Tuesday March 10, 2015 - 14:16:19 GMT
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Where Will the EURUSD Bottom?
I saw a television commentator today ask the question, Where will the EURUSD bottom? This comes in a market that has broken through key chart points and is essentially in uncharted waters by trading at levels not seen in around 12 years. As I noted in my weekend video, 1.08 (broken) and 1.05 are on the radar, with many looking for parity. So where will the EURUSD bottom?
As we noted, diverging economic performance and monetary policies have created what is a perfect storm for the dollar. History has shown that forex market rarely moves in a straight line and those in the trenches can attest to the fact even though longer-term charts may show a one-way trend, it is the bumps that leveraged traders need to avoid.
Where Will the EURUSD Bottom?
This was a post today from a long-time Global-View.com Forex Forum Member
I've noticed over a very long time that folks are very good at looking at and studying historical charts from right to left for hundreds or even thousands of hours after identifying desired reference points for perfect hindsight analysis but can't trade from left to right as markets actually function to save their lives.
Read it closely and then watch my video, EURUSD Is Headed for 1.08 and 1.05, where I argue against putting too much relevance on chart levels that date back 11+ years. What this trader is saying is you have to look forward (right side of chart) rather than look back (left side of chart) for guidance. While I might argue against this for shorter-term charts, it makes sense when looking at longer-term charts.
What I am saying is that we are in uncharted waters and why guessing at a bottom is a fruitless exercise until fundamental and/or technical factors give a reason to do so. If you want to keep it simple, focus on the following EURUSD levels, 1.10,1.08, 1.05, 1.02, 1.00. The closer the market gets to parity, the more cautious it will become. If it can regain 1.10+, then talk of parity will ease.
What Would Give the EURUSD a Reprieve?
1) The FED. If it turned cautious over the impact of a stronger dollar on the economy and/or the equity markets, pushing out the timing a rate hike would cause the forex market to pause. In this regard, the Fed is not likely to send a signal at the March 17-18 FOMC meeting, where the word “patient” will likely be dropped from the statement. While Yellen made it clear that dropping this word would not be a signal for a rate hike, the market will likely take it that way unless data starts to disappoint or Fed officials try to dampen expectations for a June rate hike.
2) The Treasury. The Fed does not set forex policy, which is the responsibility of the Treasury. So far, Treasury Secretary Lew has shown no concern over the rising dollar but you need to keep an eye on what he says as even a hint of verbal intervention would send a crowded dollar trade running for cover.
So to sum up, the market will decide where the EURUSD bottoms as guessing at one in uncharted waters is just that, guesswork. EURUSD1.00-.1.10 is likely to be a nervous zone that would become even more jittery should it manage to get into 1.00-1.05.
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Jay Meisler, founder
Global Trader Association
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