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During the day, I just have 4 charts open on whenever I am trading. These four charts are ES, NQ, $TICK, EUR/USD.
DISCLAIMER: Nothing contained anywhere on this site constitutes any investing advice or recommendation. Any purchases or sales of securities are solely at the discretion of the reader.
EUR/USD melting up all night. It is in a narrow up channel, which if busted to the downside will cause equities to go down. If 1.4100 is busted to the upside, bear case is over IMO, and a revisit to 930-934 is definitely on the cards.
The inverse correlation between the US dollar and the US equities has been a bit out of whack for past couple of days. These correlations are not universal and work until they stop working. One must keep an eye out for the fact that this correlation that has existed for such a long time might now be coming to an end.
At the same time, I am not assuming that it has come to an end. I will let the market tell me. I will once again reiterate “Wise is not the one know what is coming. Wise is the one know whats that he CANNOT know what is coming and keeps his mind, eyes and ears open”.
The chart that I will be watching a close eye on tonight is the EUR/USD chart. Euro currency fell in a waterfall fashion all day long only to reverse slightly – it has bounced back up from 1.3900 mark. I expect this bounce to be short lived and the downdraft to resume. Usually the trend of Euro is set for the night soon after the European markets open at 3AM ET.
I am sorry to disappoint you that I don’t have any bold forecasts here. I will however say that I am positioned for a downside move tomorrow (Thursday) and possibly a test of May lows either tomorrow or on Friday. Should we start moving down, I will close 50% of my short positions at Monday’s lows and the remaining 50% at SPX 875-880 region.
Interesting stuff happening in EUR/USD. We are still within the small uptrending channel within the big downtrending channel. However, we are at a point where decision needs to be made soon. The upper line of the downtrending channel and the lower line of the uptrending channel are about to intersect creating a squeeze. As a result, one of those two lines gets busted. Which one is it going to be – being the wise one, I DO NOT KNOW. However, we should have a resolution soon after trading starts in Europe.
This is what the hourly chart of EUR/USD looks like:
If we zoom into the portion on the right, this is what we can see. We have had a small breach of the uptrending channel – let us see if this breach holds. If it holds, then the next key level n the downside is 1.3800. If the small big channel gets busted to the upside, then the key level is 1.4100. If you liked what you saw, please do share some love 
UPDATE Jun 21, 2009 6:30PM PT: As I fight with my internet connection, I can see on my cell phone that EUR/USD has dipped another 20 pips taking ES and NQ into red.
UPDATE Jun 21, 2009 7:00PM PT: Someone pointed out to me that the mini uptrending channel could be drawn with a less steep angle. Here is what the chart looks like if that channel is drawn in the alternate manner. In fact I like this less steep channel as it has less breaches to the upside and the downside. However, this does not change the big picture, which is that we are at a point where we are about to see a resolution one way or the other… Of course, one has got to watch out for head-fakes.
UPDATE Jun 21, 2009 11:17PM PT: As of this moment, EUR/USD is down 81 pips, GBP/USD is down 45 pips and the dollar index /DX is still down – I don’t get this ????
For last 3 weeks, EUR/USD is in a wide downtrending channel. And there has been a broad-based weakness in the equities in keeping with the dollar-equities inverse correlation that has existed.
For last 3 days however, EUR/USD is within a mini uptrending channel within this downtrending channel. Note that within the mini channel, EUR/USD is at the bottom of the channel. So, some upside is expected in the futures overnight. However, EUR/USD will hit the top of the big downtrending channel and should start a big move down to 1.3500 which I have talked about in my prior posts on EUR/USD – this move may begin tomorrow or on Monday following the Opex. And this move should be accompanied by a visit to SPX 875-880.
If you found something useful here, please do share some love.
Reminder: Short Term = a day or two
EUR/USD has managed to bust 1.3930 level in the Globex session. This level of 1.3930 was posing a strong resistance for past 2 days. Having gotten above this level, there is very little resistance till 1.4150 (170 pips)… 1.4000 “might” pose some little resistance…
Given this currency action, the path to SPX 928 or who knows, may be even 934 seems relatively clear. At the same time, one must bear in mind that the EUR/USD was melting up just like this yesterday. However, it reversed the moment European session started. Today also, there is initial reversal in the European session (looks like everyone wants to sell their currency). But, we are nicely above the 1.3930 line, which was initially a resistance and is now acting as support.
Also, some love shared will be greatly appreciated.
UPDATE 8:00AM ET: EUR/USD has been range bound within 1.3930 and 1.3980, which is a 50 pip range for past 18 hours.. And over last 3-4 hours, it has progressively put in lower highs and has even breached below 1.3930 quite a few times. This is not looking good for the bulls.
As posted last night at 10.26pm PT, EUR/USD did keep melting up till it ran into resistance at 1.3930 and got rejected strongly.
Here is what the bigger picture looks like. 1.3760-1.3800 region is turning into a formidable support, and will not be taken out easily – which means that equities might sport a bounce here and the ES 903 (lows from the Tuesday night, Wednesday morning Globex session) might hold OR if breached, then they will be breached by a small amount only, i.e. ES 896-900 might hold for a day or two.
EUR/USD is sporting a nice bounce in a well behaved manner in an uptrending channel. May be we do get a bounce on US equities Wednesday morning. For past couple of weeks, currencies have mantained the trend that they have in first few hours of the Globex session. Given this EUR/USD should keep melting up, but should soon run into resistance near the intra-day highs of Tuesday at 1.3930 (60 pips higher from where it is right now)
Here is the daily chart of EUR/USD which I have posted over past couple of weeks in my other currency updates. One can see that the 1.3750-1.3800 is a very key region. It acted as resistance on number of occasions and now is serving as the neckline for the head-and-shoulders pattern that has been completed over past 3 weeks. In the chart below, one will see that once this level gets breached, EUR/USD should get to 1.3600 in a hurry (as the move up was a quick one too).
Coming back to the chart above, once 1.3750 is broken successfully, there are two downside target possibilities (both of which I have discussed numerous times).
As always, if you got something out of this post, some love shared will be greatly appreciated. Thanks and good night.
Continuation of my previous post, where I talk about very short-term target of 1.4000 in tonights Globex session, here I am exploring short-term, intermeidate-term and longer-term targets for EUR/USD. Down-trending Line3, which marked the top in September and December, gets tested again in next few days, taking it back up to 1.4300. This should coincide with SPX high of 970 or so.
After that I foresee a quick retracement to 1.3500 to the underside of the upward channel, Channel3. This should take SPX down to 880 region. A more severe, but less likely scenario is going all the way back to 1.2500 coinciding with a much larger retracement on SPX down to 790 – 820 region. I believe that given the amount of optimism, a 10% retracement from 970 to 880 is all we will get.
I will talk about more longer term outlook in another post tonight. My longer term outlook is some more inflation followed by severe deflation. As always, if you found something useful in this post, please feel free to share some love.
