EurAnalysis

something to wonder, which directions are we headed for up or down?

Good morning everybody

It's Friday and we have gone through one more week of "WTF is going on?".

As I explained yesterday (or was it the day before?) in one of my posts, we have multiple forces in play in the markets.

1. The situation in the Eurozone debt debacle is worsening and therefore weakening the Euro against most crosses.

2. The economy in the US is not gaining much ground and the QE3 bandwagon is beating their drums sending USD longs into hiding and the hopium freaks into equities and commodities in fairly thin trading.

3. We are in the middle of corporate earnings season which is further boosting the equity indices with decent reports and thus slightly weakening the USD.

The end result is that we have both the USD and the Euro weakening across the board and creating very choppy trade in the E/U pair. What has been typical lately is that on Fridays the market has tended to unwind positions built up between Monday and Thursday. Will we get the same effect this Friday? I do not see enough fundamental drivers to push this either way at this point, so let's look at the technical picture.

Last Friday we saw some short covering in the E/U pair which basically started a bear flag formation on H4/D1 charts and played out for the rest of the week. Based on a rudimentary wave count of this bear flag, we are struggling to complete the wave 5 upwards which I have targeted as 1.2360/80 area. Yesterday we got as high as 1.2323 and that price was very quickly rejected as traders are looking to sell rallies on this pair. Will we actually reach that wave 5 target? Being a Friday and somewhat expecting this week's moves to be unwound, my faith in reaching that target has somewhat diminished. However, it's still too early to tell. London may give us enough of a boost to get us there, at which point the pair should drop fast. Alternatively, we start unwinding this week's moves this morning and break out of the bear channel support to head for new lows.

The take away from all this is that it seems wise to continue selling into rallies. There is really not much else to say here. It's just a matter of when a sufficient amount of QE3 risk has been priced in to the markets. My feeling is that we're done, but that's just a feeling supported by this pair's refusal to show any momentum to the upside.

As always, time will tell. Stay nimble and watch your leverage. Don't get greedy today or any day for that matter. Remember, pigs get slaughtered. Don't be one.

E/U H4


E/U Daily

As always, nice analysis. I was beginning to wonder if there was anyone alive in here

Today’s orderboard

Written by Pete Jackson
July 20, 2012 at 05:46 GMT

EUR/USD: Offers 1.2280/00 (talk semi-official, Dutch names, ACB), (1.2300 also large opt expiry). More offers 1.2315/25,. Suggested buy stops above ahead of stronger offers up at 1.2340/50, buy stops above and through 1.2365. Bids 1.2230/40 sell stops below ahead of more bids 1.2200/10, sell stops below ahead of bids 1.2150/60 (1.2150 barrier)

GBP/USD: Bids 1.5650/60 1.5580/00, offers 1.5730/50 (1.5750= 200 day MA), stronger up from 1.5775 up to 1.5800 (1.5790= 100 day MA)

EUR/GBP: Bids 0.7795/05. Likely sell stops below through 0.7790. Offers 0.7835/40 and 0.7865/70

USD/JPY: Bids 78.40/50 sell stops below, more bids 78.25/35 (78.25 barrier) and 78.00/10 (78.00 barrier) sell stops below. Offers 78.90/79.10(200 day MA 79.07). Buy stops through 79.25 ahead of tech res/offers 79.40/50 (79.43= 55 day MA)

EUR/JPY: Offers 95.50/60 and 96.90/00. Tech res 97.30/40, bids 96.00/20 likely sell stops below 96.00 ahead of larger bids down at 95.55/65 with more sell stops through 95.50

AUD/JPY: Bids 81.25/35(81.26=200 day MA) and 81.00/10, likely sell stops below through 80.90. Offers 81.90/00, and 82.05/15 (82.14=100 day MA) likely buy stops just above and through 82.40

EUR/CHF: Bids 1.2000/10(SNB), Offers 1.2025/50 buy stops through 1.2055

USD/CHF: Offers 0.9800/20, bids 0.9750/60 and from 0.9730 down to 0.9700

AUD/USD: Offers 1.0440/50 (1.0450 barrier), buy stops above ahead of tech res 1.0470/75 and 1.0500 (possible barrier). Bids 1.0390/00 sell stops through 1.0390 and stronger bids down at 1.0350/70, sell stops through 1.0340 ahead of more bids 1.0300/10

EUR/AUD: tech support 1.1740/45 (recent low) and 1.1700, offers 1.1790/00 and 1.1850/60

NZD/USD: tech res 0.8070/75, Bids 0.8000/10, and 0.7980/90, sell stops through 0.79800 ahead of tech supp 0.7960/65 (200 day MA 0.7962) stronger supp 0.7915/25

Thanks Jeppy... Friday and Monday mornings are always slow

Today's Euro FX Option expiries at 14:00 GMT

1.2200
1.2225
1.2250
1.2260
1.2300
1.2325
1.2375
1.2385

Expiring options at 1.2300 are reported to be quite large. This may have more of a magnetic effect on price today after NY open provided that price is close enough to the 1.2300 handle at that time.

I notice you post information on option expiries a lot. Could you explain to me what effect that FX options and their expiries have on the spot FX market?

Thanks!

LOL Geppy - some of us need our caffeine fix before our fingers work properly ....BTW, good to see you again

GM PT - thanks for the quality analysis, a great way to start our trading day

let me help pt on this. He explained it 16th time already otherwise.

On a quiet day without much events, price on the spot market tend to be 'sucked' towards the option expiries.

Thanks ProfitsOnly

Morning all,

As always great morning read PT, i really enjoy reading your analysis and the way you put it all together. Most definitely helps me understand the Fundamental side of things of which I'm still trying to get my own grasp on.

I am out of all positions and now sitting on both my hands waiting to see where this pair will take us. I will be watching the 1.2320 , 1.2360 and 1.24 levels as shorting opportunities. However, i may just stand aside for today as its Friday and we also coming to the end of the month, plus we have company earnings too. Its been a good profitable month so far and that might just be the excuse i need to just stand aside and marvel at the market rather than trade it

Lets see what happens..

Good luck to all and Happy Trading!!!

Hello all friends ,

This is my trade today as per my EU H1 chart. If the price climb higher I will scaling my shorts. The levels depend on the PA and momentum. Closely watch H4 , EMA 200 and H1 charts , EMA 55 and fibo 38.2 . The SL and TP not set. MM < 1 %.

At the time I'm typing this post , I'm 'underwater'. Its ok, only small portion < 0.01% exposed to the risk. GL to all traders

This is IMO a rather important article.....

IMF loses all faith in the euro project

Love him or loathe him, latest from AEP at The Telegraph.

USDOLLAR preparing to go one way h1:

Ambrose is extremely biased against the entire Euro project and he tends to spin his stories to support his bias via embellishment and omission. As such, although I do enjoy reading his stories, I don't pay much attention to what he suggests other than to take it into account as a possibility. I do not believe IMF has lost all faith. They definitely are worried, but to suggest that they have lost "all" faith is nothing short of sensational reporting.

Here's another one from Ambrose today...

Spanish debt crisis returns as Germany nears bailout fatigue

Again, he is extremely biased against the Euro project, so take his opinions and interpretations with a grain of salt. Only look at the facts.

on this hugely volatile morning I knew you'd appreciate my tossing a pebble into the pond

Thanks, man. Good to be here.

Good morning,

I know those arent perfect doji candles on daily, but you know what I mean.

Btw, I am starting another poker season this Sunday with equity @1/6th of FX capital. Bring it on suckers, muahahahaa.

T