EuroDollar appears to have bottomed

[vergis92]

Euro appears to have made a short/medium term bottom and probability favours a rally from this point, analysis on related commodities also support this scenario,
for the longer term we think Crude oil is still in an uptrend as there's no substantial
evidence suggesting otherwise

There's a lot of talk about the credit crisis reaching europe, Euro could fall further etc.
but I don't think it will, as soon as we see a valid candlestick buy signal at 1.35 level or slightly below
with similar pattern in Crude we can go long on Eurodollar






CHAMPION CAPITAL | Forecasting the US markets

 

[Rossini]

Wrong, wrong, wrong.

 

[ampro]

Euro appears to have made a short/medium term bottom and probability favours a rally from this point

There's a lot of talk about the credit crisis reaching europe, Euro could fall further etc.
but I don't think it will, as soon as we see a valid candlestick buy signal at 1.35 level or slightly below

Could you expand a little more maybe on your game play for your Eur long side?
I assume you’re advising folks build a core stake from down here someplace?
Feed in & add from where to where?

Upside/downside technicals (& resulting orders) are quite visible. You mention flipping long on a valid candlestick buy signal, but you don’t qualify what that might be?

There’s little in the way of potential bullish psychology showing up down here as far as I can see, well not on the Daily (consecutive) closing tickets anyhow – which the majority of serious money keeps one eye on.

I certainly see the value (to risk) ticket biased on the short side until some kind of tentative base begins to take shape, but I guess we all have differing views on what constitutes value & base building at various steps on the ladder?

 

[vergis92]

I look at eurodollar from an intermarket analysis perspective, as well as fundamental
information on correlated commodities, my fundamental view is that crude is in a
down correction said to end soon, my technical view is that the 1.35 talked about level
has been reached,
I'm not much of an expert in candlestick signals but there's a few ones that appear
often, the simplest and first thing to watch is the candlestick body length and wig length, on daily and weekly charts, (I look at weekly charts friday evening only, else
It's may not be credible since is still in its formation process)

My belief is that as long as crude and gold place a bottom at this level so will
eurodollar, it's a strong suspicion but here's how I play it, if I suspect consolidation
like yesterday I use overnight orders for around 100 pips, if a candle appears in
crude or other strong indicator I use, with a long wig underneath it I'd be happy
to buy Eurodollar and hold for many days, eurodollar chart may be lagging behind
and not have such candle visible but I'd still buy regardless.

it doesn't matter if the candle body is red or black, ie, price closed up or down
as long as I see a long wig underneath , ideally twice as long as the body I regard
that as a buying pressure and very likely bottom, that's a simple signal


charting eurodollar alone is confusing, you get loads of conflicting such candles
but usually only cause overnight retracement.. I think it's essential to look at
weekly chart after fridays close, and also look for such candlestick formations
on commodities on a daily basis,


Finally I look at investment bankers reports about rates, rate expecttions etc, I find them to be
in a consistent conflict and of no help in forecasting Eurodollar, anything about I.R. gets priced
in so quickly, it's not use to my trading style

 

[ampro]

I'm not much of an expert in candlestick signals but there's a few ones that appear
often,

if I suspect consolidation like yesterday I use overnight orders for around 100 pips, if a candle appears in crude or other strong indicator I use, with a long wig underneath it I'd be happy to buy Eurodollar and hold for many days

it doesn't matter if the candle body is red or black, ie, price closed up or down
as long as I see a long wig underneath , ideally twice as long as the body I regard
that as a buying pressure and very likely bottom, that's a simple signal

If you've got a plan & it affords you a playable edge out there, then I guess you're set to trot.
Thing is, we’re dealing with institutions & moneymen who are still low on confidence & trust (with each other). There’s credit & liquidity out there, but not a whole lot of confidence to back it up.

Steady, or at very least, stable equity markets will begin to encourage risk tolerance back on the table & that will be one initial clue to maybe reining in the shorts on Euro etc.

At the moment these currencies aren’t being valued on the traditional measures of regional strength/weakness & interest rate variables. Fair value is up in the air across the major spotlight issues such as debt, growth prospects, etc.

In these extreme volatile markets the psychology is still there for all to see on the specific market of choice by pulling up a (sensible timeframe) technical chart & eyeballing the price visuals if you’re technically minded.

Taking your price bar observations in isolation, that hammer type formation you're attempting to explain is one clue that momentum might be slowing to the downside. But technicians usually require back up & confirmation before getting excited about turning a strong trend like this around.

The past few days business activity isn’t flashing “buy me” just yet. Those wicks (& closes off the highs) on the last couple sessions continue to justify hanging in there with the shorts, for now anyway.

Attempting to build some kind of base or floor around current levels, and/or a determined bullish push & confident pullback test & hold, will maybe tempt a few brave bargain hunters out of the shadows, but as long as it fails to even threaten & establish dominance on near term resistance lines, it’ll continue to take on water.

Good luck with your deals

 

[ampro]

charting eurodollar alone is confusing, you get loads of conflicting such candles
but usually only cause overnight retracement.. I think it's essential to look at
weekly chart after fridays close, and also look for such candlestick formations
on commodities on a daily basis,

I agree, sometimes the landscape can be littered with traps & conflicting information. You can have as much back-up & complimantary measures as you like, but occasionally, the market will simply p*ss all over you just because it can!

You can still gauge & measure the temperament out there with a few minimal (reliable) technical markers if you care to.

A couple trusty old friends being the daily & weekly goings on in the Futures market via the $INDX married up with your favored pairings.

Again, the psychology, which of course is a major influence on the market, is evident as prices butt minor & major levels up & down the ladder.

What you do with it & how you play it is obviously wholly dependant on your edge/triggers/aims/plan – call it what you will.

Some folks require more confirmation, some don’t – again it’s all down to your experience, strategy model & your time to risk ratio’s I guess.

The type(s) of confirmation I was referring to in that last post about changing tack, are highlighted in the visuals below (if Euro was/is your preferred instrument of choice).

Obviously, it’s not the be all & end all, but if you’re seeking a little likewise technical conformity, you could do worse than pitching it up against the Dollar Indx to gauge (dollar) sentiment every once in a while.

The candle/bar reversal behavior often bandied about at or around turns in the market was certainly in view down there around the 71.5-72.0 base thru the summer.
The higher low closes off 72.0 married the double top check-out on EU spot, with those bearish piercing candles playing out up at 1.5900 following that sweet low close doji.

Unless we experience a real aggressive V kick reversal with strong bullish participation off the back of this Euro sales ticket, then that type of technical behavior is another small measure which can offer a green light to begin consolidating (short) profits & feeding into reverse longs as momentum shifts back against the buck.

Genuine money switchbacks take time to play out whilst profits are banked & positions unwound. There's usually second & third etc bites of the cherry to be had if the intent is true. Well that's I've found anyhow. Sometimes it pays to be a tortoise

Anyhow, it all adds to the pot as they say…….use it or bin it

 

[vergis92]

1 strong candlestick reversal buy signal has appeared on one leading indicator
as well as a bearish divergence on USD, I'm still expecting at least a bounce on crude and Euro next week, upside target is unknown, longer term trend for crude is up since fundamentals haven't changed,
if that proves correct Eurousd will revisit previous highs in comming months or may just form new trading
range above current level

 

[Rossini]

Funny that 2 people can look at the same information, and can come out with opposite views.



I think the trend for Oil is down, at least until the world recovers from this situation which could be a long time. It may even reach 40DPB if the down side had as much momentum as the upside did.

 

[vergis92]

Funny that 2 people can look at the same information, and can come out with opposite views.

It's not just us, even investment banks give seemingly conflicting reports, 2 weeks ago UBS was confirming that crude is in up trend while PNB-Paribas was calling the euro
rally a correction, either one of them is wrong or they are addressing slightly different
time frames... PNB-Pariba report was confirmed on Eurodollar by technical charting
and a very clear lower high so I took them seriously...

Crude drop has little to do with slowing economy and a lot to do with speculative
trading, is actual demand really going to slow in China and India? I doubt it,
crude fair value is at around $80 (based on these supply and demand forces) but
as soon as investor uncertainty is removed they will only bid it higher

 

[Rossini]

Funny that 2 people can look at the same information, and can come out with opposite views.

It's not just us, even investment banks give seemingly conflicting reports, 2 weeks ago UBS was confirming that crude is in up trend while PNB-Paribas was calling the euro
rally a correction, either one of them is wrong or they are addressing slightly different
time frames... PNB-Pariba report was confirmed on Eurodollar by technical charting
and a very clear lower high so I took them seriously...

Crude drop has little to do with slowing economy and a lot to do with speculative
trading, is actual demand really going to slow in China and India? I doubt it,
crude fair value is at around $80 (based on these supply and demand forces) but
as soon as investor uncertainty is removed they will only bid it higher

Crude was so over priced at just under $150 that it had to have a correction at some point! But do you not think the fact that crude has dropped is because of speculative trading that the western economies are and will slow further? And if so, who will China and India sell to if there is less demand for all they sell? So it is fair to asume that based on supply and demand that crude will fall much further. However at the present time I agree $80DPB seems fair

 

[vergis92]

Crude was so over priced at just under $150 that it had to have a correction at some point! But do you not think the fact that crude has dropped is because of speculative trading that the western economies are and will slow further? And if so, who will China and India sell to if there is less demand for all they sell? So it is fair to asume that based on supply and demand that crude will fall much further. However at the present time I agree $80DPB seems fair

From what the energy analysts have said time and again, India and China a total
of two billion people are making a slow transition 'from bicycle to car' which is only
starting to happen, combine that with increasingly higher drilling costs....
they don't see a sustained low priced crude, Oil countries assure they have a lot
available to drill but haven't independently proved so, neither are counting on extreme drilling costs, higher shipping costs etc. experts are worried that the actual drillable
wells will fall short and we are in for a big energy crisis surprise, not right now
but it's bound to happen in coming years.
The economic slow down in Western europe and the US is a minor detail compared
to the size of the two asian giants, it will only stop if their economies really slowed
down and stopped attracting as much foreign investment, jobs.


The thing is, if the inverse correlation is strong between Oil and dollar it won't
really affect Europe as much as US dollar countries

 

[Depth Trade]

There's no correlation between dollar and oil.

There was at one time, but that was a long time ago.

That strategy and correlation was one of the first to be completely diluted, the correlation has been completely drowned out.

,,along with Gold.. etc, etc.

 

[vergis92]

There's no correlation between dollar and oil.

There was at one time, but that was a long time ago.

That strategy and correlation was one of the first to be completely diluted, the correlation has been completely drowned out.

,,along with Gold.. etc, etc.

There's a correlation but disappears or changes during period of uncertainty, wars etc.
there's no one magic , 'one size fits all' formula but it's obvious that the US dollar
is still seen as a safe heaven and that's why it rose recently, as did gold while
stock markets plumeted

whenever there's wars in the middle east both gold and crude rise,


if we return to the pre economic credit crunch period crude and gold will most likely be
inversely correlated to the dollar moves again

 

[davidnmfarrell]

I suppose it's easy to point this out now but EURUSD is at 1.2861 right now... a brave and unfulfilled prediction Vergis!

 

[vergis92]

I suppose it's easy to point this out now but EURUSD is at 1.2861 right now... a brave and unfulfilled prediction Vergis!

yes it was brave, that's how I read the market, if an expected move doesn't
happen within 3 days... is dead, let alone two weeks.
Did we get a candlestick buy signal below 1.35 I was supicious about?
yes, and then a full retracemnet of weakness suggesting reversal,
decline was expected after last weeks sell signal, and actually suggests a target of
1.2400 now,

the report I have been given called for Eurodollar 1.35 for a good reason
and a very likely bottom but you need real time technical signals to confirm
exact days... and I'm suspicious of such reports cause they have anticipated
sudden crashes long before they happened,

 

[vergis92]

The only reason USD is rallying now is because of it's safe-heaven status at times of uncertainty,
if uncertainty stops and I don't know when this will happen, speculators will turn back to pouring money into crude, Crude drop has little/nothing to do with 'falling' demand, economic slow down!

 

[andys0506]

This pair has shown no signs of bottoming.
Watch tomorrow as we can expect to see 1.2641.

 

[Rossini]

The only reason USD is rallying now is because of it's safe-heaven status at times of uncertainty,
if uncertainty stops and I don't know when this will happen, speculators will turn back to pouring money into crude, Crude drop has little/nothing to do with 'falling' demand, economic slow down!

The drop in crude of 58% has everything to do with the fundemental fact that economys all over the world are slowing. How can anyone dispute that?

 

[vergis92]

The drop in crude of 58% has everything to do with the fundemental fact that economys all over the world are slowing. How can anyone dispute that?

Wrong! speculation drives prices more than anything, was it a sudden booming global
economy that got it to $147??
as soon a as uncertainty ends dollar will go down and crude up, there's no justification
in the credit crunch or anything... certainly there's no proportional drop in consumption and demand for oil to justify a 50% drop, just they started losing money, taking profits and poured money into safe USD and Gold
The energy crisis too is still to come and we haven't seen anything serious yet but it will appear slowlly
and steadily

 

[Rossini]

Wrong! speculation drives prices more than anything, was it a sudden booming global
economy that got it to $147??
as soon a as uncertainty ends dollar will go down and crude up, there's no justification
in the credit crunch or anything... certainly there's no proportional drop in consumption and demand for oil to justify a 50% drop, just they started losing money, taking profits and poured money into safe USD and Gold
The energy crisis too is still to come and we haven't seen anything serious yet but it will appear slowlly
and steadily

Speculation in crude was the reason why prices went up to around 147 but it is much easyer to justify the current price of oil on fundementals than the highs of earlyer this year!

'certainly there's no proportional drop in consumption and demand for oil to justify a 50% drop' I agree there has not been a 50% decline in the consumption of oil- thats obvious.

The face remains that the 50% decline was justified because it was so overblown in the first place.