This is the chart of EUR/USD in the previous election year 2004. The price action looks similar to this year’s. Consolidation from the mid-Spring to mid-Autumn then breakout of the range. Previous elections had Republican winner but this time may be different. Could we see different direction of the break out? I think we can.
According to CFTC “Speculative traders’ interest in crude oil now account for roughly 70% of all trading in West Texas Intermediate crude on the New York Mercantile Exchange, compared with 37% in 2000.”
Some officials still argue that the oil buble is not speculative. Why they are so “sure”?
http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/cftcfactsheet062308.pdf
Today I found a very interesting article on www.telegraph.co.uk - Has Europe’s terminal crisis begun with a triple no vote? by Ambrose Evans-Pritchard. I absolutely agree with the author and wonder whenwill become clear that the EU is not what it should be and its currency is overvalued.
www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/23/ccview123.xml#comments
EUR/USD broke both boundaries of the ascending triangle and closed within the pattern. This means that the market is very volatile and neither bulls nor the bears are winning. Some interesting developments could be noticed these days. Interest rate markets are starting to discount the end of the FED’s rate cuts cycle. This could be very important for determining of the forex market direction. If the FED cut the rates for the last time during their next meeting EUR/USD could break lower. Watch the support @ 1.5670 and 1.5510.
EUR/USD broke to the upside the ascending triangle pattern. MACD shows divergence with the price action but obviously the buyers from Russia and Mid East countries don’t care abot the technical analysis. Some banks and hedge funds are complaining about the excessive volatility as they complained about the low volatility two years ago. The forex market is a little bit crazy and will stay this way until Mr. Trichet realizes exactly what’s going on. Until then the support is @ 1.5910 and 1.5750. The resistance is up in the sky.
“Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,” the G-7’s finance ministers and central bankers said in a statement after their meeting in Washington. Next week we’ll see if this is enough for the forex market participants to stop the dollar’s free fall. Probably sooner than later the ascending triangle chart pattern will be broken to the upside and a test of the key 1.60 will follow. The pattern’s target 1.6460 seems out of reach for now but if ECB fails to assure the market that it is concerned with the strong euro we may see this number in the near future.
On the downside watch the supprt @ 1.5680, then 1.5630 and the pivotal 1.5340 level. If the latter is broken a deeper correction towards 1.50 is possible.
FED cuts rates with 75 bps. In the statement again were mentioned the downside risks to growth and we can expect further easing. Some analysts expect Fed funds rate at 1%. The reaction of the forex market was choppy after the announcement. EUR/USD is extremely overbought and is due for correction but at the same time the dollar sentiment is as bearish as it can be. Watch the support @ 1.5675 (5 day MA and yesterday’s low). If it is broken a shooting star reversal pattern will be confirmed and correction towards 1.5490 is expected. While the market is above the support level the next target is 1.5902 and then 1.6000.
The market participants were “dissapointed” by yesterday’s FED move. FOMC cut by only 25 bp both rates. It’s strange why the market expectations changed during the last few days even after the stronger NFP report last Friday. I think the answer is simple. If the FED meets always the market expectations after the decision is announced the price movements will be very small and so will be the big boys’ profits. High volatility comes only after “suprises”. So the game plan is simple. Before the FED decision or major news release Big boys shift the market expectations in one direction. After the event they are “suprised” by the FOMC move or the actual data and they jump on the breeks and mak e “sudden”U-turn. All the public is surprised both by the data and the price direction change.
What can we do to avoid losses cause from such surprises? Next time when FOMC meets don’t read the expert’s comments but the real data. Or just don’t trade during major events.
Today is teh NFP day. The US Employment report is probably the most important of all the market moving events. Today’s NFP will probably afect the markets more than usually because it precedes very important FOMC meeting. If today we see number greater that 100K FED may skip this rate cut or may cut by 25 bp and change the statement. This could boost the Dollar and send EUR/USD below 1.4520 and GBP/USD below 2.0180.