As I’m sure most readers are aware, the Eurodollar rallied quite hard in Asia this afternoon. This followed comments from the European Stability Fund that China is interested in participating in its bond tender next month.
If this was to happen in significant volume it could help push up the price of these bonds, reducing the cost of European bailout funding. However, these are only comments at this stage and it remains to be seen how significant this development will actually be.
Sometimes, however, markets can be triggered into significant moves by what seems on the surface to be minor news. This often happens because markets are “stretched” in the opposite direction.Technical analysis can provide useful insight into these opportunities.
Interesting to see then that if bullish Euro sentiment carries through to the close of today’s candle, we will have completed an ABC correction at a Fibonacci cluster level.
This cluster consists of a 61.8% retracement of the last major swing up together with a projection that the b/c swing will be 127% of the length of the retracement from a back to b.
One approach to entry strategy with this set up is to enter if there is a close above the high of the candle making the trough and only if the stochastic oscillator on the higher time frame weekly chart is trending up at the time of entry