I will be back with my weekly video market recap later this weekend discussing the indices and overall price action in equities. As you know, though, the events over in Europe appear to be quite tumultuous. The Euro/Japanese Yen and Euro/U.S. Dollar currency crosses have long been viewed as proxies for global risk appetite, or lack thereof. Generally speaking, the stronger the Euro, the more risk is “on,” and vice versa. Clearly, the recent glaring strength in both the Yen and Dollar, coupled with persistent weakness in the Euro,seems to have been part of of the risk aversion equation we have seen in the markets.
Regarding these currency crosses, the issue headed into next week is whether the situation truly is the worst of the worst over in Europe. The Euro bulls have a chance to follow-through on Friday’s long-legged doji (considered a potential reversal signal) versus the Yen on the daily chart (first one below), after a prior steep downtrend. Versus the Dollar, Euro bulls printed a bullish engulfing candle on the daily chart on Friday, although I am showing you the weekly chart (second below) to illustrate that this is an area where the Euro has found major support versus the Dollar in recent years. Again, any individual Japanese candlestick requires sound confirmation to the upside in order to have a chance to be a valid reversal pattern.
From a larger standpoint, if the Euro cannot find any type of support next week then it is likely indicative of a cataclysm across the pond. Otherwise, the setup is there for Euro bulls to make their case that emotions and negative news flow is overblown. I have no horse in this race right now, but I would be inclined to cast a doubtful eye on some of the bear flag breakdowns in stocks this week if Euro bulls confirm these reversal candles versus the Yen and Dollar.
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The aud usd cross put in a reversal candle as well. As you know its considered another risk on indicator. DX futures did not climb at all today when the spx was still getting butt slapped w a hot slice. Possibly another sign of risk off topping. I am inclined to go long pretty early in the week
The sell off today was for the most part very orderly. There did not seem to be panic as the market walked down the whole day. What do you make of this type of action? Any insight would be greatly appreciated.
kukx, This is bear market action and most likely the market has not bottomed out. Primary daily trend is down in stocks, that is all you really need to focus on.
Stay short or in cash, or you’ll end up short of cash.
If the past is any indicator of the present: BTFD.
1.19 is the next major support level for the EUR/USD. The major rose 7 cents higher during Q1’s “bull” move marked from 2012’s open.
So 1.21 would be a bell regression return on reciprocal a weakening Euro move.
President Zoelleck doesn’t make many pronouncements, but he did make a dire 2008 reference this week (-UK Guardian). So then there’s that.
Finally, the NZD/USD rose some this week, which may forecast more probative than the AUD/USD as the former replaces the latter as an Fx indicator (as Central Bank yield’s slowly and surely increase in NZ whilst decreasing in AUD).
forgive me “blind” but what does “BTFD” mean? back the fuck down? I know its going to be something simple and I will be rediculed but that’s fine. Thanks!
whoops good spelling of ridiculed
that’s a lot of zip~loc bags..