Tuesday, December 10, 2013

XEU Euro Daily Chart Upward-Sloping Channel H&S

The euro has popped strongly higher since Draghi's press conference last Thursday. The stronger euro keeps the sick man of Europe very ill. Manufacturer's and exporters are at a disadvantage as the currency rises, sans Germany.  The corresponding push lower in the dollar helps keep commodities and copper buoyant which helps keep the U.S. stock market higher. The indicators are long and strong (green lines) wanting to see higher highs with the euro even after any pull back occurs. So the euro may drop to the lower rail of the upward-sloping channel, say at 1.367-1.371-ish, but the euro would be expected to print higher. The euro should peak in the coming days.

Looking back, the rising wedge and negative divergence was an easy top call in late October. That is when the EUO inverse ETF was played successfully for the spank down. The bottom in November is cheesy. Markets are far more affected by central banker actions these days. The Fed, BOJ and ECB are the markets. The blue lines show an H&S pattern in play with the right shoulder now printing. The H&S would be negated if the price takes out the October highs. If price drops under the neckline at 1.34, the target is 1.30. Price has violated the upper standard deviation band (not shown) so a move back to the middle band, the 20-day MA at 1.3545, is on the table.

The euro needs say, 1 to 4 days to potentially top out so it is worth watching for an entry into EUO in the days ahead, but not yet. The initial downside projection, once the euro tops likely later this week, is a move to the 20-day MA 1.3545 and rising. When the euro starts moving lower (since it must to help Europe recover, otherwise the continent falls deeper into recession and depression and will drag global markets lower) the dollar will move higher placing negative pressure on copper, commodities, oil and U.S. equities. In general, currencies should start to develop an intermediate term (weeks and months) sideways move. The euro should dip lower as it moves into this sideways vibe forward and the dollar should move higher into the sideways vibe forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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