Good morning all.
Today is many things. It's Friday, it's month end and the piece de resistance... Ben Bernanke's speech at the Jackson Hole Symposium.
Forget the capital flows typical of a month end or of a typical Friday. Today we have a bigger event. The market's expectation is that Ben is going to give some hints about the next round of easing by the Fed or perhaps even announce it outright. The markets are quite irrational aren't they? This is the problem with perceived precedence. In 2010 Mr. Bernanke all but outright announced QE2 and ever since then, the market has expected him to do it again. One must keep in mind that Jackson Hole 2010 was a very different situation and called for extreme measures. We're not in those circumstances any more. In fact the US economy is showing very good promise. Lately the economic data has been showing signs of life unlike the EuroZone economy where is has been showing consistent contraction (yet still refuse to admit they are in a recession). In a nutshell, those who feel we will get QE3 (Much less get an announcement from Ben today) are either living in a delusionary world or they believe that Ben is.
So today I expect the QE3 bandwagon to be very disappointed which should lend lots of support to the US Dollar. How Week-end and Month-end flows affect that will be a different story, although during times of extreme sentiment, these flows tend to have a subdued effect. Regardless of what happens today as far as flows are concerned, what we don't see in Benny disappointment effect today, we will most likely see on Monday.
Technically, since we pretty well spent this week and the last part of last week in a 100 pip range, absolutely nothing has changed on the support/resistance or the trend line front. However, PA has drawn us two possible bearish reversal patterns for which I am awaiting confirmation.
The first one is the double top pattern I have already mentioned in a previous daily update. The tops come in around 1.2580 with a neckline at around 1.2470. A break of 1.2470, would target 1.2360 to complete the pattern.
The second one is a tilted Head and Shoulders formation with the neckline currently coming in at this morning's levels around 1.2495 and a head at 1.2575. A break of the neckline targets 1.2415 to complete the pattern.
If the H/S pattern confirms by breaking the neckline, then the move to complete it will take us below the neckline of the double top pattern and will most likely confirm and complete that also. So really, if all goes well, a break down from current levels should target 1.2360 today. As you all know, technicals do fail sometimes. If Bernanke leads the market to believe that QE3 is coming, even if the neckline is broken and confirmed by then, no line or technical pattern is going to stop the E/U from rallying.
Well I don't know about all of you, but I'm certainly on the edge of my seat today. I do expect to see some final jostling for position before Benny's speech. In fact, if the market really loses hope in QE3 before Ben opens his mouth, by the time he says anything, there may not be a move left. It's almost impossible to say how things will unfold when the market is hyped on fear and greed. All one can do is enter a trade that offers the best risk/reward ratio... or just remain sidelined like most of the smart money has done.
Best of luck today to all of you.
E/U H4
E/U Daily
Today is many things. It's Friday, it's month end and the piece de resistance... Ben Bernanke's speech at the Jackson Hole Symposium.
Forget the capital flows typical of a month end or of a typical Friday. Today we have a bigger event. The market's expectation is that Ben is going to give some hints about the next round of easing by the Fed or perhaps even announce it outright. The markets are quite irrational aren't they? This is the problem with perceived precedence. In 2010 Mr. Bernanke all but outright announced QE2 and ever since then, the market has expected him to do it again. One must keep in mind that Jackson Hole 2010 was a very different situation and called for extreme measures. We're not in those circumstances any more. In fact the US economy is showing very good promise. Lately the economic data has been showing signs of life unlike the EuroZone economy where is has been showing consistent contraction (yet still refuse to admit they are in a recession). In a nutshell, those who feel we will get QE3 (Much less get an announcement from Ben today) are either living in a delusionary world or they believe that Ben is.
So today I expect the QE3 bandwagon to be very disappointed which should lend lots of support to the US Dollar. How Week-end and Month-end flows affect that will be a different story, although during times of extreme sentiment, these flows tend to have a subdued effect. Regardless of what happens today as far as flows are concerned, what we don't see in Benny disappointment effect today, we will most likely see on Monday.
Technically, since we pretty well spent this week and the last part of last week in a 100 pip range, absolutely nothing has changed on the support/resistance or the trend line front. However, PA has drawn us two possible bearish reversal patterns for which I am awaiting confirmation.
The first one is the double top pattern I have already mentioned in a previous daily update. The tops come in around 1.2580 with a neckline at around 1.2470. A break of 1.2470, would target 1.2360 to complete the pattern.
The second one is a tilted Head and Shoulders formation with the neckline currently coming in at this morning's levels around 1.2495 and a head at 1.2575. A break of the neckline targets 1.2415 to complete the pattern.
If the H/S pattern confirms by breaking the neckline, then the move to complete it will take us below the neckline of the double top pattern and will most likely confirm and complete that also. So really, if all goes well, a break down from current levels should target 1.2360 today. As you all know, technicals do fail sometimes. If Bernanke leads the market to believe that QE3 is coming, even if the neckline is broken and confirmed by then, no line or technical pattern is going to stop the E/U from rallying.
Well I don't know about all of you, but I'm certainly on the edge of my seat today. I do expect to see some final jostling for position before Benny's speech. In fact, if the market really loses hope in QE3 before Ben opens his mouth, by the time he says anything, there may not be a move left. It's almost impossible to say how things will unfold when the market is hyped on fear and greed. All one can do is enter a trade that offers the best risk/reward ratio... or just remain sidelined like most of the smart money has done.
Best of luck today to all of you.
E/U H4
E/U Daily
Those who say it cannot be done should not interrupt those who are doing it
. I got stopped out two weeks ago and now am almost flat. Only few sell orders from far above are still open.
