EUR:USD – Daily. Potential for corrective down trend to end here.

Hi,

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.

EUR:USD - Daily. Source: Bloomberg

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

Cheers

Ric

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
This entry was posted in Forex, Market, Trading, Uncategorized. Bookmark the permalink.

5 Responses to EUR:USD – Daily. Potential for corrective down trend to end here.

  1. Anthony Kwok says:

    Appears to be a “no go” as the stochastic oscillator on the Weekly chart is trending down.

    • Ric Spooner says:

      Hi Anthony,

      As you say this set up failed to trigger on the current candle. It was unable to close above the high of the trough candle and the weekly stochastics are still trending down.

      However, there may still be a set up. If Monday’s low is not breached and we get a candle with a strong close in the near future this could easily push %K above %D on the fast stochastics in the weekly chart

      Cheers
      Ric

  2. Ajay says:

    Guys – this is funny that we make a big deal of small news. China buys bonds of all the countries. If they are buying Portugal bonds, that doesn’t mean they will stop buying US Treasuries. If you are a new investor, you are always attracted to aggresive rate of return. The reason they are high as it’s possible they they can default. Safe CD have low rate of return. Stock market has higher rate of return.
    Also didn’t we hear the same message last time, that China was buying Greece bonds. What happened? They didn’t buy enough othewise Greece won’t be in a same default mode. Good luck and Happy trading.

  3. daveold says:

    Ric, your ABC correction label would be very unorthodox in EW terms because the length of C falls well short of minimum requirement—100% length of A. The 127% external ret of last swing up very valid. The pattern from the 4938 high is not at all clear but it doesn’t look like a simple corrective. More like a rather messy 5 wave series imo.

    The EU and GU are mostly quite closely correlated but the correlation has gone to pot recently (good reasons for that) Comparing the EU with the GU there is a good case for ABC corrective on the GU where C=A at 1.6041. Price made 1.6056 three days ago and bounced.

    Just thoughts !

    DavidO

    • Ric Spooner says:

      Hi Dave,

      Thanks for your thoughts which are as usual appreciated.

      I agree on GBP – looked good.

      I am aware that this EUR set up may offend the trained “Elliot Eye”. However, I find that these small, false break style 3rd swings are can be very effective in the right circumstances. This strategy although based loosely on aspects of Elliot wave analysis is not a full EW strategy and will differ on some occasions.

      Cheers
      Ric

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