Thread: Closed: Discuss EUR/USD News with a DailyFX Analyst

Hello Traders,

Though Monday's docket was light in regards to economic announcements, the calendar will heat up with three central bank interest rate announcements and a Spanish bond auction this week.

These events usually create some market volatility so trade carefully. UK Diamond Jubilee holiday reducing trading volumes so moves have been exaggerated.

For a more detailed calendar that includes medium and low priority announcements click the following link:

Economic Calendar | DailyFX Forex Events Calendar | DailyFX

Also watch the DailyFX Team coverage of these market moving events:
Trade the News Live | Forex Trading Analysis | DailyFX

30 min looks like it wants to roll over for the short term.
think will get a move lower 1.2455?

if we have a "clear" break up, it could unleash another bull run to daily S3.........

Originally Posted by EuroTraderApp

Don't worry about this Eric. This is a healthy correction and the Euro is highly likely to head significantly lower given the confluence of events in June. Rajoy of Spain has come out today urging EU members to consider a fiscal union. The market is a little bit excited but a fiscal union (if Germany agrees) will take 6-10 years. The dollar's weakness is driving the current price action (not so much Euro strength) - this is all in the anticipation that some kind of QE3 will be announced.

Stay short.

It's Seniors like you that give green horns like me the confidence to gain invaluable experience in this trade. Really appreciate it and thanks so much.

Originally Posted by jogold18

30 min looks like it wants to roll over for the short term.
think will get a move lower 1.2455?

if we have a "clear" break up, it could unleash another bull run to daily S3.........

Hey jogold, I am thinking the Euro could roll over as well as the 1.2500 whole number/round number resistance at R1 Daily Pivot standing in way of Euro rally

I like this resistance in H4 from 1,3250 highs. I have a sell position with an aggressive risk-reward. Now the currency tests 4Hour-EMA50, the resistance, R1 and 1Hour-EMA200.

Originally Posted by Gregory McLeod

Hey jogold, I am thinking the Euro could roll over as well as the 1.2500 whole number/round number resistance at R1 Daily Pivot standing in way of Euro rally

Agree................

GL..

Originally Posted by rcopadilla

Your report does make it look like you DO trade for a living. Good luck!!!
I have backtesting that indicate it is very possible to double trading capital weekly.
It only takes 10 doubles to make $1K to over $1M.

It is also very possible to halve trading capital weekly. It only takes 10 halvings to make $1M into $1K!

Originally Posted by Gregory McLeod

Hey jogold, I am thinking the Euro could roll over as well as the 1.2500 whole number/round number resistance at R1 Daily Pivot standing in way of Euro rally

it would seem like it does want too, but i have my doubts that it will break lower. i have resis turned support by the weekly pivot and on a daily TF i like further up to around the monthly pivot. if im correct with my analysis, we would get this kind of picture........



also tmr pivot will play a role as to how price will move. alot of the time during correction modes, price will respect daily pivots, (and for that matter, all diff TF pivots) so tmrw pivot will play a role as to where this baby will go if we can stay above then higher we go, if we break below and find resis then we might get a lower low towards the 1.23XX area.
im just spitting out a bunch of lines over here, cuz the first initial support is the weekly pivot (orange) from there we shall see.

anyway im done, london session is over time to pack up and relax my brain and keep them pretty pips i made :P

good day/night/evening

1.25 appears to be formidable resistance

Originally Posted by Robert Eckert

You left out the June 15th target date for Spain to sell off the small nationalized banks (the regional banks in Catalonia, Valencia, and Galicia; the big Bankia acquisition is an albatross they can't get rid of); it would be a surprising win if they get rid of all three, but if they cannot at least close a deal on the Catalonian bank it is a sign that banking insiders know the situation is much worse than is now public (although not just people in the markets but also people in the streets have been guessing that "there is more than one cockroach in the kitchen" for quite some time). Then of course June 17 is second-round French elections and the replay of the Greek elections, followed by a summit meeting on June 28. Some of the news events have the potential to be "non-disastrous" but there is nothing whatsoever that has the potential to be "good" news (except the summit announcing a comprehensive restructuring of the EU-- yeah, right).

It murdered two other things as well: the European economy as a whole, and any possibility that the sovereign debts would ever be repaid. One of the funky statistics I like is the rate-of-change of total external trade, that is Imports PLUS Exports to/from the non-EU countries, which generally has less volatility than the trade deficit/surplus (Imports MINUS Exports) since as one grows or shrinks usually the other is moving in the opposite direction; sheer population growth generally means that this rate-of-change stays positive even in bad economic times but it fell to zero or slightly below in May-June 2011. Not by coincidence, that period marked the explosion of the "indignado" protests in Spain and affiliated protest movements in Greece. These subsided in Spain until the end of 2011 (although in Greece, October marked the heyday of the fad for throwing eggs at politicians) as the euro exchange rate started to fall from the 1.40's halfway to a sustainable level, and the rate-of-change-of-trade went right back up to its usual level: EUR/USD needed to drop 2000 pips and rapidly, but it only got halfway to where it needed to be, and then reversed to go back into the low 1.40's, with the natural consequence that rate-of-change-of-trade turned around also to go negative by December. This was in the face of what should have been a "quantitative easing": the LTRO injected a lot of money into the banking system; however, the Eurocrats then essentially forbade the banks to use any of that money to make loans so that there was no effect on the economy at all, except for the markets bidding the euro back up and crushing enterprises that involved exports outside the continent. The point-of-no-return that passed last fall, without any of the Eurocrats accepting the fact (they still don't seem to get it), is that this was the last chance for any debt restructuring without mass defaults; the ECB or some such institution needed to respond by buying up a lot of sovereign debt, fully understanding that it would have to be written off, but instead there was only a modest amount of debt-paper purchases, which then stopped. The markets, if not the Eurocrats, finally recognized that the euro would have to go way lower, or die, and January saw a 1.22xx rate which would have allowed an economic recovery if it had been sustained.

The political temperature heated back up in Spain as well (along with the "colorful" but not really very meaningful Berlosconi meltdown in Italy), but the worst events were mainly in Greece, which saw protests escalating to rocks and firebombs, while the political parties gave up on the concept of governing, turning over the prime minister's office to an economics professor, poor Lukas Papademos, so that he could take the blame for hard decisions; and there were ups and downs on the question of whether any "austerity" deal should be submitted to a popular referendum, which would have killed it. The final "memorandum of understanding" in March did write off some of the Greek debt, although not enough to make it plausible that the remaining amounts could still be paid off, and in return Greece agreed to deliberately tank its whole economy, which some Germans believe for some unfathomable reason is going to help the chance that the remaining debt gets repaid with the money the Greeks won't have. I wasn't trading during all this, but my buddy was, going long/short/long/short on EUR/JPY (he never trusts EUR/USD) and asking me for advice all the time (all I could tell him was that, from my understanding of things, there was no rational reason for the euro ever to go up). I entered the game in mid-March, when I thought the foolishness was over and that the euro would return to its January levels: I shorted, and got massacred, just as the March-April rally took hold. I was baffled as to who could possibly be buying euros in huge quantities in mid-March: it turned out that the European Banking Agency was forcing banks to offload risky assets from their balance sheets, which were being bought up by banks from elsewhere (principally Asia) with severe forex consequences. Another point-of-no-return passed, again without the Eurocrats understanding or accepting it: the eurozone as it is now operated, with institutions under treaty mandate to maintain hawkish policies regardless of economic conditions, cannot possibly survive; either the treaties must be massively redrafted, or the southern economies have to exit the euro quickly, or-- the economic depression will accelerate until political violence forces a breakup of the whole EU. I would not have believed until recently that the last option was the most likely one, but the policies remain suicidal.

My rate-of-change-of-trade stat did manage to climb up from its unusual negative level at the end of 2011 to an almost normal level by the end of 1st quarter, but may now be back to zero or below. The continued strong euro is fatal: projections (by Bloomberg some weeks back; I don't of course trust any projections from Brussels) that the EU economy would turn around from a contraction through the end of 2012 to a mild positive rate of growth in 2013 depended on the assumption that the exchange rate would get down to ~1.22 fairly quickly and stay there; every day that that doesn't happen means that businesses cannot plan rationally. At this point I no longer believe that ~1.22 is low enough; it has to go below 1.20 in order for there to be confidence that it won't bounce way back up again. But as I keep seeing, the mere fact that the euro OUGHT TO go way down is no guarantee at all that it WILL.

A month or so ago, somebody posted a link that the psychology of the most successful traders has uncomfortable similarities to the "psychopath" profile. Part of my problem has been that I have never been able to fully set aside the realization that the markets I am watching represent the economic fates of hundreds of millions of people. This current bounce means I am thousands of dollars in the red, and that of course hurts; but it also means that the chances are rising every day that the end of this story will be a return to 1930's conditions in Europe, with economic collapse leading to increasing political violence. There are some more points-of-no-return coming up this summer.

Thanks Robert, as always very useful and in-depth. One question: are you sure the Eurocrats forbade the banks to lend the money on? LIBOR-OIS spreads in the months post the LTRO indicate that interbank lending did occur at more fluid pace, and that the real reason the money did not reach the economy was a) to prop up core tier 1 capital and b) it was simply being parked with the ECB itself (I remember in Q1 of this year, Bloomberg would daily highlight a record amount of overnight-deposits with the ECB owing to reticence on the banks' part to lend the money on to businesses).

Re: your custom indicator on rate of change of trade, what are you dividing by to get the delta? (I might have missed it in your answer).

Re: traders being compared to psychopaths - 100%. Gordon Gekko epitomized this concept when he retorted to Bud Fox "CAUSE ITS WRECKABLE" (he was referring to Blue Star airlines' inherent balance sheet weakness and ability to liquidate assets and walk away with net-cash - although it meant that thousands would lose their jobs). I find myself salivating at the fact that so much could go wrong in June thus making my Short on the Euro work. My friend, who runs Supply-Chain-Management for a winery in Greece is suffering daily, especially when I ask him to give me an hourly sitrep from the front lines. But that's what we are - and you too Robert can't walk away from it. God left the world of fiat currency trading a long time ago.
Midas

Originally Posted by Mary R

1.25 appears to be formidable resistance

yes it would but my MACD histo hints to me will shall break and head towards the longer term pivot...........

that positive diverge really makes me wonder that the pressure will continue for the short term to the upside............ we shall see.

ok, ok i go now and stop littering the place with my charts.

Originally Posted by jogold18

yes it would but my MACD histo hints to me will shall break and head towards the longer term pivot...........

that positive diverge really makes me wonder that the pressure will continue for the short term to the upside............ we shall see.

ok, ok i go now and stop littering the place with my charts.

Hey jogold! Your charts are works of art keep them coming!

They are good analysis too!

Originally Posted by EuroTraderApp

Thanks Robert, as always very useful and in-depth. One question: are you sure the Eurocrats forbade the banks to lend the money on? LIBOR-OIS spreads in the months post the LTRO indicate that interbank lending did occur at more fluid pace, and that the real reason the money did not reach the economy was a) to prop up core tier 1 capital and b) it was simply being parked with the ECB itself (I remember in Q1 of this year, Bloomberg would daily highlight a record amount of overnight-deposits with the ECB owing to reticence on the banks' part to lend the money on to businesses).

Re: your custom indicator on rate of change of trade, what are you dividing by to get the delta? (I might have missed it in your answer).

Re: traders being compared to psychopaths - 100%. Gordon Gekko epitomized this concept when he retorted to Bud Fox "CAUSE ITS WRECKABLE" (he was referring to Blue Star airlines' inherent balance sheet weakness and ability to liquidate assets and walk away with net-cash - although it meant that thousands would lose their jobs). I find myself salivating at the fact that so much could go wrong in June thus making my Short on the Euro work. My friend, who runs Supply-Chain-Management for a winery in Greece is suffering daily, especially when I ask him to give me an hourly sitrep from the front lines. But that's what we are - and you too Robert can't walk away from it. God left the world of fiat currency trading a long time ago.
Midas

Traders as psychopaths is a bit of an exaggeration. Small retail traders are a drop in the ocean as far as the vast sums of money which exchanges hands in the forex markets every day. You and I making or losing a few hundred pips on the euro pairs is having no impact on the lives of the people who live there.
The political situation is more complicated than it appears at first glance. If you talk to most Greek people their chief complaint, even nowadays is the fact that the Greeks were oppressed by Turkey and Turkish rulers for so many centuries. This long standing ethnic rivalry and hatred between Greece and Turkey may be the reason that Greece joined the EU - to thumb their noses at the Turks and say "We're Europeans now" Leaving the EU would be an admission of failure in that sense. so my guess is that Greece will vote to stay part of the EU and suffer through the bad economic times.

The bounce at the Pivot went all the way up to R1. The next down cycle has started, this time from much better levels.

Originally Posted by Mary R

Traders as psychopaths is a bit of an exaggeration. Small retail traders are a drop in the ocean as far as the vast sums of money which exchanges hands in the forex markets every day. You and I making or losing a few hundred pips on the euro pairs is having no impact on the lives of the people who live there.
The political situation is more complicated than it appears at first glance. If you talk to most Greek people their chief complaint, even nowadays is the fact that the Greeks were oppressed by Turkey and Turkish rulers for so many centuries. This long standing ethnic rivalry and hatred between Greece and Turkey may be the reason that Greece joined the EU - to thumb their noses at the Turks and say "We're Europeans now" Leaving the EU would be an admission of failure in that sense. so my guess is that Greece will vote to stay part of the EU and suffer through the bad economic times.

Wow Mary, that is a very important and interesting piece of information and makes quite a bit of sense from a cultural stand point.