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Higher US Bond Prices Will Support The US Dollar

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Nov 14 2011

The risk is off today with Euro reversing significantly lower from 1.3800, and almost erased all gains seen on Friday. As such possibility for stronger US dollar remains in play for this week, but in such case, S&P500 needs to weaken towards and below 1215, while 1292 resistance holds.

One of the main reasons why "for now" higher dollar possibility exists is a bond market, which still shows bullish technical set-up on the TLT chart below. In such case US yileds will weaken which will send the US stocks lower and dollar higher. What we also want to point out here, is that moves higher on stocks and majors, seen on Friday are not confirmed by a bond market! So, if all markets are not showing the same direction, then something is wrong here. Now the question is to which market we should trust!? Well, we know that troubles in the Euro zone are not anywhere near the end and that any rally is just temporary hope. Based on this, we suspect that stocks are overbought and that sooner or later they will turn lower, which agrees with forecast for higher bonds; TLT in our case.

On the chart below we have five waves up followed by a slow price action, called consolidation. Its a contra-trend move from where market should break to the upside, above 119.50 wave (1) peak.

TLT 1h chart:



TLT; iShares Barclays 20+ Year Treasury Bond Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Barclays Capital U.S. 20+ Year Treasury Bond Index (the Index). The Index measures the performance of public obligations of the United States Treasury that have a remaining maturity of 20 or more years.


Eur/Usd The Breakout Point; "Weakness In Progress"

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Nov 10 2011

The US dollar moved significantly higher in recent sessions, as Risk trade fell sharply, driven by fears over the euro zone crisis! It was the worst day in six weeks for the US stocks market which lost more than 3%. It was also one of the worst days for Eur/Usd pair which lost more than 300 pips from its daily highs, and found the recent support just above 1.3500. Well, this appears to be just a temporary low for the pair, because based on the 4h chart we can see that downtrend has just started, if we consider a broken neckline of a head and shoulders pattern that we paid attention for some time.

Well, if we do just simple measurement from the head to the neckline and then from the breakout point, we can see that projected target for the pair comes even below 1.3. We also need to be aware that broken support, like neckline in our case, usually becomes resistance, so watch for sell-offs after any pull-backs. Of course, its never easy to call a target like that, but that’s it what market is telling us right now. So the concept is very simple here, pair is bearish as long the price trades below 1.3860!
If you want more detailed technical analysis regarding the USD strength which was expected from technical point of view, please review the video below.

For more analysis visit us at www.ew-forecast.com or follow us on twitter



08/11/11Video Analysis:





Eur/Usd Intra-day Update

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Nov 08 2011

No doubt, bounce from 1.36 is corrective move, so we know that larger trend will continue lower. But the question is when wave 2) will finish!? Well those correction are usually very tricky and hard to follow all the sub-waves, so for now, we think its better to stay aside, and wait on possible test of higher resistance. Nice area of resistance and possible turning point comes in at 1.3900/50!





US Dollar Strength Is Unconfirmed

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Oct 31 2011

We can see some massive dollar moves after BOJ intervention which obviously caused cause some selling pressure on other majors as well, and not only against the Japanese yen. We are sure that many traders out there are considering a change of a larger trend on many FX pairs; in fact, even we did. But we however, must keep in mind that just few hours of reversal does not necessarily mean “change of a larger trend”. On our latest 4h updated counts, you will notice that all pairs are still trading above/below their critical regions, which means that these moves can be temporary as well! In fact, if trend has really changed because of the BOJ, then we also need to keep in mind that any Usd/Jpy recovery after the intervention was mostly limited, and did not last more than 48 hours.

The next important thing that we need to mention is Euro/SP futures correlation. We know that these two markets are mostly trading together! Well, if that’s the case, and if this dollar gains are for real, then of course we would expect lower levels on SP Futures also. Well, on the chart here, we can see that there is actually a “gap” between those two markets, which means that current dollar strength is not confirmed by a stock market. Even oil prices did not move lower as we would expect while dollar is rising. Now the question is which market will catch up the moves!? Will Euro move higher or S&P lower?!

So, what is our bias here!? Well, from a long-term we expect a decline on stocks, so if we get weaker SP and broken critical levels highlighted on 4h FX pairs, then we will go with dollar bulls. So until then we remain cautious.



Usd/Chf Outlook

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Oct 25 2011

Usd/Chf recovered in five waves since August, after a very clear breakout to the upside, out of a downtrend channel, which is the most important evidence of a change in trend; from bearish to bullish. As such, we are very confident that significant low is in place and that Usd/Chf will move even higher in coming months, towards parity. But before larger uptrend will continue, we will likely see a deeper pull-back as first impulsive leg wave I appears complete around 0.9310..

Daily chart



4h chart

On the 4h chart below, we can see that Usd/Chf collapsed lower at the end of the past week, through the wave A support. As such, we suspect that wave B is complete around 0.9080 and that wave C is headed lower, ideally into 0.8640 zone, where also wave C equals to wave A. You may have also noticed a head and shoulders pattern, which signals for more bears ahead, after a break through the neckline.




Usd/Jpy: Trend Remains Side-ways

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Oct 17 2011

After a few days of an extremely ranged price action, Usd/Jpy has exploded to the upside, which however does not seem to be the right direction in days ahead, especially after 80 pip reversal seen on day later. Notice also that price action since mid-August is extremely slow and choppy, clear indication of a corrective, contra-trend price action. As such, our bias are still to the downside, but may not be seen immediately as we look for an incomplete triangle. Waves D) and E) now in view, while market trades between important 77.85 and 76.07 levels.

Trend is bearish while 77.85 holds! As things stands right now, we still suggest you to avoid this pair, and wait on a break through one of important levels that will determine direction of a trend.

4h chart:




Euro: Multi-month consolidation

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Oct 17 2011

After a sharp move lower, seen in the past few weeks pair has found a support and has rebounded quite significantly since then. As such, we suspect that wave D is complete and that pair is now trading in final stages of a wave B) running triangle, which may complete late this year. Keep in mind that this wave B) is only second leg of a corrective move lower started in 2008. So, once wave B) is done, a sharp sell-off will follow in C) move, below black wave B extreme!

We expect a sell-off on Euro even towards 1.18 while pair trades below 1.4938.



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