Opinions on Euro

I am almost exclusively a TA trader. But I stay current on FA to correlate market sentiment with the TA. The purpose of this post is to solicit opinions on what is happening with the EurUsd pair. It makes no sense to me and perhaps I am overlooking something.

1. The ECB is continuing QE and even now, discussing a further rate cut (in the news this morning)
2. Europe's economy continues to show weakness
3. The US economy, while not sprinting out of the gate, shows mild stability
4. The Fed has raised rates and is speculated to continue, even if at a more subdued pace and perhaps later in the year

These factors alone should be keeping the pair in the range it was in at the end of 2015. Yes, oil, China and the stock markets, etc are wreaking havoc on all markets. But the recent push to 1.13 (today) just doesn't make any sense to me. Technically, it is defying overbought conditions. Divergences don't result in anything significant. Depending on the timeframe, price action seems to mean nothing, unless you're looking at weekly or daily charts - but then I go back to the FA for a reason and can't find one.

Huge short squeeze?
OR
A safe haven in these economic conditions? Really?

The EU has been my "go to" trade but I have not entered for caution that it could reverse at any time or just keep going up. I feel whatever position I would take would be too risky. Meanwhile, the Yen becomes a safe haven too? What?

I invite anyone to make sense of this. Please enlighten me and probably many others.

Hi WD

Look forward to explaining how I see it some time later on today

Still trading up to London Close and need over half an hour to try and explain etc

Yes it makes sense to me - in terms of PA - TA and maybe to a part even with FA etc

Regards

F

You're completely right on the pressures for the euro to weaken from here, especially as Kuroda has basically given the greenlight for Draghi to move to negative rates. But... weak euro was already a crowded trade and this is more about USD weakness than the euro.

First the single most crowded trade in all asset classes is long dollar. There is virtually no speculative capital that can be added to that position, it is several standard deviations away from its long term averages. So positioning is massively against further dollar strength unless it's from genuine trade or capital flows.

Second, there are serious doubts about the state of the US economy, while some indicators are ok, others are flashing red (manufacturing PMI and company results suggest the US has gone into a manufacturing recession). The consumer is not bailing out the corporate sector because they are using things like the 'oil dividend' and better wage growth to delever household balance sheets that remain bloated post the GFC. Over the last few weeks, economic forecasts for the US for this year have been slashed. And consensus which was for four rate hikes this year (ha!) are coming down too, to between zero and two. If the US slips into a full recession (a 20% probability according to models), the Fed has no normal policy tools as it never normalised interest rates in this cycle. Hence real fear that it may be forced to go 'unconventional' à la Japan and Europe. In short all that puts huge pressure on that consensus long dollar position. The Yen strength you mention is largely a result of the flight into JGBs today. - you probably saw the news, today it became the first G7 10-Yr to trade at negative rates.

In short, this is more about dollar from here than the euro, and volatility is going to massive around data releases from the US elsewhere where it helps fill in some of the blanks.

Erasmus
(A fundamental trader)

Interesting and well rounded outlook. Given the current conditions and your fundamental analysis, where do you see it going this year?

There are some (perhaps many) that still see parity for the Euro. That said, Goldman bailed on their short position this morning when they had called for $.95 by year end. Sure doesn't make them an expert...

We are reminded of the August run to 1.17 on long dollar unwinding and market turmoil - it went back to 1.11 within a week and ultimately back to 1.05 by December.

So what now?

Forexmospherian said:

Hi WD

Look forward to explaining how I see it some time later on today

Still trading up to London Close and need over half an hour to try and explain etc

Yes it makes sense to me - in terms of PA - TA and maybe to a part even with FA etc

Regards

F

Click to expand...

Hi WD

First of all - I would agree with the previous comment from Erasmus with regards to the Fundamental side and the negative problems of the US Dollar in Presidential Election year.

With regards to the other factors that do have an effect on the EU prices - we have the TA - and I like you WD are more interested in what happening in the charts every day involving PA and of course manipulation - whether either form - ie legal by large players stop hunting both Bulls and Bears - and other forms of manipulations involving dark pools and even central governments.

Basically to me - It all make sense in the charts

I am more of an intraday trader then a swing or position / long term but the PA as made sense to me and I will explain it more in 3 main charts -

Monthly - 12hr - 6 hrs

First with the big stuff and the monthly - yes in a down trend as shown by the down trendline - but with a low last year that was followed by a HL at around the 1 500 area.

The 12 hrs breaks it down from the Low and Higher low and then on to a HL - all price action signals of an up trend

From December 2015 we started a turn and so far of the 6 weeks of 2016 its been in a up trend with HL's and HH's

If we then go down to the 6 hrs you can see it clearer . For me intraday I use a tick chart and most frames under 3 mins - simple because I want accurate entries with super tight stops to make several intraday trades with many making anything from a RR of 4 up to even 20 on some occasions based on stops from 3 to 7 pips.

If we go back to that high late year around 1700 since then we dropped to 500 ish - so a 1200 pip range

Many bears would not expect price to bounce up over 50% of range so say 600 pips and that makes around 1100.

Its important to remember that this is a very large Money game played by Governments - large Banks other loads of other commercial businesses - including large Car manufactures ( Porsche made more money on FX some years than they did selling their cars ) and large players play games when they know were all the money is based on stops etc

So there was large temptation to get price back over 1100 after spending so much time in the 750 to 1000 area and really the LH could be anything under 1700 next.

If we did go on after several pullbacks down to say 1050 or 1100 and try over both 1600 and 1700 - then we enter a different ballgame - and back to my monthly chart with another down TL

Today we have been up to 1338 area - many are expecting 1400 to 1500 and then if the big players think the dollar looks tp be improving and too many are buying the Euro - they might decide to take it all the way back to 600 area - ie back in down trend and keeping to LH's under 1700 and LL's under 800 and 700 - but still staying over 450 / 500 - so to carry on with the game again

Here's my charts

Monthly -




12 hrs -




6 hrs -

Wicked_Daddy said:

Interesting and well rounded outlook. Given the current conditions and your fundamental analysis, where do you see it going this year?

There are some (perhaps many) that still see parity for the Euro. That said, Goldman bailed on their short position this morning when they had called for $.95 by year end. Sure doesn't make them an expert...

We are reminded of the August run to 1.17 on long dollar unwinding and market turmoil - it went back to 1.11 within a week and ultimately back to 1.05 by December.

So what now?

Click to expand...

With the euro, who knows. Does Draghi go ape**** before Yellen turns doveish again? From a fundamental perspective I'd short sterling instead against the dollar or - if you can - CNH. I'd leave the euro alone (fundamentally speaking).

Wicked_Daddy said:

These factors alone should be keeping the pair in the range it was in at the end of 2015.

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Who says that was the right price and today's is wrong?

In general price is right every time it prints but I think they got a bit carried away at the end of 2015 and perhaps today is more normal, if that exists.

Erasmus said:

With the euro, who knows. Does Draghi go ape**** before Yellen turns doveish again? From a fundamental perspective I'd short sterling instead against the dollar or - if you can - CNH. I'd leave the euro alone (fundamentally speaking).

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Yep. I have taken to my other favorites, EurGbp and NzdUsd. I am also intrigued recently with EurCad, only because the daily pip variation is so wide. Could be fun.

On Draghi: I don't think he'll let the Euro get too far. That would defeat the current and mid term path of easing. March comments should motivate a return to the previous range if it hasn't done it on its own.

Thanks F.

As usual, very thorough and thanks for taking the time to delve in so deep. My technicals line up closely with yours and I suppose I agree with them. In the end, it still surprises me how the market reacts to the various inputs. Logically, while the technicals always tell a story of price action, price action tells the illogical story of human emotion. Therein lies the conflict.

I am not an emotional trader. But the market is an emotional thing and sometimes I just don't get it.

NickBk said:

Who says that was the right price and today's is wrong?

In general price is right every time it prints but I think they got a bit carried away at the end of 2015 and perhaps today is more normal, if that exists.

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Not wrong, just whacked. Ha ha... Anyway, I'll subscribe to the idea that "normal" is chaos and chaos is normal (per Bill Williams).

Wicked_Daddy said:

Thanks F.

As usual, very thorough and thanks for taking the time to delve in so deep. My technicals line up closely with yours and I suppose I agree with them. In the end, it still surprises me how the market reacts to the various inputs. Logically, while the technicals always tell a story of price action, price action tells the illogical story of human emotion. Therein lies the conflict.

I am not an emotional trader. But the market is an emotional thing and sometimes I just don't get it.

Click to expand...

Hi WD

Nowadays with supercomputers - the market makers and big boys have so much information to play with - and so quickly.

They know every method of trading possible and therefore have a massive advantage over a considerable size of the rest of the market and so take advantage of all the emotions and bias out in the market along with deliberately setting up false sentiment directions to catch out both bulls and bears

For example on EU - yesterday we had a new high for year and over what 4 months or so to 1338 and so if average ATR on EU is say 70 -100 pips then new bulls place stops at say 1240 or 1250 even down to 1220 and 1200

So today the market makers take the Euro down to 116o area - over 170+ pips to take out all those bulll traders

Under 1200 and 1180 we get new bear in with 50 to 100 pip stops and so the market will try and take them out by back over 1240 -60 etc

Money as to be made - what better way then seeing were most retail and small institutions are - and then expose them and take them out

Another thing - I remember being on another FX forum over 7 years ago - a US one and so many US traders would only buy the dollar - never sell it - ie a complete bias in just one direction

We could even drop below 1100 and still be with HL's on my 6 hr chart - in fact nothing to stop them taking it the rest of the month down to even 800 and starting back up again

It cannot be seen to go over 1700 or even 2000 - as that spoils the game for now on directions - similar under 500 or 400 would give too much away - but anything else is possible simply because the market makers need to catch as many as possible out - how will they make their money otherwise ?

Nowadays I am totally skeptical about anything that comes out from Governments and Banks with regards to their plans - they leave doors open to do the opposite

For me Goldman Sachs have been brilliant at it in the past - but you can only fool people for so long and so nowadays more and more traders are streetwise

I am currently selling the EU under 1250 - but will be planning to buy again above 1160 - hopefully above 1200 even.

Would only stay with sells under 1140 and 1100 - looking then to buy over 1060 etc

Above 1280 and 1340 - yes back to bull land to look at more buys etc

GL and have a good February

Regards

F

Totally agree. It's all smoke and mirrors designed to siphon money out of the small player. I just take bites out of short trends, reach a daily quota and be done with it.

Wicked_Daddy said:

Totally agree. It's all smoke and mirrors designed to siphon money out of the small player. I just take bites out of short trends, reach a daily quota and be done with it.

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That opens another question I permanently toss around with people.

If we have an edge should we not push it as much as we can?
I initially discussed this with poker players who play 24/7 as they have an edge and don't cap themselves to a daily amount.

What if we make our target in the 1st hour, should we not continue looking for more opportunities, as our next trade doesn't know it is the first or last in a day just that it is the next one that fits our criteria.

I ask as I am leaning towards the trade as long as I can and so what if I made a good amount already school of thought. Interesting to hear yours and others thoughts on it.

NickBk said:

I ask as I am leaning towards the trade as long as I can and so what if I made a good amount already school of thought. Interesting to hear yours and others thoughts on it.

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I have found that setting a target is a good discipline to have. Like my other trading rules, it keeps me focused and mechanical in my approach. That said, it is the rule I most often disobey. Mainly because if I get in a good trade that shows strength and room to move past my target, I'll let it go a bit more. A long time ago, I would trade all day. I would wake up at 2:00am (US), trade London and New York and maybe more. It felt like an obsession and much of my style was closer to gambling than what should be deemed effective trading. I needed to get control, have a plan and treat it like a business; with operational parameters, policies, goals, etc. I took a week off and developed my business plan. On May 21st of 2015 I implemented my plan. It has made all the difference in my life.

I have set hours. I have set profit % targets. I have specific pairs I trade so I can become adept at their movements. I have specific lot sizes based on account size, risk, etc. I have a chart set-up that works for me so I'm not constantly searching for the grail indicator.

Before May 21, my trading was in the negative by a substantial amount. Now all that has been recovered plus a 242% ROI, post recovery.

Now I have a life. Sure, I leave money on the table. So what. I take what I need and that's good enough. There is an opportunity every minute of the day from Sunday to Friday. I don't need them all. I need to eat, spend time with my family, walk the dog, get some sun, play with my toys... all the things I wanted to accomplish by trading in the first place.

I guess you have to ask yourself: Why do I want to trade?

Wicked_Daddy said:

I have found that setting a target is a good discipline to have. Like my other trading rules, it keeps me focused and mechanical in my approach. That said, it is the rule I most often disobey. Mainly because if I get in a good trade that shows strength and room to move past my target, I'll let it go a bit more. A long time ago, I would trade all day. I would wake up at 2:00am (US), trade London and New York and maybe more. It felt like an obsession and much of my style was closer to gambling than what should be deemed effective trading. I needed to get control, have a plan and treat it like a business; with operational parameters, policies, goals, etc. I took a week off and developed my business plan. On May 21st of 2015 I implemented my plan. It has made all the difference in my life.

I have set hours. I have set profit % targets. I have specific pairs I trade so I can become adept at their movements. I have specific lot sizes based on account size, risk, etc. I have a chart set-up that works for me so I'm not constantly searching for the grail indicator.

Before May 21, my trading was in the negative by a substantial amount. Now all that has been recovered plus a 242% ROI, post recovery.

Now I have a life. Sure, I leave money on the table. So what. I take what I need and that's good enough. There is an opportunity every minute of the day from Sunday to Friday. I don't need them all. I need to eat, spend time with my family, walk the dog, get some sun, play with my toys... all the things I wanted to accomplish by trading in the first place.

I guess you have to ask yourself: Why do I want to trade?

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Thanks for your answer.

For me I am trying to find a balance at the moment. I know I spend too many hours but I really enjoy it after years and so why not. I care about the money for sure. I am new to FX in this last year (having traded indices for 20+ years) so I get a big kick out of it and whilst I spend a lot of hours my criteria for trades stays the same so I just get more vanilla trades rather than go crazy.
When I get off to a great start is the day I keep upping the ante and have a cracking day, though I do start the next day at 0.
The mental battle is a lot of fun too, as we all know most of what we do is played in our own minds and we can be the biggest harm to ourselves at times.
Ok 02.00 here will cast an eye on the Dow for the next 30 minutes and look again in the morning.
Good luck.

Hey, if it makes you happy and makes money, so be it!

You must be on Central Time. Where?

Siberia...

NickBk said:

Siberia...

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No kidding? Damn.

Yes very serious.