close) last week first showed obviously the hesitation of the market but mainly told me that the "come back" failed
- I consider the marubozu (wide candle with no shadow) as one of the most powerful candle pattern and it shows a lot of power in the move, particularly when you have several of them.
- The RSI which is very linked to the marubozus (that's math) is a good strength indicator but to be used on the opposite way most of people do: an oversold or overbought status shows a lot a strength in the direction of the move : I often buy the overbought and sell the oversold. To be more precise, when a price is overbought for the "first" time, I often wait for it to return to a "normal" statut to buy it: it often returns to that status shortly after
- SMA are reliable supports/resistance and particularly here, the SMA(50) hold the EURUSD for a while

Lately, every time I post on this thread, the EURUSD is 200 pips lower than the previous time... I'm still enjoying a nice ride on my short. While the technical landscape still shows a lot of strength and is quite bearish, my intention is to stick to the "short term" plan and get out soon so i can enjoy this end of year with a mimimum of open positions and merry christmas guys

At that stage, i can see 2 options:
- Either the EURUSD heads down to 1.42 and tests the SMA(200) in which case I'd probably take my profit there as I expect a serious support at those levels
- Or the move down takes a break and the pair starts rallying: provided there's enough profit to 1.42 at that time, I may consider to put more on my short.

We'll see what tomorrow will bring

Come on EURUSD buddy, just a slight effort on the way down and your old friend Sauros can have a break from the markets and get a nice gift for christmas with the money of the longs

Hey Sauros thanks, I'm on the train now, just hoping that this bright, shining thing ahead of us, is the day light!

almbayrak66 wrote:

Hey Sauros thanks, I'm on the train now, just hoping that this bright, shining thing ahead of us, is the day light!

Hey almbayrak66, It's probably the day light at the end of the tunnel

Sauros wrote:

Come on EURUSD buddy, just a slight effort on the way down and your old friend Sauros can have a break from the markets and get a nice gift for christmas with the money of the longs

Thanks buddy for the little move down I was waiting for, it looks like the 1.43-level finally broke.
I'm out and I took my profit on my short EURUSD banking a (almost) 500 pip profit: the main reason is I want to go off the markets and take a break until the next year.

The move down on the EURUSD is technically so strong that i guess there's still room for more downside, but this said, I believe the 1.42-mark and the 200-SMA level will offer a strong support and there will be battles there.
Let's see all this in 2010 and Merry Christmas Fellow Traders

The US Dollar is likely to rise against most major currencies in
2010 according to a "smiling" model of the greenback’s performance at
the beginning, middle and conclusion of major recessions in the United
States.
The ‘Dollar Smile’ Hypothesis
Intuitively, one would suppose that the US Dollar should decline if
the United States falls into a deep recession as the Federal Reserve
cuts interest rates to stimulate economic growth, making the greenback
unattractive relative to other currencies. However, a theory originally
advanced by Stephen Jen, then an economist with Morgan Stanley,
suggests something quite different. His logic goes as follows:

Phase 1:When
the United States – the world’s largest economy and consumer market –
falls into a deep recession, investors fearful that the downturn will
spread globally sell off their holdings of risky assets (stocks,
commodities) and move capital into the relative safety of cash and
government bonds. The economic and geopolitical primacy of the United
States along with the unmatched sophistication and liquidity its
capital markets means that the cash and bonds of choice in this
scenario are the Dollar and US Treasuries. This means that the
greenback should rise if the US begins to experience a deep-enough
recession to warrant fears of worldwide contagion.

Phase 2:As
the pace of decline in economic activity invariably begins to slow, the
markets become hopeful that the worst is over and capital begins to
shift out of Dollar-denominated safe haven assets and back toward
higher-risk and higher-return investments, sending US unit lower from
its peak amid the crisis.

Phase 3:Finally,
as economic recovery in the United States begins to gain momentum,
investors start to speculate that the Federal Reserve will need to
raise interest rates (which were surely lowered amid recession) to rein
in building inflationary pressure, sending the US Dollar higher once
again.

Broadly speaking, history seems to bear out Mr Jen’s hypothesis. As
illustrated in the chart below, data going back to 1970 shows that the
US Dollar Index (an average of the greenback’s value against six of its
top counterparts) is higher when US Gross Domestic Product growth rates
are either sharply above or below the average of other G7 nations; it
is lower when the difference in growth rates declines, revealing a
“convex” relationship or a “smile”:





‘Dollar Smile’ Points to USD Gains in 2010
The “dollar smile” framework seem to fit rather neatly into what we
have seen in recent years after the global credit crunch and subsequent
recession descended on the world economy. In 2008, the onset of the
crisis brought a sharp move lower in the spectrum of risky assets
mirrored by a surge in the Dollar even as the US economy broadly
floundered.
If this seemed like the last gasp of life across financial markets,
then 2009 was a collective sigh of relief. As central banks dropped
interest rates to record lows and governments frantically doled out
some $2 trillion dollars in stimulus, the sheer panic that seized
investors after the collapse of investment banking giant Lehman
Brothers began to recede: sharp declines in leading economic indicators
began to slow, credit markets showed cautious signs of life, and a
glimmer of hope began take root across the world’s exchanges. Having
stared down a near-collapse of the global financial system, investors
began piling back into risky assets, sending the Dollar tumbling in the
process.
Looking ahead to 2010, it seems we are beginning to enter the right
side of the “smile”. We find ourselves with a US economy that has put
in two consecutive quarters of positive economic growth – the latest at
the snappy annualized pace of 5.7% - as well as with a Federal Reserve
that has been actively trimming the asset-buying portion of the
monetary stimulus that was put in place amid the crisis with the
promise of ending all unconventional easing measures by March. From
there, the path of US interest rates leads invariably higher, leaving
the door open for speculation about eventual monetary tightening to
drive the US Dollar upward against most major currencies.

The EUR/USD has come under pressure as a better than expected ADP
report has fueled dollar support, making the pair a risky target for
scalpers. However, historically ahead of the ECB rate decision price
action becomes condensed creating an ideal environment for high
frequency trading. Therefore, with tomorrow’s event risk looming
traders should wait for current volatility to subside and look for the
desired price action. Additionally, downside risks may be limited as
the pair is trading in an area of former congestion with Fibo support
just below.
Key Technical Levels

Support at 1.3802-50.0% Fibo of 1.2444-1.5149 has held once and a
second failed test could lead to an extended period of consolidation.
Last time the pair traded at current levels it settled not a month long
range which add significance to its potential as a barrier for further
losses. .

Quantitative Metrics
A widening Bollinger band width is a concerning factor when
considering the EUR/USD as a scalping target. A resumption of the
bearish trend after a period of consolidation has led to one-way price
action detracting from the pair’s attractiveness. However, we are
seeing the intra-day volatility quiet which is conducive for using a
high frequency strategy. Additionally, a one week implied volatility of
9.995 is a signal that condensed price action may continue.

Read more: DailyFX - EUR/USD Presents Scalping Opportunity Ahead Of ECB Decision http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/scalping_report/2010-02-03-1710-EUR_USD_Presents_Scalping_Opportunity_Ahead.html#ixzz0eVtIIORA

Fundamental Forecast for Euro: Bearish

- Euro hits five-month low on S&P 500 tumbles
- Fear of Greek debt crisis spreads to Spain and Portugal, sends Euro lower
- Forex futures and options forecast for Euro shows many fear further losses


The Euro finished the week substantially lower against the safe
haven US Dollar on sharp declines in the US S&P 500 and broad
deterioration in financial market risk appetite. The ongoing budget
deficit crisis in Euro Zone member Greece grew beyond its borders,
causing a substantial widening in sovereign bond yield spreads for
countries such as Portugal and Spain. Arguably the worst crisis to
threaten the stability of the European Monetary Union to date, market
reactions only exacerbated losses and the Euro was especially weak
against the resurgent US Dollar.


Short-term forecasts subsequently depend on the trajectory of financial market risk
sentiment, how it relates to European asset classes and the continued
viability of the EMU. Though the 16-member Euro zone is no stranger to
turmoil, sustained budget crises threaten to shake the foundations of
the union and present real danger to the euro. Markets are subsequently
likely to ignore anything but the biggest surprises in upcoming
economic event risk and instead pay very close attention to ongoing
activity in sovereign deficit troubles. The key question rolling
forward is whether or not Greece can contain its growing budget deficit
and whether any problems in one country can cause contagion across the
broader Euro Zone. Similar budget issues in Portugal and Spain have
come to the spotlight despite their comparatively manageable fiscal
shortfalls and underline risks that fiscal troubles may spread to other
EMU members.

Greece is in special danger not only due to the sheer size of the
fiscal deficit as a percentage of GDP, but any political efforts to
institute cuts in spending and rein in the deficit have been met with
fierce popular opposition. The political deadlock is especially
troubling given that the Greek government will need significant funding
in the months ahead as the deficit grows and interest rate payments
skyrocket. If markets are unwilling to purchase Greek debt, then it
seems likely that the strongest EMU countries may need to bail-out the
debt-ridden country. Hawkish rhetoric from European officials suggests
that few can stomach any such action, and it will be critical to see
any and all developments in what remains a volatile situation across
the common currency zone.

Fundamental data in the week ahead will likely take a backseat to
broader financial market activity, but it may be important to watch any
surprises in upcoming Q4, 2009 Gross Domestic Product reports from
individual countries and the broader Euro zone economy. Consensus
forecasts call for the second consecutive quarter of Euro zone economic
growth at a 0.3 percent QoQ change. Any especially sizeable surprises
could have pronounced effects on domestic financial markets and—by
extension—on the highly risks-sensitive Euro currency. Long-term
correlations between the Euro/US Dollar exchange rate and the US
S&P 500 remain near record-highs and emphasize the pair’s
sensitivity to risk appetite. Suffice it to say, any strongly negative
GDP data releases or continued EMU deficit struggles could have
similarly dire effects on the Euro.
– DR

Im pretty bullish dollar vs Eur a few months out ... anyone else with me?

I'm with you Snapman. I foresee dollar strength.

Snapman wrote:

Im pretty bullish dollar vs Eur a few months out ... anyone else with me?

Hard to foresee where it will be in a few months while I think that in the short term it has some momentum to south. To me, all depends on how the dust settles in the Euro area, a good (at least if the markets believe it's good) resolution of the PIGS "crisis" could send it back quite high. With the current turmoil, the confidence in EUR as an alternate currency to the USD has vanished and it's being repriced, but if Europe manages to deal with its first real test successfully, it could come back powerfully.
Keep in mind that despite of the "we support a strong USD" rethoric, Obama plans to double the exports. The US debt and the losses from the toxic assets (no one knows what their value is yet) are both in USD... so a strong USD could have dramatic consequences for the US economy. Don't forget that to me the rally last year was essentially due to the USD weakness.
FYI at the moment, I'm aside from EURUSD after decent profits on the way down and focusing on my short European stocks (which is to some extent the same play)

By Anchalee Worrachate
Feb. 15 (Bloomberg) -- The euro may fall by 1.6 percent in the near term before gaining ground again, according to Societe Generale SA, citing trading patterns.
The euro, which has lost 5.2 percent against the dollar this year, may drop to $1.3485 initially or to the "lower end of the tentative declining channel" at $1.3390, said Hugues Naka, a technical analyst at SocGen in Paris.
The bottom of that channel "should contain any move below the long-term Fibonacci retracement at $1.3485 and force the euro to head north again," Naka wrote in an e-mailed note.
The euro declined to $1.3617 as of 11:15 a.m. today from
$1.3632 on Feb. 12. The currency will find support at $1.3590 where buying orders may be clustered, he wrote.
Resistance levels, where sell orders may be grouped, include $1.3635, $1.3695 and $1.3800, according to the bank.
Fibonacci retracement levels refer to a series of numbers known as the Fibonacci sequence that are used by technical analysts to identify support and resistance based on retracements of past price changes.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Who else is bearish into next week?

Bearish yes!

By Anchalee Worrachate
March 1 (Bloomberg) -- The euro may fall further in the near term to $1.3451, where buy orders may be clustered, according to Mizuho Corporate Bank Ltd.
Europe’s currency has lost 5.5 percent against the dollar this year on concern nations including Greece and Portugal will struggle to contain their budget deficits.
"There are absolutely no signs on the monthly candles that the sell-off in the last three months may be coming to an end,"
said Nicole Elliott, a London-based senior analyst at the bank.
"What we are seeing now is a deeper correction in the euro than I’ve expected. We will need some dramatic shifts in a weekly chart to be able to say the trend is reversing."
The euro decreased as much as 0.8 percent to $1.3522 today, from $1.3631 on Feb. 26. It reached $1.3444 on Feb. 19, the lowest level since May 2009. The common currency will struggle to rise above $1.3665, a level where sell orders may be clustered, according to Elliott.
A Doji candle is formed when a security closes near the previous day’s closing price after moving higher and lower during the trading session. The pattern typically occurs at the end of a prolonged trend.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Scalpuman wrote:

By Anchalee Worrachate
March 1 (Bloomberg) -- The euro may fall further in the near term to $1.3451, where buy orders may be clustered, according to Mizuho Corporate Bank Ltd.
Europe’s currency has lost 5.5 percent against the dollar this year on concern nations including Greece and Portugal will struggle to contain their budget deficits.
"There are absolutely no signs on the monthly candles that the sell-off in the last three months may be coming to an end,"
said Nicole Elliott, a London-based senior analyst at the bank.
"What we are seeing now is a deeper correction in the euro than I’ve expected. We will need some dramatic shifts in a weekly chart to be able to say the trend is reversing."
The euro decreased as much as 0.8 percent to $1.3522 today, from $1.3631 on Feb. 26. It reached $1.3444 on Feb. 19, the lowest level since May 2009. The common currency will struggle to rise above $1.3665, a level where sell orders may be clustered, according to Elliott.
A Doji candle is formed when a security closes near the previous day’s closing price after moving higher and lower during the trading session. The pattern typically occurs at the end of a prolonged trend.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

and down down we go

Batman wrote:

Bearish yes!

Done! While the odds are on your side, I'll be your counterpart on this one and will take the long side for the week (while I'll wait a bit more before taking an actual position on the market, posting at the forum is free, trading isn't). To me a weak USD is the fuel of the recovery in the US. Since the beginning of the year it has gained against Euro because of the stress in the Euro-area and today we're seeing a strong move up against the pound (a move of +400 pips in a one hour or so) on "political stress". I mean the recent strength of the USD has been out of control of the US and I think it's not in their interest : the US are losing progressively the benefits from the QE program. I guess there will a reaction from the US sooner or later : the recovery is at stake, and despite the "we support a strong currency" rhetoric I guess all fully understand the name of the game (in the West) is "we need a weak currency".
When the time to trade this will come (we still have time), I'll probably won't play the strength of the USD trading the EURUSD (the EUR has lost too much of its "alternate currency role for now), Gold?

Sauros wrote:

Batman wrote:

Bearish yes!

Done! While the odds are on your side, I'll be your counterpart on this one and will take the long side for the week (while I'll wait a bit more before taking an actual position on the market, posting at the forum is free, trading isn't). To me a weak USD is the fuel of the recovery in the US. Since the beginning of the year it has gained against Euro because of the stress in the Euro-area and today we're seeing a strong move up against the pound (a move of +400 pips in a one hour or so) on "political stress". I mean the recent strength of the USD has been out of control of the US and I think it's not in their interest : the US are losing progressively the benefits from the QE program. I guess there will a reaction from the US sooner or later : the recovery is at stake, and despite the "we support a strong currency" rhetoric I guess all fully understand the name of the game (in the West) is "we need a weak currency".
When the time to trade this will come (we still have time), I'll probably won't play the strength of the USD trading the EURUSD (the EUR has lost too much of its "alternate currency role for now), Gold?

interesting thoughts, im still bearish till wednesday, though prices are coming to a squeeze fast, i still maintain. its still tradingin in the range i expect.

http://groupanlz.blogspot.com/2010/03/eur-update-30110.html

right now its on the bottom of the channel, and will definitely bounce back, but all in expectations for me.

Snapman wrote:

Sauros wrote:

Batman wrote:

Bearish yes!

Done! While the odds are on your side, I'll be your counterpart on this one and will take the long side for the week (while I'll wait a bit more before taking an actual position on the market, posting at the forum is free, trading isn't). To me a weak USD is the fuel of the recovery in the US. Since the beginning of the year it has gained against Euro because of the stress in the Euro-area and today we're seeing a strong move up against the pound (a move of +400 pips in a one hour or so) on "political stress". I mean the recent strength of the USD has been out of control of the US and I think it's not in their interest : the US are losing progressively the benefits from the QE program. I guess there will a reaction from the US sooner or later : the recovery is at stake, and despite the "we support a strong currency" rhetoric I guess all fully understand the name of the game (in the West) is "we need a weak currency".
When the time to trade this will come (we still have time), I'll probably won't play the strength of the USD trading the EURUSD (the EUR has lost too much of its "alternate currency role for now), Gold?

interesting thoughts, im still bearish till wednesday, though prices are coming to a squeeze fast, i still maintain. its still tradingin in the range i expect.

http://groupanlz.blogspot.com/2010/03/eur-update-30110.html

right now its on the bottom of the channel, and will definitely bounce back, but all in expectations for me.

I'll agree that a significant whipsaw is possible, presenting upside risk to any shorters.

Snapman wrote:

Sauros wrote:

Batman wrote:

Bearish yes!

Done! While the odds are on your side, I'll be your counterpart on this one and will take the long side for the week (while I'll wait a bit more before taking an actual position on the market, posting at the forum is free, trading isn't). To me a weak USD is the fuel of the recovery in the US. Since the beginning of the year it has gained against Euro because of the stress in the Euro-area and today we're seeing a strong move up against the pound (a move of +400 pips in a one hour or so) on "political stress". I mean the recent strength of the USD has been out of control of the US and I think it's not in their interest : the US are losing progressively the benefits from the QE program. I guess there will a reaction from the US sooner or later : the recovery is at stake, and despite the "we support a strong currency" rhetoric I guess all fully understand the name of the game (in the West) is "we need a weak currency".
When the time to trade this will come (we still have time), I'll probably won't play the strength of the USD trading the EURUSD (the EUR has lost too much of its "alternate currency role for now), Gold?

interesting thoughts, im still bearish till wednesday, though prices are coming to a squeeze fast, i still maintain. its still tradingin in the range i expect.

http://groupanlz.blogspot.com/2010/03/eur-update-30110.html

right now its on the bottom of the channel, and will definitely bounce back, but all in expectations for me.

1.37, well it seems the first part of our bet is for me
Let's see how the week ends now

Sauros wrote:

Snapman wrote:

Sauros wrote:

Batman wrote:

Bearish yes!

Done! While the odds are on your side, I'll be your counterpart on this one and will take the long side for the week (while I'll wait a bit more before taking an actual position on the market, posting at the forum is free, trading isn't). To me a weak USD is the fuel of the recovery in the US. Since the beginning of the year it has gained against Euro because of the stress in the Euro-area and today we're seeing a strong move up against the pound (a move of +400 pips in a one hour or so) on "political stress". I mean the recent strength of the USD has been out of control of the US and I think it's not in their interest : the US are losing progressively the benefits from the QE program. I guess there will a reaction from the US sooner or later : the recovery is at stake, and despite the "we support a strong currency" rhetoric I guess all fully understand the name of the game (in the West) is "we need a weak currency".
When the time to trade this will come (we still have time), I'll probably won't play the strength of the USD trading the EURUSD (the EUR has lost too much of its "alternate currency role for now), Gold?

interesting thoughts, im still bearish till wednesday, though prices are coming to a squeeze fast, i still maintain. its still tradingin in the range i expect.

http://groupanlz.blogspot.com/2010/03/eur-update-30110.html

right now its on the bottom of the channel, and will definitely bounce back, but all in expectations for me.

1.37, well it seems the first part of our bet is for me
Let's see how the week ends now

Well as my other post said on my blog, i was only bearish till wed... my specified range was broken, but its breaking to the upside. the big question if this move is strong enough to constitute a break in upper BB which may mean continued dollar strength. also resistence levels from the previous month are yet to be tested. prices have already pulled back from 1.37 only making a lower high. Though as you said we got teh rest of the week to see how this plays out.

interesting update it seems that the weekly chart is favorable for a weekly move to the upside. Which may help determine the price squeeze on the 60 min chart. Which would mean to the upside, making you corrrect sauros sir! .... hmm

This picture will be much more clear by friday. Any big econ news coming up in the EURO zone?

Snapman wrote:

interesting update it seems that the weekly chart is favorable for a weekly move to the upside. Which may help determine the price squeeze on the 60 min chart. Which would mean to the upside, making you corrrect sauros sir! .... hmm

This picture will be much more clear by friday. Any big econ news coming up in the EURO zone?

Around 1.3617... OK I concede you a tie as I expected a move more clearly up...
The current situation is quite interesting as the stock markets soared and the EURUSD hasn't followed that much, that would confirm the risk aversion play has faded (since Dec last year).
Seeing the strenghtening of the USD yesterday while the stock markets increased triggered a long German stock index (long DAX position) position yesterday March 5th (once again i believe that the weak EUR and the situation in Greece strongly favours Germany) : lucky timing as today the DAX jumped as the German new industrial orders impressively increased (+4.3%) in the morning and good US employment data later. +100 points in a day (keep the doctor away)
My gold position (I put on more at around 1100) shows a decent gain this week (+$40) as well.
We could be in a configuration where a weak EURUSD favours gold and the stock markets, but what is great is that a increasing EURUSD may have the very same effect too

Sauros wrote:

Snapman wrote:

interesting update it seems that the weekly chart is favorable for a weekly move to the upside. Which may help determine the price squeeze on the 60 min chart. Which would mean to the upside, making you corrrect sauros sir! .... hmm

This picture will be much more clear by friday. Any big econ news coming up in the EURO zone?

Around 1.3617... OK I concede you a tie as I expected a move more clearly up...
The current situation is quite interesting as the stock markets soared and the EURUSD hasn't followed that much, that would confirm the risk aversion play has faded (since Dec last year).
Seeing the strenghtening of the USD yesterday while the stock markets increased triggered a long German stock index (long DAX position) position yesterday March 5th (once again i believe that the weak EUR and the situation in Greece strongly favours Germany) : lucky timing as today the DAX jumped as the German new industrial orders impressively increased (+4.3%) in the morning and good US employment data later. +100 points in a day (keep the doctor away)
My gold position (I put on more at around 1100) shows a decent gain this week (+$40) as well.
We could be in a configuration where a weak EURUSD favours gold and the stock markets, but what is great is that a increasing EURUSD may have the very same effect too

I did decently, i did a little better than break even. At least made profits :p . but i think the trend direction will be established into next week.

Too be honest I stopped looking at the SPX (or any other equity index) correlation. I was doing some basic excel calculations and came up with around .30 correlation past 3 months and rough same thing about a year out. Ill wait for a dollar weakness thesis to come back before considering a correlation play again. Though is possible that we will see dollar strength well into second quarter.

All in all longer term out the picture to me seems much hazier. ill be taking it week by week. ill keep you posted on my progress

This trade is screwing up my oil and natural gas trades. Commodities traders cannot figure out weather a weak or strong USD helps. IN, addition volume has been light as of late, which is impacting the volatility.

Batman wrote:

This trade is screwing up my oil and natural gas trades. Commodities traders cannot figure out weather a weak or strong USD helps. IN, addition volume has been light as of late, which is impacting the volatility.

You're right, the correlation between the commos and the EURUSD seems currently a bit mixed up.
I guess it's due to the stress in the Euro area and the drop in the EURUSD was more the drop of the EUR than the increase of the USD, and that created a bias.
I could notice this on Gold today: it seems that whether the EURUSD goes up or down, the gold goes down.
When the USD strengthens, the gold (and the commos) drops.
Now when the EUR recovers and the investors gain back confidence in the currency, the role of gold as an "alternative currency" fades and the gold drops too... I'm wondering what the best way to play this is if the situation remains (maybe a mere short gold position)

Difficult to trade the EURUSD now, as told before I'm aside from the pair and for me the no brainer has been to go long on (German) stocks (DAX) and I'm currently enjoying a good ride with my position