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RE: EURUSD

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Also we saw yesterday both EUR and GBP looking like they wanted to drop but then that poor US data held things up. It's a sign that even poor US tier 1 data can't halt the dollars bounce.

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While we wait for stock indices and Oil to decide what they are doing (looking OK for a turn down BTW...) I thought I just update my thinking on the EURUSD.

 

I believe we have just completed a large time frame complex wave 4 and just put in a wave1-2 retrace and are now heading down in a wave 3.  If right this move will be strong down and my Weekly chart shows me that we could make parity on this cross and maybe even go lower (it has been down to 80 before).  That's over 1000 points potential for longer term traders and my strategy is to hold the trades I took at the turn for the duration of the ride, seeking to add on retraces where sensible (using the daily chart).

 

For now we are, I feel, in thee small timeframe 1-2 of the big wave 3 (still in the 1 and looking for the turn back up).  I don't much care where it turns back up as I'm stalking the W2 turn back down after than but there are a number of candidates in the near term for this first turn as you can see from he chart below.  The tricky part will be judging the turn after that but if we can, Points! Points! Points!

 

Your collaboration on this would be most welcome!

 

 

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I can see why you would think that EUR-USD could potentially go lower. Aside from the technical analysis suggesting that, the ECB also wish to weaken the currency in order to make their exports far more competative as well as stimulate growth and get inflation up. However it does not help when oil is low and potentially going lower, if oil output is not decreased, then the ECB would have to look at other measures. From the chart, then next logical step would be way below 1 euro. Although hard to imagine, the technical analysis does suggest that this is indeed possible.



 

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..and here's my offering on the daily, expecting the turn has already been made at C to be followed by 12345 down with a drop beyond the start of the ABC up so atleast 105nn. I haven't a view yet on the placement of 1-5 I'm going to ponder that next. W3 should be strong and thats the one I'd want to be on so finding the turn of 2 being key. C

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Why is Parity hard to imagine?  Also I think your assessment places too much faith on the ability of central banks to influence the markets.  They did post the credit crunch crisis but that was because the markets wanted something to grab onto, a life raft is you will, but now the markets have run too hot with central bank stimulus and the promised economic recovery has not materialised.

 

The wheels are coming off and there is nothing anyone can do about it except batten down the hatches!

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Condor,

 

You can't place the 1-5s before they happen and you shouldn't try or it will influence you incorrectly.  If you hit a turning point use other analytical methods to identify resistance (Fibs, Trams, Historic Support/Resistance levels etc) and then use EW as a guide in flight.  Depending on whether you want to swing trade the move down or simply hold and ride, adding as you go, you will use the EWs differently.

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OK  sounds sensible, I was just trying to put out an idea of what might come next.  The idea of a retrace to atleast 105nn seems plausible tho right? (maybe a lot lower given your comment above) If it is a continuing bear trend with the ABC being a retrace. 

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Condor, The idea is sound no question.  We can never know from EW alone what is occurring in realtime (only with hindsight does EW really become apparent).  However that hindsight allows one to understand where we are in the natural market cycles and improve the odds of being right on big trend direction.

 

For me we are heading down in another motive wave from this turn (wave 3) but that is never 100% so I keep analysing as we go in search of alternatives that would negate my primary view.  I'd suggest you have a go at analysing the Weekly and Daily to see what you come up with for the longer term picture and then plot out the hourly with that in mind, updating as new price data comes in.

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I've just got on the W1 down (hopefully I don't fall off again - already had 1 failed attempt) Although I love stop losses I find myself using them too much!  I'm looking for this entry to carry me 800 pts + , don't see why not, wheesl off and all that.

Maybe I now need to wait and see if W1 materialises as hoped and becomes W2 back up then try to call the top of that for the W3 down. C

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Condor,

 

I see it going up one more time at least, probably to the Fib50% (circa 11350) before resuming the major trend down.  EURGBP is nearing a retrace rally point potential (that can happen with both EUR and GBP falling of course).  I also see GBP nearing a turn back down (Fib 76% this time).  This is all internally consistent across all 3 pairs, if EURGBP rallies then you would expect GBPUSD to fall faster than EURUSD, at least temporarily.  Also GBP making it to Fib 76% while EUR only makes 50% is consistent with GBP being stronger than the EURO vs USD. 

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On the 4 hour chart, I can see the price going up if it hits 1.3270 based on current values, looking for at least 15-20 pips profit.

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The similarity between EURUSD and GBPUSD is clear to me.  Again it looks like a complex retrace move and while not exactly the same, you wouldn't expect that, it is so similar that you have to conclude that where one goes the other will too.

 

I wont repeat the written assessment that I made on GBPUSD, all is similar.  On this one we would have to accept a near miss on the pink 3 on the Daily Triangle but that is common enough.  Stronger Neg Mom Div on the Daily here, the GBP seems to be slightly ahead of the EUR so if we do see GBP hammer down first then that could be a cue for EUR to follow.  Again I expect a stronger retrace from the EUR than GBP on the hourly but when done the wave 3 drop will begin in earnest...

 

Charts:

 

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EURUSD has just taken a sharp move down, if it breaks 11250 a significant drop could be ahead.  Would GBP follow?

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GBPUSD is currently not following the same trend as EURUSD, Brexit talks probably influencing it so I doubt it would follow suit.

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What makes you say that they are not following the same trend.  If you mean they are not exactly the same then I agree but both are showing similarities in the big picture (Daily time frame).

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Over the past week or so the trend of the pound has been up and the Euro down, if you are looking at a longer term than that, you may be right.

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Ok, I see where you are coming from and longer term for sure it perhaps looks more similar but even on he hourly chart, say from 14 April, I see EURUSD up to ECB then down about the same amount of points and GBPUSD UP to ECB then down and up to current but if it now drops, as I expect it to then it is following EUR.

 

Let's see...

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Many thanks for your post regarding divergence between EUR and GBP trends.  It got me thinking and now I am not so sure I was right that the EURO is leading GBP.  I think the forum is not so much a place to find great ideas for trades (though that is also something that can happen) as a place to find alternative ideas and challenges to your thinking that could save you from mistakes.

 

Having looked at the EURUSD and GBPUSD crosses again I now think that GBP maybe ahead of the EUR but both are on similar tracks, as I thought before.

 

I believe the EURUSD market is in a complex wave 4 retrace but unlike the GBP (see other thread - cable conundrum) I thing the EUR has another leg up to go before it completes the Wave 4.

 

Unlike GBPUSD, EURUSD has low Stochastic and RSI on the Daily (reverse with GBPUSD), which is suggestive of a rally (not conclusive of course but does match my final leg up to C/y(wave 4 end) scenario).  On the hourly I do see strong likelihood of another small leg down to the weekly support line before this final rally phase begins.  So while EUR and GBP may diverge for a while I expect both to go down in another major leg of the bear markets they have both been in for some years now.



 

 

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I can't really comment on your EW analysis as I do not use it but the Daily chart for the EURUSD has indicated it will take a fall, just waiting for the right entry point.This is possibly shorter term than you are looking at though.

 

 

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Interesting!  Looking at Daily charts suggests to me medium to long term trading.  How are you using the Daily charts for short term trading?  What is it about the Daily chart that suggests EURUSD will drop?  I see a drop on the Hourly but not on the Daily (at least not in the short term).

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The relatively recent divergence from the usual relative confluence of the GBP's and Euro's relationship with the USD would seem to be wholly Brexit driven and would make a good study on how big institutions need to trade and need to position themselves for future events.

 

Big players can't just dump big orders on the market without adversely affecting price as they get filled, they need to take time because they need to use measured portions.

Various potential outcomes get priced into the market, since the beginning of April the polls where closing as the exit vote gained support and GBP was slipping, as the polls over the last few weeks have seen a steady rise in the remain vote GBP has been rising. 

So we are seeing a steady rise in GBP due to big players moving to reposition their bets (obviously) but is it mainly due to Brexit polls? (and presidential visits). Keep an eye on it.

 

Whatever, the fact the big players have to take time, and will start early, to position ('buy the rumour') and reposition (on changing news) is what gives the retail trader their opportunity to 'jump on board' if you can spot the steady pattern they make.

 

 

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All true, in principle at least, I haven't the foggiest idea whether Brexit "fears" or otherwise are impacting GBP.  Best I can do is to consider that Brexit adds to the pre-existing uncertainty in the market place: deficit situation, low interest rates (will USD rate go up again or not?); poor economic backdrop (BHS administration is just the beginning I feel, the weakest fall first) etc etc.

 

Uncertainty usually hits sentiment to the negative side, which is what we have, and the recent rally (if you can even call it that) is just a manifestation of this uncertainty playing out in what the Elliot Wave crowd call a complex wave pattern.  Such patterns portray an extended period of uncertainty, this one after a long bear run, and only when they resolve will we know which way the trend is going (resumption of Bear or turn into Bull?).  If the complex wave plays out in the "usual" way and the EW count hold weight then GBP should break down for another strong leg into the Bear trend that has, in my view, not finished.  Uncertainty usually leads to a negative impact on markets unless or until that uncertainty is reduced (vs the price) or trumped by good news.  I can't see Brexit in or out as good news as such.  I can only imagine that the uncertainty from Brexit remains until the vote and only after that will we be able to guess what the market really thinks of the result (all other things being equal, which they rarely are...).

 

Interestingly hedge funds COT data shows increased bearishness into a level that is significantly bearish from an historic perspective.  The last time the managed money guys were this bearish was April 2013 at which point this market went on to bullish rally.  The time before was Sept/Oct 2011 after which we had a big Bear run.  Just goes to show that the professionals are wrong as much as right I guess...

 

For the moment the market is taking that final leg up I was talking about, now I am keenly interested to see if it turns at my Daily Tramline (circa 14550).

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PS: for the avoidance of doubt, I was talking about GBPUSD in response to Caseynotes comments re Brexit and divergence between EUR and GBP and not about the EURUSD, I still think that one will drop another leg then rally and then complete its complex wave after GBP.

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Coincidentally, chart today of G4 currency comparison since start of year..

 



 

 

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 I use a Bollinger Band and RSI system where if a candle closes outside of the bollinger band it indicates that the trend will continue in that direction providing it isn't over bought/sold. After this candle I wait for a specific amount of movement (depending on market/timeframe) before placing my trade. I have simplified my system a bit there are a few other factors to take into consideration but hopefully you get the gist of it.

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Thanks Bradders,

So the basic idea is that so long as the price stays within the bands the trend is intact but if it materially moves outside them then a trend change is indicated?

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Not really Mercury. It is the closure of a candle outside the bollinger band that signifies a trend not just the price moving outside the bollinger band. 

 

The trend is usually (not always) ended with at least one candle closing outside the bollinger bands too, so when looking at the charts it is good to make sure whether you are seeing the beginning or end of a trend.

 

 

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.and do you use a bollinger band value of 2 standard deviations? Thanks C

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Sorry, yes I meant candle close, price moving out and back in with a tail is not necessarily significant.  So is it just candle close that gives you the clue to a trend change or do you also use other indicators and if so what else do you use to corroborate a trend change?

 

I presume you so trade within the bands along a trend?

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