I agree with your summary of events that have transpired.

Not sure you have the market figured out when trying to guess what comes next, it sounded like opinion to me. You may be in for a surprise that USD strength should reverse later this week as the short term corrective rallies run out, and the larger trend resumes for next months cycle.

Watch Gold, it is leading the way and is 90% correlated to the EUR/USD this season. Gold, along with other currency majors are completing the final C wave in an A-B-C corrective pattern, but when that is done if a few days, then expect a strong recovery from these historically oversold EUR/USD positions. If you have reason to think Gold will fall much below support around $750, then so will the EUR/USD continue to decline. When the 3 down in Gold/Oil/Eur are complete, then a 5 wave up to at least 50% and likely to test the previous high is the historic pattern.

Now is not the time to chase the end of a pattern that moved 1400 pips in a month, the risk is high compared to the reward. A media head line said even a 3 year old could see shorting EUR/USD is smart - frankly, when headlines like that appear it is time to reverse.

Traders need to look at weekly charts of EUR/USD and USD Index to see the larger trend of the past few years is clear, and understand that the larger trend will prevail for the remainder of this year to complete the cycles. Nothing substantial has changed enough to warrant endless USD Index strength, - easy come, easy go.

I agree with your summary of events that have transpired. Not sure you have the market figured out when trying to guess what comes next, it sounded like opinion to me. You may be in for a surprise that USD strength should reverse later this week as the short term corrective rallies run out, and the larger trend resumes for next months cycle. Watch Gold, it is leading the way and is 90% correlated to the EUR/USD this season. Gold, along with other currency majors are completing the final C wave in an A-B-C corrective pattern, but when that is done if a few days, then expect a strong recovery from these historically oversold EUR/USD positions. If you have reason to think Gold will fall much below support around $750, then so will the EUR/USD continue to decline. When the 3 down in Gold/Oil/Eur are complete, then a 5 wave up to at least 50% and likely to test the previous high is the historic pattern. Now is not the time to chase the end of a pattern that moved 1400 pips in a month, the risk is high compared to the reward. A media head line said even a 3 year old could see shorting EUR/USD is smart - frankly, when headlines like that appear it is time to reverse. Traders need to look at weekly charts of EUR/USD and USD Index to see the larger trend of the past few years is clear, and understand that the larger trend will prevail for the remainder of this year to complete the cycles. Nothing substantial has changed enough to warrant endless USD Index strength, - easy come, easy go.

Great article.

Great article.

wow, thanks. That was an interesting article

wow, thanks. That was an interesting article :)

Whatever was technically obvious several months ago all of a sudden has become an issue for the discussion after the fact. The article could have had some value being published back in May but now it seems like being already a bit too little and way too late.

Whatever was technically obvious several months ago all of a sudden has become an issue for the discussion after the fact. The article could have had some value being published back in May but now it seems like being already a bit too little and way too late.

In view of the comment that "The article could have had some value being published back in May but now it seems like being already a bit too little and way too late", I have included the closing paragraphs of my column of July 13th this year.

"The effect of the gathering European problems has so far been minimal on the euro. For almost a year now the focus has been on the US, with most of the drama, bad news and worry coming from the American economy and financial system.

Europe has escaped most of the problems from sub prime crisis, at least in the sense that the public concern over those issues has depressed economic activity. Europe also has its well know social net which cushions and draws out the effect of economic troubles. In the US the response of consumers and business is faster and more pronounced. Even though the consumer and business outlook in the US did not turn profoundly south until the New Year, US economic activity took an immediate hit in the fourth quarter. With European consumer and business indicators now at similar levels to where they are in the US, one can expect the European economies to soon follow suit.

No social net, not even the extensive European variety can support a fading economy for ever. And then there is inflation and the price of energy. Though energy inflation is somewhat mitigated (perhaps 10 percent) by the rise in the euro against the dollar, energy prices must begin to bite on the continent for consumers and business.

European energy prices are more expensive than the US due to higher taxes. European incomes are lower than in the US. The ability of Europeans to absorb skyrocketing energy prices is no better than in the US and in fact may be worse. The marginal effect on economic activity of expensive energy in the Eurozone may well be greater than in the US.

If European governments are concerned abut the prospects for growth perhaps it is time for the currency market to take note. Poor or negative European growth figures are not priced into the euro. When they arrive the adjustment will be swift".

Joseph Trevisani
FX Solutions

In view of the comment that "The article could have had some value being published back in May but now it seems like being already a bit too little and way too late", I have included the closing paragraphs of my column of July 13th this year. "The effect of the gathering European problems has so far been minimal on the euro. For almost a year now the focus has been on the US, with most of the drama, bad news and worry coming from the American economy and financial system. Europe has escaped most of the problems from sub prime crisis, at least in the sense that the public concern over those issues has depressed economic activity. Europe also has its well know social net which cushions and draws out the effect of economic troubles. In the US the response of consumers and business is faster and more pronounced. Even though the consumer and business outlook in the US did not turn profoundly south until the New Year, US economic activity took an immediate hit in the fourth quarter. With European consumer and business indicators now at similar levels to where they are in the US, one can expect the European economies to soon follow suit. No social net, not even the extensive European variety can support a fading economy for ever. And then there is inflation and the price of energy. Though energy inflation is somewhat mitigated (perhaps 10 percent) by the rise in the euro against the dollar, energy prices must begin to bite on the continent for consumers and business. European energy prices are more expensive than the US due to higher taxes. European incomes are lower than in the US. The ability of Europeans to absorb skyrocketing energy prices is no better than in the US and in fact may be worse. The marginal effect on economic activity of expensive energy in the Eurozone may well be greater than in the US. If European governments are concerned abut the prospects for growth perhaps it is time for the currency market to take note. Poor or negative European growth figures are not priced into the euro. When they arrive the adjustment will be swift". Joseph Trevisani FX Solutions

Great Article. I cant believe someone mention "the article is after the fact"... All this is happening as we speak... so take notes and make good use of it.

Great Article. I cant believe someone mention "the article is after the fact"... All this is happening as we speak... so take notes and make good use of it.

Great article, indeed. But the euro has reached its status of commodity and an alternative currency against the dollar slump. The global high inflation and the rise of the energy prices were all caused by the ‘big-ease’ Fed policy, free trade agreements, creating huge financial unbalances with budget and current account deficits in the US on one hand, and extreme surpluses in China etc. on the other hand. We need to see if the dollar reserves from the emerging markets would come back home not just to prop the stock market (another bubble) but in business investments that create jobs. The rise of the euro was caused by the emerging markets diversifying away from their dollar reserves and in my opinion this trend will continue. The end of the euro trend would be the actual death of the euro and total destruction of the European Union; otherwise, if the US economy continues to perform badly, the dollar denominated assets would still be avoided...

Great article, indeed. But the euro has reached its status of commodity and an alternative currency against the dollar slump. The global high inflation and the rise of the energy prices were all caused by the ‘big-ease’ Fed policy, free trade agreements, creating huge financial unbalances with budget and current account deficits in the US on one hand, and extreme surpluses in China etc. on the other hand. We need to see if the dollar reserves from the emerging markets would come back home not just to prop the stock market (another bubble) but in business investments that create jobs. The rise of the euro was caused by the emerging markets diversifying away from their dollar reserves and in my opinion this trend will continue. The end of the euro trend would be the actual death of the euro and total destruction of the European Union; otherwise, if the US economy continues to perform badly, the dollar denominated assets would still be avoided...

The Euro Zone doesn't have to be destroied to have the pair equal in value. In my opinnion the down-trend will continue all the way down to the 1.16... level in the next coming year. If you look at a 5 year chart, you'll see what a beautiful double-top we have. By year-end I see the 1.38... level for the EUR/USD. Now I am just waiting for a rebound to short the pair again.
By the way, the deficit won't define the value of the pair anymore. Everyone is in debt in this world right now, and will be for a while. What traders will look at the most is, which country can handle those deficits better.
Regards,

The Euro Zone doesn't have to be destroied to have the pair equal in value. In my opinnion the down-trend will continue all the way down to the 1.16... level in the next coming year. If you look at a 5 year chart, you'll see what a beautiful double-top we have. By year-end I see the 1.38... level for the EUR/USD. Now I am just waiting for a rebound to short the pair again. By the way, the deficit won't define the value of the pair anymore. Everyone is in debt in this world right now, and will be for a while. :) What traders will look at the most is, which country can handle those deficits better. Regards,

Joe, if you don't think the housing debacle was evidenced last August, go back and read Martin Feldstein's Jackson Hole presentation.

Joe, if you don't think the housing debacle was evidenced last August, go back and read Martin Feldstein's Jackson Hole presentation.