Friday, March 6, 2015

XEU Euro Weekly Chart Oversold Falling Wedge Positive Divergence

Everyone and his bro are short the euro. Even the taxi cab driver and shoeshine boy. And why not? Europe has now prostituted themselves just like the United States goosing stock markets with easy money by depreciating the value of their currencies. The global race to debase, the race to the bottom, continues. The action is basically a trade war reminiscent of the 1930's during the Great Depression.

You know what happens when the boat is fully loaded to the downside; markets move in the opposite direction since a large consensus of traders are caught off guard. The euro has collapsed and continues collapsing today under 1.10 to a LOD at 1.0951. So that last red candlestick will extend further downwards. The green lines show firm positive divergence across the board except the MACD line that is weak and bleak. The euro will likely recover strongly in the coming days and considering the shorts in play, the move higher may be like a rocket. However, after the bounce occurs for a week or two, the euro will want to come back down again to satisfy the weak and bleak MACD line. At that time, the MACD will go possie d and a more firm bottom will be in for the euro.

The euro monthly chart shows weak and bleak indicators remaining so the bottom in the euro is not likely for a month or few but the price action should be more sideways than down. Those looking for parity (1.00) will likely be disappointed. The 1.06-1.08 area may be a more logical downside target that prints the bottom in May-June.

Thus, if you made a lot of dough on the downside take the money and run, actually flip it to the long side for the euro since a spike higher is likely on the doorstep. Do not get greedy on the recovery move since that spike will not last long and the euro will come back down as discussed above. If you are a longer term player on the short side, you can be patient for lower lows in euro but you will be biting your lip as you watch the euro elevate over the next week or so.

Of course, the dollar and euro move inverse to each other since the currency baskets are weighted about 50% with each other's currency. Thus, the same analysis holds for the US dollar index--only in reverse since the euro and dollar move inversely. The US dollar is overbot with a rising wedge and negative divergence so it will receive a spankdown. The US dollar weekly chart also displays the MACD line a hair higher from the last high confirming the same inverse technical analysis as described for the euro above. The euro spike may have some juice once many of the shorts panic and the possie d kicks in. 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.

Note Added 9:29 AM: The euro prints a new LOD at 1.0871 after the US Monthly Jobs Report.

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