“I think that gravity sets into everything, including careers, but pendulums do swing and mountains do become valleys after a while… if you keep on walking.” – Sylvester Stallone
Good evening. I hope everyone is fine today. It’s been an interesting day, so far, as the dollar continued to depreciate across the board and some important levels have been brought into play. In what follows, I will discuss the EURUSD and post some interesting charts – updating the last short-term charts & setups I posted some days ago.
Here we go. Euro’s action today against the dollar was encouraging to the bulls in the first part of the day, but another failed attempt against resistance @1.3430 occurred so things don’t look much different than they did last Friday. As mentioned in my morning article today, my plan was to buy EUR on break higher, towards this resistance line at 1.3430. And it was a good plan. I was looking at a bullish setup also on Monday, when buying on pullback at 1.3230 seemed a decent bet. Well, it certainly wasn’t a bad plan – though price pulled back “only” to 1.3245 – a few pips away from the level I was monitoring, in order to buy the dip.
A trader friend asked me why I am looking for buying setups – since the Eurozone has big, big problems and the domino effect is more than obvious. So I take this opportunity to explain my rationale. Judging by recent market action, statistics and overall news sentiment – it was (and still is) quite clear that most people look to sell the EUR on every single upside action – and a bell should ring when most people do the same thing, hence becoming more cautious and slightly courageous. As a momentum trader, waiting for breaks out of the range and challenging previous lower highs or tops is more important than focusing on all the news, data releases and balancing other factors meant to influence the market.
I use to tell myself and other people that when a chart doesn’t tell you much, it might be a good idea to flip it upside down – maybe then it might provide you more clues. So this should help – if you are biased for trading from the short side (due to news, fundamental conditions, expectations etc.) in a bull market (EURUSD short-term). That’s why I suggested to take a look at the USD Index chart (inversely correlated to EURUSD as per the chart below), because it doesn’t seem too bullish nowadays and is rather showing a big warning sign – signaling a potential breakdown.
- EURUSD Vs. USD Index 1-18-2011
Since last attempt to break above 1.3430/50 failed once again today, that level remains on my watch list, therefore looking to buy higher. I will post updates, as usual, in my morning reports.
- EURUSD daily chart 1-18-2011
Now let’s take a look at some of the up-to-date versions of the charts I posted few days ago.
GBPUSD
Cable was a great performer lately and trades above previous lower high. Though – today’s candle might suggest exhaustion, likely to result in a pullback towards the 1.57 region.
- GBPUSD daily chart 1-18-2011
NZDUSD
The Kiwi dollar slowly climbed into the .7700 region to test the falling trendline connecting previous monthly tops.
- NZDUSD daily chart 1-18-2011
USDSEK
- USDSEK daily chart 1-18-2011
GBPCHF
- GBPCHF daily chart 1-18-2011
CHFJPY
- CHFJPY daily chart 1-18-2011
USDCHF
- USDCHF daily chart 1-18-2011
EURCHF
- EURCHF daily chart 1-18-2011
Silver
- Silver daily chart 1-18-2011
USDPN
- USDPLN daily chart 1-18-2011
Have a great evening and see you tomorrow!
Liviu,
great post on the Euro and thanks for sharing your thoughts on it. I appreciate how you showed us the dollar index along with the Eur/Usd chart that gives us some more clues. I think that with the Eur/usd it will be difficult to see a trend develop either way because both currencies are in such bad shape. If we begin to see signs of one currency starting to improve over the other then I would look for a new long trend to develop.
The last thing to note is the 4hr candle produced another recjection of the 1.3450 area so if that area holds we could range trade for a while. If it breaks I think we will see 1.3800
thanks
Casey
Thank you for your comment, Casey
Yep – it's not a matter of which currency is in a better shape but rather which is in a worse shape. Since No News is Good News for the EUR lately – as long as the rating agencies and the news cannonballs are not primarily doing what they do best – there's more room for a correction to the upside. Although my primary goal is to look for dollar short opportunities, I'm very cautious, being aware it's not the time yet to yell full volume "buy, buy, buy!" (whatever currency against USD).
Good luck!
I agree with being carefull about the USD. Things could be tricky and the breakouts might pull back deep into consolidation. But I'm also eying these levels on daily charts. If they give way, following trends should provide plenty of good opportunities. Great job!
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Hi Liviu.
Great post! There are definitely a lot of really good setups from a technical perspective but EU really seems to have an issue with clear direction at the moment. It did have a really good cup & handle formation on the 1-hour time frame (zoom out on MT4) which could indicate possible further upside, but right now it just seems resilient. I guess I am on the side line for now just waiting a bit for a better setup..
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Liviu, are you really trading SEK and PLN crosses? Which platform are you using? On mine (I use Saxotrader) the the spreads are prohibitive (40 and 36 pips).
Hi Daniela.
Yes, I have them in Oanda. Spreads are high comparing to majors, yes, but on positions held for longer time periods it shouldn't matter that much (due to larger targets and stops)
Another reason (the main reason, in fact) I post my views on SEK and PLN is because there are many readers form those countries – especially from Poland
Afternoon reading:)
http://www.futuresmag.com/Issues/2011/January-201…
Great comprehensive views. I like it when you mentioned that if one does not see anything on the chart, getting clues from elsewhere may help. The USD Index definitely looks like it is going to bear anytime soon. Guess we shall all stay tuned!
Hi, thanks for commenting
The dollar index is still in bad shape and today's recoveries of both EUR and GBP are quite interesting. It's still early to say they're not due for larger pullbacks, though… and metals are not helping