EUROUSD|BREXIT|TRADE|ECONOMIC GROWTH|PREMIUM[Short Term]ANALYSIS
Updated
EURO|USD: Episode (1)- Series: Major Currencies and Currency Indices -18th of August 2019 (8-9 Minute Read)
3 Contingencies upon which the timing of this analysis is based on: Brexit(Finally) Happening in the next 6 months, similarly expecting a US/China Trade deal in the same time-frame, and of course later on Trump winning 2020. I have to reiterate here, that I will never include any personal political opinions in my analysis- he is the current president(and most likely for 2 terms). My primary job is to evaluate the impact of his administration on the markets.
Since that's been said, let's start with the basics. Left chart is the Monthly EURUSD, right chart is the x2 Weekly Chart. While I was analysing the chart patterns and moving averages, the 2 weeks chart gave much better clues than the weekly one. With the 3 named contingencies, a probability model with expected values can be build which obviously can't be performed by an individual investor. Even if these contingencies do not play out the same way this chart is build on, the most value part of this analysis either way, are the pitchforks, MA trendlines and the wave/harmonic pattern labelling(Which EUR/USD will most likely continue to follow). Since most people on this page are traders, firstly I will go in detail on the x2 Weekly chart.
Zoomed out x2 Weekly Chart
Based on the drawn pitchfork, trading EURUSD in the last couple of months has been extremely easy. Until the deadline of Brexit(this October), I do not see a reason why this trend won't continue down to (Y) or further. The more difficult part to predict is the formation of the second (X). No matter how bad Brexit is to Europe, it will relieve pressure on the Euro. In addition, the current situation is already priced in, so once brexit occurs, after the initial sell-off I wouldn't be surprised if there is a shift of momentum to (X). The most likely target range for (X) would be in between 1.14 and 1.16. The longer Brexit is prolonged, the longer the current negative momentum will last. Lastly, 2020 is an election year in the US, and this will be a supplementary factor that might ease of the pressure on the Euro in 2020(Especially if a prospective Democrat runs versus Trump). On this point, we will have to continue by analysing the monthly chart.
Zoomed out, Monthly EURUSD Chart
Q: With the current setup; Brexit and US/China Trade deal occuring, what will happen with the Euro?
-Primarily it will follow the drawn Monthly Pitchfork. When it comes to the Butterfly setup, it is just an idea that's the most logical in this buildup. Point (A) in the Butterfly signifies the rejection of the euro bulls attempting to re-enter the previous triangle and break-off from the ichimoku monthly cloud and the 100 Monthly MA(Purple/Orange line). Furthermore, it can be observed from the Monthly Pitchfork, since the 2nd part of 2018, it is clear that the EURUSD has been trading within the 0.5 and 0.25 bands of the pitchfork. This is quite a long shot, but I am expecting another ichimoku cloud breakout rejection at (C), followed by an election win from Trump. In this scenario, the EURO will temporarily end up below 1(0.95) against the Dollar at point (Z).
Concluding this analysis, I am expecting a continuation of the ECB's dovishness and easing until a good portion of the European Banks collapse. On this point I am quite serious; how in the world does the ECB, expect European banks to be sustainably profitable in the fixed income divisions with such low rates? The only way is to cut the financing and stop giving out credit, and end up in a typical "Credit Crunch" situation(That throughout history has been the most common cause for recessions). Once a US/China deal occurs, the ECB would relatively keep being dovish compared to the FED- adding up additional pressure on the Euro. This is a continuation of my argument in my last thoroughly historical analysis of US Monetary policy(Linked as #2 down below). Oh and not to forget- there will be plenty recession uncertainties this autumn and the following spring(VIX Analysis, Linked #1). And let me be clear, NO ONE knows exactly how the markets will behave.
(Give me your feedback people, don't be shy! If you disagree, that'll be even better; it'll just make up for a great discussion in the comments)
|Step_Ahead_oftheMarket|
>>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>>
However, if you'd like to support me and get informed in the greatest of details, every thumbs up or follow is greatly appreciated!
{Make sure to check out my previous ideas and my series on US( SPX ) Sector including 11 episodes of the major US sectors}
1. PART 1-VIX: Volatility Index tradingview.com/chart/VIX/JqftOGwh-RECESSION-IMPENDING-MEDIUM-TERM-VOLATILITY-VIX-PREMIUM-ANALYSIS/
2. PART 2-FRED: FED SuperCycle Interest Rate tradingview.com/chart/FEDFUNDS/H2iTE7ig-RECESSION-IMPENDING-PART2-FED-RATES-SUPERCYCLE-PREMIUM-ANALYSIS/
3. Series Finale; Episode 11: US Utilities( XLU ) tradingview.com/chart/XLU/B0BlK6dE-US-SECTOR-SERIES-FINALE-11-11-UTILITIES-XLU-ESSENTIAL-TA-NOTES/
Full Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content for private or corporate purposes- contact me through any of my social media channels. Wish that tview had a copy-right option, but it is what it is.
3 Contingencies upon which the timing of this analysis is based on: Brexit(Finally) Happening in the next 6 months, similarly expecting a US/China Trade deal in the same time-frame, and of course later on Trump winning 2020. I have to reiterate here, that I will never include any personal political opinions in my analysis- he is the current president(and most likely for 2 terms). My primary job is to evaluate the impact of his administration on the markets.
Since that's been said, let's start with the basics. Left chart is the Monthly EURUSD, right chart is the x2 Weekly Chart. While I was analysing the chart patterns and moving averages, the 2 weeks chart gave much better clues than the weekly one. With the 3 named contingencies, a probability model with expected values can be build which obviously can't be performed by an individual investor. Even if these contingencies do not play out the same way this chart is build on, the most value part of this analysis either way, are the pitchforks, MA trendlines and the wave/harmonic pattern labelling(Which EUR/USD will most likely continue to follow). Since most people on this page are traders, firstly I will go in detail on the x2 Weekly chart.
Zoomed out x2 Weekly Chart
Based on the drawn pitchfork, trading EURUSD in the last couple of months has been extremely easy. Until the deadline of Brexit(this October), I do not see a reason why this trend won't continue down to (Y) or further. The more difficult part to predict is the formation of the second (X). No matter how bad Brexit is to Europe, it will relieve pressure on the Euro. In addition, the current situation is already priced in, so once brexit occurs, after the initial sell-off I wouldn't be surprised if there is a shift of momentum to (X). The most likely target range for (X) would be in between 1.14 and 1.16. The longer Brexit is prolonged, the longer the current negative momentum will last. Lastly, 2020 is an election year in the US, and this will be a supplementary factor that might ease of the pressure on the Euro in 2020(Especially if a prospective Democrat runs versus Trump). On this point, we will have to continue by analysing the monthly chart.
Zoomed out, Monthly EURUSD Chart
Q: With the current setup; Brexit and US/China Trade deal occuring, what will happen with the Euro?
-Primarily it will follow the drawn Monthly Pitchfork. When it comes to the Butterfly setup, it is just an idea that's the most logical in this buildup. Point (A) in the Butterfly signifies the rejection of the euro bulls attempting to re-enter the previous triangle and break-off from the ichimoku monthly cloud and the 100 Monthly MA(Purple/Orange line). Furthermore, it can be observed from the Monthly Pitchfork, since the 2nd part of 2018, it is clear that the EURUSD has been trading within the 0.5 and 0.25 bands of the pitchfork. This is quite a long shot, but I am expecting another ichimoku cloud breakout rejection at (C), followed by an election win from Trump. In this scenario, the EURO will temporarily end up below 1(0.95) against the Dollar at point (Z).
Concluding this analysis, I am expecting a continuation of the ECB's dovishness and easing until a good portion of the European Banks collapse. On this point I am quite serious; how in the world does the ECB, expect European banks to be sustainably profitable in the fixed income divisions with such low rates? The only way is to cut the financing and stop giving out credit, and end up in a typical "Credit Crunch" situation(That throughout history has been the most common cause for recessions). Once a US/China deal occurs, the ECB would relatively keep being dovish compared to the FED- adding up additional pressure on the Euro. This is a continuation of my argument in my last thoroughly historical analysis of US Monetary policy(Linked as #2 down below). Oh and not to forget- there will be plenty recession uncertainties this autumn and the following spring(VIX Analysis, Linked #1). And let me be clear, NO ONE knows exactly how the markets will behave.
(Give me your feedback people, don't be shy! If you disagree, that'll be even better; it'll just make up for a great discussion in the comments)
|Step_Ahead_oftheMarket|
>>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>>
However, if you'd like to support me and get informed in the greatest of details, every thumbs up or follow is greatly appreciated!
{Make sure to check out my previous ideas and my series on US( SPX ) Sector including 11 episodes of the major US sectors}
1. PART 1-VIX: Volatility Index tradingview.com/chart/VIX/JqftOGwh-RECESSION-IMPENDING-MEDIUM-TERM-VOLATILITY-VIX-PREMIUM-ANALYSIS/
2. PART 2-FRED: FED SuperCycle Interest Rate tradingview.com/chart/FEDFUNDS/H2iTE7ig-RECESSION-IMPENDING-PART2-FED-RATES-SUPERCYCLE-PREMIUM-ANALYSIS/
3. Series Finale; Episode 11: US Utilities( XLU ) tradingview.com/chart/XLU/B0BlK6dE-US-SECTOR-SERIES-FINALE-11-11-UTILITIES-XLU-ESSENTIAL-TA-NOTES/
Full Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content for private or corporate purposes- contact me through any of my social media channels. Wish that tview had a copy-right option, but it is what it is.
Note
Short Update on EURUSD. After the ECB's announcement the EURUSD is momentarily in a wedge/triangle that seems quite bullish.The sharpest point of this triangle is around 1.084 that supports the original idea (Y point on the right chart, and B on the left).
From Draghi's speech it seems that they are going to keep the current rates until inflation expectations get better. In a way this implies that rates could either be stable for 2020, or slightly decrease while their QE setup increases if indicators continue to turn bearish.
Step_Ahead_ofthemarket
Note
Saxo charts just became available. Long term outlook on the EurUSD.
Every trendline is clearly labelled.
Note
EURUSD breaking out on the dailyf rom the downward sloping wedge/triangle.
1.085 target not reached, mostly because of the bad US PMI numbers. In hindsight 1.088 bottom is still good.
If a deal goes through, expecting a bullish ABC pattern with the targets labelled from the chart above 1.14-1.16.
-Step_ahead_ofthemarket-
Note
Have to admit the timing was a bit off. But, there's no way I could've guessed the timing of all the trade and brexit news, or anyone could've for that matter. Both chart and the analysis still stay strong and the principles is the same.Note
Weekly divergence RSI vs channel on the DXY. Great sign for the EURUSD going into 2020. Issue is, is the dollar going to implode- probably not. At least not until the 2020 elections.
Note
Expecting the EURUSD to trade in range for the next couple of weeks. Currently all the economic data, trade negotiations and expectations are being priced in. I think we should see some positive surprises in the next round of economic data especially in the eurozone (i.e manufacturing).
Although, the euro relatively to the dollar still seems to be continuously weakening, and tariffs are adding more pain. One way the Euro could rebound is, if there is a fiscal spending initiative (especially from Germany), to counterbalance some of the negative economic developments (e.x tariffs, low consumer confidence etc).
-Step_ahead_ofthemarket-
Note
Stop-hunting could be in play, in fact it might hit the target from the chart above (around 1.08) before going up. RSI bottomed, expecting a bullish divergence at the start of 2020.
-Step_ahead_ofthemarket-
Note
isabelnet.com/eur-usd-one-year-historical-volatility-u-s-dollar-and-euro/Volatility at a historical low, should we expecting a big move to happen soon? Considering the 2020 outlook, this a big move could be very likely.
Note
This idea is doing great so far. Looking for a breakout!
Note
EURUSD very indecisive. Triangle showing potential reversal, yet price isn't breaking out yet. Breakout point, if it closes above 1.12 on the weekly.
_step_ahead_ofthemarket_
Note
DXY very indecisive.
Note
Post ECB meeting sell-off. Kind of expected since the trust in the ECB to do a good job has gone down with Lagarde.Targeting the 1.1 area. Expecting a bullish bounce after that.
Note
Short update on this chart.It doesn't get simpler than this. China issuing 2 T Yuan worth of stimulus/ 250bil EUR. China and the Euro zone are very dependent on one another in terms of trade. Hence the euro is going down alongside the yuan, against the dollar.
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