Global YEN Intervention After the Earthquake

The Japan earthquake took the YEN to its highest level against US Dollar in the post-war era. Today G7 group intervened on the FOREX market selling YENs. The selling was started by BOJ and is reported to be followed by other members of the group. The YEN lost about 2.9% for a day. This could be only the start of it. Let's get technical.

The monthly graph shows the YEN is on a strong support level (shown by the blue horizontal line). The level sustained for several months as seen on the graph. The more important thing seen on the graph are the bullish divergences between the price and MACD indicator. The same type of divergences are seen during 1993-1995 years. Divergences of such magnitude could result in a multiyear downtrend for the YEN against the US Dollar. That would have positive effect on the Japan export economy, could result in even greater Japan dominance on the world markets of goods and eventually get the country again on the rapid development road.

A Warning Sign for the Euro Bulls

The rise up of the Euro against the Dollar has been in place for the last months. Now the time for a change may be near. Take a look at the daily EUR/USD graph (click on it to see it big):

Here we have a bit of a worring picture. The value of Euro has continued to rise despite the MACD recorded lower values. The Stochastic followed the MACD but still the MAs are on the positive side. That explains the volatile movements we are seeing these days. The Stochastic is pointing forward and the Euro rose again today. So far. The formation which is about to be formed is very worrisome for the Euro as there is a chance the power of the Euro Bulls that drives the increase of its value toward the Dollar to be vanishing.

The weekly graph still shows the Euro may has some time to go up but the Stochastic points it to be a bit overbought.

The more important warning sign is on the Monthly EURO/USD graph shown below:

Here the MAs are still not on a positive side but still the Euro has risen a lot for the past months. What lights the red lamp is the Stochastic value which show the Dollar might be oversold. If that proves to be true we might witness another major rise of the Dollar in the next months. The situations requires attention and the conclusions might vary depending on the real data.

Current expectations for September, 2010

Expectations in short for September -
Dollar - down
Gold - down
Stock markets - up

Today the FED again has reassured the markets it will continue its monetary policy of easy money in order to stimulate consumer spending and get US out of the trap. This alone will give enough  strength of the Euro to continue its advance as there will be expectations of increasing the amount of available Dollars on the market. The weaker Dollar will give more competitive strength to US companies and further improve their financial results. As a secondary effect the Crude oil value could increase.

On the other hand such stimulus money (or any other type of government support) would give markets the long awaited trigger to start trading positive expectations again.

As markets turn positive using Gold as a hedging vehicle would become less popular. Having a big enough drop in demand of Gold would pretty much turn the tide. A considerable drop in Gold price would scare most of the last crowd that entered the Gold market in hope to make some quick profits which would increase the selling pressure further.

All these are an expression of an analytic point of view. Will wait for the end of September to compare with the real data.

Euro/Dollar (EUR/USD) Analysis - Monthly, June, 2010

Last month the Dollar made one of its biggest gains in a month against the Euro. The trading began at May, 1st at around 1.33 and closed the month at 1.2286 with 1.2140/30 being the lowest level reached. This made almost 7.6% gain for the Dollar.

As was supposed in the current weekly technical analysis, June started with a test of the lowest level around 1.214 which was penetrated a bit to 1.2110 and a bounce followed. Now the Euro trades below its previous support level around 1.23.

The monthly graphs shows we are in a Dollar area and the Euro is deeply oversold. A warning sign for any Euro bulls would be the MACD whose histogram continues to dig deeper on the negative side.

As the support level at 1.23 was broken last month the next one (which is a major strong support) lays around 1.17/1.19 area. If the inertia from the last month proves to be strong enough, this is a possible target to reach.

Looking on the Weekly and Daily graphs we could see some signs for an upward Euro movement but even if it appears during the month, the overall trend is still negative for the Euro.

One should keep in mind that there is a possibility for a strong bullish divergence for the Euro to be formed on the monthly graph and if that happens it could signal a long (possibly years) upward trend for the Euro against the US Dollar. Still as we are looking at a very big time-frame graph it could take 1-2 months before such a divergence to appear clearly.

EUR/USD Technical Analysis - Monthly, May

The technical analysis picture on the EUR/USD monthly graph still looks depressing for the Euro. We are in the midst of a Dollar uptrend although there might be seen some signs for a change coming.
MACD is on the negative side and there seems more time will be needed till it goes positive. At the same time Stochastic shows the Euro is in the oversold area. The picture suggests that at least for the first days of May the Dollar will continue to grow stronger. As history shows there could be several months to pass before the trend gets definitely changed.

We could take a look at the monthly graph and expand it for a much longer period to see which are the possible resistance levels for the Dollar on its way up.
The horizontal red line shows the first possible Dollar resistance level against the Euro which lays at around 1.30.
As Euro looks being much oversold the most probable scenario looks a test of the 1.30 level and a bounce back.

Update: Markets reacted to the agreed bailout package of Greece with sending the Euro lower. In long term there is a chance Greece manages to recover and return the 110 billions of debt the EU and IMF decided to give her. As a result there will eventually be more quantity of money poured into the EU and IMF treasures. That however could take maybe 15-20 years to conclude. So the direct effect is diluting the Euro value and as a result the Dollar gets stronger.

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.

EUR / USD Technical View - Strong support for the Dollar?

On Nov. 17 I wrote an article about the negative correlation between the dollar and the stocks. About 2 weeks later the dollar started its victorious march and the stocks didn't follow. The macro conditions about such a movement were clear. Let's take a look at some graphics now.

The monthly graph shows a clear down path for the Euro. Although the MACD is on a positive side, the Stochastic is strongly pointing down. There is a bearish divergence between the Stochastic and the price. The Moving averages are not so strongly bullish about the Euro. All this could lead to a fall of Euro to around 1.3650-1.37 - a resistance level for the first upside movement of Euro at Aug 2004. This level is also 50% decrease from the last upside movement. This may seem like a bold view but the other graphics seem to support it.

The weekly graph shows the bearish Stochastic divergence (we have higher levels of Euro and lower highs of the Stochastic) even more clearly. The Moving averages still haven't crossed on the downside but there is still more the Stochastic to go. It is close to the oversold level but still not there. The daily graph shows more.

On the daily graph the MACD is strongly negative. The Stochastic is strongly oversold. There could be some retractions to higher levels of Euro but with such a negative MACD the dollar positions seem stronger for now. With the support from the graphs of the higher time-frames, the path seems only one way. Till it gets on or close to the above mentioned levels.