EUR/USD short term outlook
will be the topic of the post. If you look at the chart of the pair you will
see that it is trying to break an important resistance level of 1.3200. If you
are going to look at daily charts you will see another thing too. You will see
that the pair has been in a range for about three months (from the 15th
of September when an uptrend in eur/usd ended). Another thing that you will
notice is a technical pattern on this daily chart. You can clearly see inverted
head and shoulders. I am not too much thrilled about the pattern, because it is
usually formed at the end of a downtrend move and this one formed at the end of
a uptrend move. Yet, the fact that the pair has stayed for three month in a
range is very important. It might be ripe for a breakout and it is very
probable that the break will be upwards.
From the fundamental point
of view US dollar is kind of a ‘safe haven’ in relationship to Euro. Why? The
whole region is facing a possible bankruptcy scenario due to huge national
debts. We know that US can also face the same things quite soon. However, it
still finds investors to finance its’ deficits and doomsday scenario for US is
postponed.
On the other hand, this
fiscal cliff question is pretty acute at the moment and a lot of investors tend
to put aside problems in Europe (short term) and concentrate on this ‘fiscal
cliff’ stuff. This could potentially drive eur/usd pair upwards.
We are in the second half of
the last month of the year and it would be not very sound to reverse short
dollar positions (long Euro positions) at the moment. In my opinion, most
speculators and investors would simply hold their long eur/usd bets till the
end of the year and reverse to shorting the pair at the beginning of 2013. Everybody
will come back to the problems in Europe and continue selling Euro. Why? It is
quite clear: government officials will not be able to solve these huge
financial problems that Europe is facing. If you have an open mind you should
clearly see that problems in Europe are getting worse and worse and more and
more EU countries need stimulus than two years ago. Lending at an interest to
solve debt problem is simply digging a deeper pit. The only way to get out of
it is to stop digging. Yes, if you want to get out of your pit, stop digging.
Will they? I don’t think so.
Ok, how high can eur/usd
climb? Holiday season can be a pretty volatile one! My number would be around
1.3500 level. But it is only my opinion. That is the level where the pair
climbed at the end of February of 2012 and failed to break it. So, this is the
peak of eur/usd in 2012. What is going to happen there is again a question of
speculation. We have to watch what central bankers say in order to get further
clues in terms of direction for this and any other currency pair.
I have just placed a buy stop
order at the break of 1.3188 level with 44 pips stop loss order and take profit
at 1.3480. If the stop is not hit and the pair moves upward I am going to move
my stop. I usually place them below daily lows in an uptrend (4-30 pips below
daily lows) and above daily high in a downtrend (4-30 pips above daily high).
It is not a strict rule as I usually trade a few positions or create a line of
trades, so my stop levels might differ for each specific order that is open. At
the moment, I have only one long eur/usd trade.
Ok, so much for today. I
hope I will have enough stamina to analyze other major pairs and give you my
expectations regarding them before the year ends. I will try to give my
thoughts regarding Japanese Yen in the next blog post.
Ok. I hope you benefited
from the post. If you liked the post I would also be happy if you gave a plus
on Google+, tweeted, liked it on Facebook and other social platforms. Have a
nice day.
Vytas.
Disclaimer
Trading
financial markets carries a high level of risk, and may not be suitable for all
investors. All information on the blog http://trend0.blogspot.com/ is of educational
nature and cannot be considered as advice, recommendation or signals to trade
in any financial markets.