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

Originally Posted by DollarBull

I think many currencies will be range bound for a while. EURUSD may remain close to where it is at 1.3070, or may head southwards. I do not see much potential for it to rally high, unless someone gives me a strong rationale why it should go up. Of course QE by US is a possibility. It needs to wait for some budget to be passed, no?

There's a good chance as in normal years the summer months for the Northern Hemisphere can be about range trading. The only thing is that this year is nowhere near normal.

Hi All,

We put this rec out earlier and wanted to share.....have a good day:

Euro/Dollar Sell Recommendation Issued @1.3200

All my best,

Joel

Cheers, Uturn
"The market is always turning"

Originally Posted by rickos69

I can't argue with the technical part because I don't have the knowledge. But the fundamental, which in the long run overshadows by far the technical part, seems to contain gaps in its thinking. If I am not mistaken, when you talk about yield, you must also take into consideration the inflation rate of the currency of the bond in order to arrive at the net real yield. Isn't it generally believed that inflation will be higher in the US due to the huge liquidity injections? Past high inflation periods have proven that raising interest rates seldom covers the loss due to inflation. That is a minus in his argument. (Of course, this may change if EZ follows suit eventually in QE)

On the other hand, there is the expectation of currency evaluation or devaluation by the time of maturity. This affects prospective foreign investors due to the conversion back to their home currency upon maturity or sale of the bond. Assuming that foreign investors will be needed to cover those humongous amounts, the perception as to the future of the USD is crucial for them. This is a plus for his argument, again, assuming that the perception is that the USD has a postive future. Again, there is no mention of this.

Core inflation in the U.S. is 1.8%. Core inflation in the Eurozone is 1.5%. Trichet's tough stance on inflation relative to the U.S. makes absolutely no sense to me. The U.S. is likely to have higher inflation than the Eurozone in the future, higher interest rates, and thus a stronger currency.

Originally Posted by cmellon

Do you mean like heading south soon after hitting 3080? I am not sure if it's going to reverse down again that soon. Although the medium direction could well be south, I am not sure about the shorter term direction.

For your point 4: It's been anticipated that the result is ok. Geithner gave a hint in his interview last time. He said for most part US bank is well capitalized.

For your point 5: Isn't that why we had a drop from 1.36 almost non stop to 1.29? It's all priced in, everyone knows it, and everyone has been betting on it since early April. If anything, after the announcemet, EUR may be bought more aggresively (classic sell rumor buy facts). ECB is just trying to lessen the pain and volatility of a sudden 600 pips drop by giving early hints.

There is a lot of time between now and the ECB meeting. I am adding to my EURUSD short on this bounce.

Originally Posted by qed

Core inflation in the U.S. is 1.8%. Core inflation in the Eurozone is 1.5%. Trichet's tough stance on inflation relative to the U.S. makes absolutely no sense to me. The U.S. is likely to have higher inflation than the Eurozone in the future, higher interest rates, and thus a stronger currency.

I understand what you're saying, but, the comparison will not be 1.5 to 1.8 in the future. The differential will be much greater. To put it differently, we accept that the US will exit this situation first. Why will they raise interest rates? Because of inflation. They will be chasing after it with the rates. In the meantime EZ will still be struggling. Low inflation, and probably if trichet has his way, interest rates above what they should be in order to stimulate expansion. The net differential will probably be minimal if at all.

However, following your posts, if I read you correctly, I do agree that the US is following the least idiotic path of the two.

Originally Posted by rickos69

I understand what you're saying, but, the comparison will not be 1.5 to 1.8 in the future. The differential will be much greater. To put it differently, we accept that the US will exit this situation first. Why will they raise interest rates? Because of inflation. They will be chasing after it with the rates. In the meantime EZ will still be struggling. Low inflation, and probably if trichet has his way, interest rates above what they should be in order to stimulate expansion. The net differential will probably be minimal if at all.

However, following your posts, if I read you correctly, I do agree that the US is following the least idiotic path of the two.

I think inflation is off the table in Europe and the U.S., but more likely in the U.S. if it were to occur. It would likely be mild though. I agree with you that interest rate differentials may be minimal on the short end. On the long end I am not so sure. Debt is likely to really explode in the U.S. as the stimulus amounted to massive social spending that will have to be paid for. Obama's call for 4% GDP growth in 2011 is pure fantasy. Taxes are going up in the U.S. and this will crush consumption keeping inflation lower than large deficits might suggest.

The U.S. is going through the Europeanization of its economy and that is the landscape we have to adjust to as investors. One possibility is that the U.S. economy and other economies get overstimulated and the hot money goes into commodities and the emerging markets recover fueling commodity inflation. I doubt that would carry through to core inflation though. But you can be sure that somethig very unexpected will happen with all of this stimulation. I have no idea what though.

Originally Posted by jolopino

It was good idea to stay aside. The idea to sell near 1.3095(or at 1.3085) still alive. I will go out from this trade if I will see 4 up candles in daily chat. Basically quick observation of previous down trend tells me that there was no 3 up candles if market than went down. Be cautious. Better idea to is to sell on a break of yesterdays low.

I was to greedy placing sell limit on 1.3095. Market on 1.3085 made its own choice. I removed my unlucky order. Will see how situation develops. I am planning to make addition update after daily candle will be closed. reversal from 1.3085 will be indicated if we break 1.2990, but I will not place orders on this level. My strategy tells me to sell on an hourly close below 1.2920.

This cap & trade that Obama wants to put through seems deflationary to me at the core level.

In the U.S. we have plentiful sources of natural gas and oil, however the enviro whackos will not allow the oil companies to drill for it. As a result the price of natural gas skyrocketed a couple years ago and this ultimately had the effect of driving industries that depended on natural gas for inputs to locate overseas. Now the price of natural gas is very low again do to new technologies that are able to squeeze blood out of a turnip. Still, those jobs are gone, and natural gas prices contribute to lower inflation. As these jobs leave people become unemployed and go into the service industry putting pressure on middle class wages which is deflationary.

From what I understand cap and trade was adopted in Europe in 2005. I would assume that prices for many manufactured goods and electicity leapt in price. The initial effect would be inflationary until industries were moved overseas to polluters like China and India, or shut down by cheaper imports. Cap & Trade mearly exports production and jobs overseas and increases imports. I would like to hear from Europeans. Has this been the effect of Cap & Trade?

And I recall that at the peak of this stock market bubble German manufacturing workers went on strike to get higher wages across the board. While this has immediate inflationary effects it is ultimately deflationary as businesses can relocate in places like China where labor is cheap. I believe retail sales looked good for a while in Germany after these wage gains but it is all artificial IMO.

So I would argue that Cap&Trade and high wages in Germany are both very deflationary events at the core inflation level. It has just taken a while to play out, but the deflation should continue. And discontent should fester as the middle class is squeezed. And this will put pressure on the EURUSD. Has all of the Eurozone adopted Cap&Trade?

Originally Posted by jolopino

I was to greedy placing sell limit on 1.3095. Market on 1.3085 made its own choice. I removed my unlucky order. Will see how situation develops. I am planning to make addition update after daily candle will be closed. reversal from 1.3085 will be indicated if we break 1.2990, but I will not place orders on this level. My strategy tells me to sell on an hourly close below 1.2920.

Some analysis from my part which I name as soft factors
1. We have seen 3 day up candles- I checked daily chart (for a year) and did not find any down trend where we saw the same 3 up candles. Tomorrow will be very important day
2. Previous down leg has fib supports. I would like to point out 50 % retrenchment level. (1.3130-1.3150)Previously it helped eur/usd to stay in range. If it level will be taken out, my bias from bearish will turn to neutral.
3. Taking about my trading plan, I will only use sell stops and hourly candle close. I plan to avoid sell limits. On European session it will be clear where to search for these levels. Till we will not get daily close above .13330, I will enter only in sell positions.

Originally Posted by jolopino

Some analysis from my part which I name as soft factors
1. We have seen 3 day up candles- I checked daily chart (for a year) and did not find any down trend where we saw the same 3 up candles. Tomorrow will be very important day
2. Previous down leg has fib supports. I would like to point out 50 % retrenchment level. (1.3130-1.3150)Previously it helped eur/usd to stay in range. If it level will be taken out, my bias from bearish will turn to neutral.
3. Taking about my trading plan, I will only use sell stops and hourly candle close. I plan to avoid sell limits. On European session it will be clear where to search for these levels. Till we will not get daily close above .13330, I will enter only in sell positions.

Bit confused, your analysis would lead one to think that the market is bullish (my bias is bullish as well and have been trading from the long side, buying the dips). Why are you fading this and trading from the short side, selling the bounce I am assuming. Seem little dogmatic and inflexible, no offense intended. Anyway, good luck with your trade. My trades are short term so I wish you well on your side.

Originally Posted by analyzer

Bit confused, your analysis would lead one to think that the market is bullish (my bias is bullish as well and have been trading from the long side, buying the dips). Why are you fading this and trading from the short side, selling the bounce I am assuming. Seem little dogmatic and inflexible, no offense intended. Anyway, good luck with your trade. My trades are short term so I wish you well on your side.

As you see my technical analysis include both candle and fib support level analysis. Those two methods have both bullish and bearish calls. I trade only using my system, but not technical analysis. System stands to sell in the same direction as daily chart. For now daily chart directions is down. I believe if we will go up then secretly sell stops will no be trigged.

Originally Posted by jolopino

As you see my technical analysis include both candle and fib support level analysis. Those two methods have both bullish and bearish calls. I trade only using my system, but not technical analysis. System stands to sell in the same direction as daily chart. For now daily chart directions is down. I believe if we will go up then secretly sell stops will no be trigged.

good luck on your trades. supposedly, there are stops around 3150 area and EURJPY have been acting spunky lately and spillover could make EURUSD spike and then run.

just my 2 cents

Originally Posted by analyzer

good luck on your trades. supposedly, there are stops around 3150 area and EURJPY have been acting spunky lately and spillover could make EURUSD spike and then run.

just my 2 cents

At the moment I am out of trades. Basically I am not very good at catching such bounces against major movement. My sell side I think can be in play only tomorrow. According to your analysis you think that we will soon break 1.33 ?

Originally Posted by soccer_daemon

Hi Brabed,

Good to see you are still around, my Boundary Layer Price yesterday was 3046 and
that's probably what capped last session's -. Today's it's 3062.6 due to yesterday's new -.

Will be interesting to see what unfolds from today. Also she is sitting above the Week
Short RT TCD projection, but at the moment tracking around the Day RT Short TCD
projection trajectory.

It's all interesting to see how it bounced very strongly off the Day RT Short TCD
projection couple hrs before the Long expansion.

I won't bother to post the PM1 model since 7th isn't around to comment but
Long omega has been surpressed for a week now, there is more up move on the
horizon. The good Long entry should be the 2961-2965 area (you know how those
are calculated already).

Anyway, I haven't looked at the system numbers today, but based on what I saw
last night and just thought a quick check with yourself.

Good luck!

Cheers,
SD

ps: BTW, the LocBind Short today already hits 25pips.

Hey SD,

I have been loosely tracking the boundary layer value but I haven't really integrated it into my system. I also have been toying with the RT projections. I'm seeing some pretty interesting things, but not enough yet to integrate it. I'm reworking my whole system (again) so I've been busy with that. I think I'm finally headed in the right direction though, so that's the good news.

Take care,

Bryan