Good morning traders.
Trust you all had a good long weekend (depending on where you are) and are ready for some fast paced eurusd action ? I´ll have to stop cracking this joke as its wearing thin, I know. The thing is I keep saying to myself – it’s going to change soon as we´ll get some movement and good price action and start making some decent Benjamins …. then nothing changes and we get more of this slow grind with no volatility. Unfortunately this is trading and we simply have to make do with what we get.
Not that its such a big chore as we have constantly made money in the long run (although this last month we have had 2 losing weeks) but I know it’s tedious when you´re sat at your desk all day! These conditions are difficult for everyone but especially for newer traders as there is always the nagging doubt at the back of your mind to just get in the market.
This is trading 101 suicide. I know from raw experience how wrong this is. All you´ll end up doing is losing money faster than you thought possible. One mistake will compound the next and before you know it your capital base is severely depleted. Hang in there. Stick to the strategy. Do not deviate and remain disciplined. The levels work so trade only there.
Ok that’s enough of me free associating about the pitfalls of slow markets – time to get down to business.
Updated model and max strategy performance here. For more detailed info on the strategies we use click here. We have had 2 down weeks this month due to the tough trading conditions but I think our performance shows that a patient approach to just trading the levels we post for our model strategy pays dividends. Its not exciting but then who cares about excitement :). I´ll take the money every time.
Markets remain cautious due primarily to the on going and seemingly worsening trade war between the US and China. Nothing I’ve seen or heard suggests anything is going to get resolved any time soon so it appears we are in for an extended affair. Where this will lead is anyone’s guess but the history of such events regardless of what disingenuous politicians might say is not economically positive for anyone involved.
US China Trade War
From our point of view the big impact will be on the USDx and thereby the eurusd We have seen a modest pullback during the last week in the dollar index and with no real data impact this week it could continue. One scenario is that if there is a flight to safety the USD will go bid and leave the euro facing steeper declines.
On the other hand, if the Chinese stop buying USDs to purchase US debt (as they have threatened) this could go the other way but there will be others waiting in the wings to snap up what they may be selling so the impact could be muted. I don’t know where this will lead in the medium term.
All we do know is that the US economy remains stronger than just about anywhere else and while this might be a slight pullback in the USDx, it could still be looking to go higher as there is no other game in town that’s going to yield what US debt delivers.
The hard right / populist parties didn’t quite make the impact that many feared but they are now firmly entrenched within the EU policy making structures after these elections so could hold the key to how easily the federalist train can stay on track.
National debt and budgetary policy would be one area where they could make an impact and obviously on immigration but that’s more of a political play. The one sure thing is that the likes of Macron and his ´Big Europe´ agenda will have a much tougher time. The upshot is that the euro could come under political pressure and hence be a hard buy to get to higher levels. Yesterday there was comment that the ECB could be looking to impose penalties on Italy of up to 4bln euros if they dont stick to budget guidelines.
Where to start. With PM May now out (or soon to be) of the chair the next issue is who will replace her and what will be their views as to hard or soft brexit. I cant begin to go into the runners and riders here and try to figure out the play on each. All I can say is that the GBP remains under pressure and the chance of a hard Brexit has increased. This can’t be good for the eurusd.
In summary from a macro pov the risks to the euro look to be on the downside. However, we did get a decent pullback last week from just above the 1.11 level and technically we could still get some push higher in the next week up to the ECB on the 6th June.
For today and much of the week for that matter, we have no big ticket data items to contend with.
The Daily Chart
While we did get a move off the lows last week which gave the impression that there is more to come, we are forming a triangle pattern again and could break either side. The 1.12 level is holding further advances at present so we need a clean break above here to provide a base for a further push. The equal wick highs at 1.1265 would be the first target then 1.13. Whether there is enough fuel to push higher is debatable.
The Hour Chart
Levels as per.
We are at support at 1.1180 as I write this morning. We have a steep drop down to 1.1134 with little supportive structure to the downside apart from a staging post at 1.1150s. To the upside the R1 level at 1.1220s looks attractive but yesterday’s pa stalled at just above the big fig of 1.12.
Its remains difficult to see anything clearly given the price action right now so trade the levels and watch pa at the 1.12 or the 1.1150s to see whether we get any decent pattern on the lower time frame to suggest further extensions either way.
Have a good one :).