EUR USD Wave analysis

In the post about the strong technical support for the rise of the US Dollar at the end of December 2009 the graphs showed the upcoming movement. Since then the Dollar has risen towards the Euro with about 5% (which is almost 7 cents or 700 pips). As the situation developed the aim of this post is to present some clearly seen wave movements inside the bigger uptrend for the Dollar and also in the parts that make that bigger trend itself.

On the left is the Daily graph of EUR/USD pair for the past almost 3 months. What is clearly seen there is that the uptrend for the Dollar is developed in waves. This period could be divided into two main parts:

• the first big fall to 1.42 (A)
• the second fall which we witness now (B)

The first upward movement took part in 5 waves (marked with the blue lines on the graph) and at the end of them there was a retracement to the 38.2% level at 1.4570/80.

What those waves could show us is that the current movement is not finished yet and there should be a Fifth down wave for the Euro to follow. This is supported by the indicators where on the monthly graph the Stochastic still hasn't reached its lowest levels and continues to point downward.

Another interesting thing which could be noticed on the graphs are the levels of retracement which follows each of the Euro down waves.

The graph on the left shows the second part of the big upward Dollar move.

In most of the waves the retracement led to a 38.2% to 50% correction of the downfall for the Euro. What we could expect now in a short term is an upward Euro movement at least to 38.2% level which is around 1.3750/60.
After that level is reached the last fifth down wave could follow which will lead to another increase of the Dollar towards the Euro to levels below 1.35.

S&P 500 technical review

Yesterday's slide of US stock markets might have surprised a lot of people. Without doubt it was a fierce and strong decline despite the upward mood of the crowd. One of the biggest problems with the last several increases is the volume behind them. At last there was no one to buy. Some news interpreted as bad pulled the trigger.
Anyway, let's see the graphs.

The 1 hour graph of S&P 500 shows some signs of bullish divergences between the value of the index and the indicators - those marked by the straight red lines. Nearly the same is the picture on the 30min graph.

The decline in the Unemployment rate (which was reported as 9.7% - less than the 10% seen in the last month) might give the market the needed fuel for such a short term increase.

The obstacle before any major increase of the markets at the current time  could be seen on the Weekly graph. The bearish divergence that is clearly seen there takes the lead now. The Stochastic clearly points downward but MACD is still positive. There is a chance that the index gets caught between the two Moving Averages for some time. That would mean a bottom value of about 1035/45 in a first place as that level corresponds well with the EMA50 and 23.60% level of the Fibonacci retracement from the current top. If the markets seeks deeper negativism in order to continue to rise, the next level could be found around 950-1000.

Still the movement of the markets precedes the real Economic news so what we witness from the last days of January might very well be just "selling the news".