Sunday June 13, 2004 - 11:57:47 GMT
Share This Story
Trendways - www.trendways.com
The Dollar and the continentals: what's next?
An excerpt from this week's Trendways weekend analysis:
"Technically I wasn't surprised by the market tun which started last Wednesday. Already on the IMC analysis of last Tuesday evening I had pointed out that the rest of the week would be critical as EUR/$ would either have to finally break above 1.2385 and rally or a failure would most probably lead to heavy liquidation of long EUR positions and a possible model break, which finally came on Wednesday afternoon when the unit fell under 1.2075 and closed well below that key level. At that time my main concern was that it was only the Euro which had triggered a model break and any kind of lasting model divergence between the contis would make trading decisions difficult since, as it is the case at times of such divergence, one can't tell with certainty which of the two currencies will drag the other in its direction. What really helped was the observation of TC's and it was exactly that observation which made me write on Thursday evening's IMC update that, with a TC above 80, the higher probability was $/CHF would have to follow EUR/$ rather than the opposite, hence my suggestion at the time to buy this pair at the mid 1.24's against the then model direction. Friday's model break by $/CHF simply confirmed the expectation.
The big question arising now is whether these latest model breaks will lead to a sustained USD uptrend or they will only result in some limited gains both in terms of size and time within the general framework for this year which has thus far justified my view expressed as early as last January, namely that this wouldn't be a year of big trends. Once again the market is standing on crossroads as EUR/$ is threatening its long term support lines and although as you know I am not a fan of linear analysis with regard to shot term lines which are often used by stop hunters, I can't disregard long term lines , especially when all time horizons tend to more or less the same level. Without saying that such lines can't be used as a market trap, it would be imprudent to assume that a linear break in such a case should ne taken lightly. To be more specific on levels, we now have the monthly EUR/$ support line at 1.1845 and the respective weekly line at 1.1885 and they both go back to March/April 2002. At the same time we also have a daily line connecting last and this year's major lows (1.0760 and 1.1755) which starts the week coming in around 1.1835 and is rising. Therefore we can definitely say that on a linear analysis basis the area 1.1835-85 will be critical this coming week and, if cleared, it will indicate a linear break of the nearly 2 1/2 year EUR/$ uptrend."
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."