EURUSD - Trends, Forecasts and Implications (Part 1) - page 23
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VTB comment
The price of November 2009 Brent crude oil futures has risen to a higher level of $71.5, influenced by a change in the foreign exchange market. The price is trying to hold just above the old traded level of $71.3, and with the current state of the currency market, we can expect the price to remain at these levels for some time to come. Technically, the situation allows us to expect a return to $70, but the time of staying at the current level is difficult to predict. Indirect indications are in favour of such a possibility during the US session.
The Dow Jones index has been repeating the same scenario for the last 3 days. At the start of trading, the declines which had started are contained. Later there is a planned rebound which follows a similar scenario. In this situation it is difficult and sometimes senseless to use TA methods. The fundamental factors are decisive.
After the stellar reversal the Eurodollar (EURUSD) fell to 1.4650. The standard holding pattern of the last trading period, and especially of the last three days, continued thereafter. The standard development took the form of a hold-down at 1.4650 until 3pm (19:00 Moscow time). Thereafter, there was a gradual rise with the aim of pulling the stock market to higher levels. The course figures as 1.4700 or 1.4800 do not make much sense. It took 2 figures to rise from 9600 to 9800, from 1.4550 to 1.4750. The benchmark price of 10500 points of the DJIA is about to rise to 1.5450. In the near future, the current momentum may be expected to continue.
EURUSD (6EZ9), M30
By the way, I found a good indicator today, looks good on the daily timeframe
I have a bearish divergence on the Euro on H4 and a bullish divergence on USDCHF, maybe a pullback is coming.
>> now I'd like to see the day's work.
Is there a divergence there?
Not on the day.
>> I think they're gonna end the day in the red.
And there buy divergence to build.
VTB commentary
So, the 1.47 mark is finally broken through, the euro made a high at 1.4765. This renewed the high shown during the upward rally of the euro in December. At the same time the related markets continued to rise. Yesterday the Dow Jones rose 1.12% to 9791. The Shanghai index closed today up 2.02% at 3060. The price of a barrel of WTI crude oil rose to $72.53 and gold is at $1,022 per troy ounce.
In explaining all these movements, analysts' tapes repeat mantras about growing optimism about the imminent recovery of the global economy. According to them, rising risk appetite is hitting the dollar, as it has become a funding currency, replacing the yen due to low interest rates. The Japanese currency, in spite of an even lower interest rate, does not want to return to its pre-crisis role as carry trade leader. JPY crosses remain depressed, and the USD/JPY has been falling almost continuously in recent weeks, with yesterday's low at 90.11.
However, judging by the capital inflows, the dollar is indeed a funding currency. TICS published yesterday showed that net portfolio capital outflows from the US for July amounted to $97.5bn, the lowest since the start of the calendar. Cumulatively since the start of the calendar year, portfolio capital outflows were $465.0bn, with positive inflows out of those 7 months only in March. As we can see, it cannot go on like this for long; at some point, the US will have to return the investment appeal of the US economy, at least temporarily, in order to postpone the agony of the dollar's status as the world's number one currency. And we see the following possible measures for this: 1) demonstration of economic growth in the American economy 2) demonstration of dollar stability 3) raising the Fed rate. Obviously, the second and third points contradict the first, since healthy economic growth requires a cheap national currency and low interest rates. We can already see that a devaluation of the dollar to support the US economy has begun. But in principle, a stable dollar does not necessarily mean an expensive dollar at all.
We don't think that in the next half a year the Euro will break through the all-time highs (it will be a strong blow to the dollar's prestige), but a stabilization of the dollar around 1.50 against the Euro may be in the interests of the USA in the coming months. When the US economy starts to show growth, the Fed may raise the rate, making USD assets more attractive for investment.
However, we are sceptical that these measures will help the USA in the longer term, the imbalances in the world economy are too great. But so far the whole world is in euphoria over the emerging "green shoots". The US industrial production figures for August published yesterday showed an increase of 0.8% m/m and in addition, the figures for July were revised up from 0.5% m/m to 1.0% m/m. Industrial production now shows a decline of only -10.7% over the last year and the lowest y/y value in the new data was observed in May at -13.2%. U.S. capacity utilisation rose to 69.6% in August compared to a low of 68.3% in June (before the crisis started in summer 2008, capacity utilisation was above 80%). In order not to miss out on the fruits of recovery in the global economy (which started by pumping money into national economies by global central banks), the US will have to stabilise its dollar at lower levels when capacity utilisation starts to show good growth rates.
In the medium term, we expect the euro to stabilise around 1.50. However, significant fluctuations are possible in the short term. We believe that the current upward trend of the euro will not end at 1.49, and after a consolidation around 1.50 in October, the euro could rise briefly to 1.56. Then, in November, we foresee a very sharp and powerful shock, which would bring the Euro back down to 1.40 (which might be timed to coincide with a rate hike in the USA or something else). We see its purpose as being, on the one hand, to support the dollar's market position and status and, on the other hand, to dislodge market players who are in the long term to sell the dollar after the euro has moved up out of its summer range. We then expect the euro to return back to 1.50 and above.
Market analysis
Alexei Mikheev, VTB 24 analyst
On the EUR on the day there is a double top, according to the law of the genre it has to break through it after the pullback, as soon as the blue bar starts to show after the red one, I will shoot
Nice indicator, where did you get it?
with your MM the first entry 1% -2%
then turn at least 100 pips in profit
on the trend, even in the bu, you do not need to exit earlier than 100 or 50 pips at an average price movement as it is now.
last year the euro moved 191-192 pips from high to low
at this risk on a very large depo is quite an adequate profit
not bad :)