A-B-C-D Trade - page 83
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Before we get back on the EUR/USD, allow me to post a link to an article that suspects that Moody's MIGHT look to downgrade the U.S. if Obama's tax plan passes into law.
News Headlines
You might have to click through the front page and look for the headline:
"Moody's May Cut US Rating on Tax Package"
Please be advised that some important quotes/points include:
"A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months."
Once factoring the cost, the U.S. debt-to-GDP ratio would be about 73%.
The USD is strong now due to high bond yields (investors dumping bonds). This coincides with a recent Greenspan opinion that there won't be a strong market for U.S. bonds after QE2.
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This is dinner conversation for us since we are technical traders, but interesting nevertheless.
Earlier today on a financial show, a prominent investment adviser was practically shouted down when he conveyed his opinion that the USD will weaken significantly due to its high debt level.
The same man predicted the collapse of the U.S. real estate market in 2006.
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Rebuttals include that interest rates drive currency valuations and the interest rates will rise next year in the U.S.
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USD is also strong now due to PIIGS nations being is bad condition too. However, they are implementing austerity programs, despite its unpopularity as witnessed by general strikes, riots, etc.
QE2 will prop up the stock market, which was its intention/effort to prompt creation of jobs. It will also require an "exit strategy" per Fed Chief Bernake. As mentioned, one guru suggested that this will create a 3rd and final bubble.
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Let me capsulize a quote from one of the FED Governors on the QE2 strategy. He said that by buying U.S. bonds, that will push interest rates (yields) lower and drive investors to buy corporate bonds. This in turn will drive down corporate bond yields and make their borrowing cost lower, allowing for more budgetary resources applied to jobs.
So far, yields have not been lowered, and in fact have spiked up. This, unintentionally, and partially, is responsible for the strength of the USD.
Therefore, within their own theory, the initial result is that the FED's action with QE2 has driven up the cost of borrowing for corporations and made it harder to create jobs.
The stronger USD also is opposite the President's vision of doubling the U.S exports within 5 years, which absolutely requires a weaker USD.
EUR/CHF has revisited the all-time low 1.2766, which was established on Sept 5th 2010, , probing to 1.2757 before bounce.
This level is a 161.8 regular extension off the long-term charts. Expect a lot of stop-losses to trigger should it trade below 1.2750.
Reasoning is "flight-to-safety" into Swiss Franc, after renewed European sovereign debt concerns.
When Japan's economy was red hot, a group of countries enacted a coordinated effort to make the Yen rise, to offset the trade deficit with Japan.
This sounds all too familiar as China is the current punching bag. No, the 1985 action did not reduce the trade deficit with Japan.
Article from October 20, 2010.
Japan yen weakens on China rate hike Lisa Twaronite's This Week in Japan - MarketWatch
Switzerland held rate and had no reported market-moving verbiage. EUR/CHF poked its head above Asian High and paused.
In backdrop of EU Summit on Debt, Spain is conducting their bond sale at 09:30. This is one day after Moody's stated they would review their debt situation for possible downgrade.
As a side note, Moody's also is doing the same with Belgium.
While EUR/USD is testing Asian High, USD/JPY broke Asian Low, down to its 138.2 of 84.07 and is stalled there at the moment. This is also 50% fib of wider plot.
The market was dismayed when China did not raise rates last weekend, to counter inflation.
According to this Dec 9th article, which has a graph on past performance, the USD will strengthen across the board.
/go?link=http://greenfaucet.com/
We had European and U.K. data 08:00 through 10:00. No discernible reaction to U.S. 13:30 data, but the 15:00 positive Philadelphia Fed data did provide some movement to a lackluster session.
Traders that monitor the 15-min chart could see the higher than normal amount of wick length on the candles.
The wicky session followed Asian which traded in a tight range. EUR/USD made an extension to the upside 161.8 at 11:00 GMT, as well as 161.8 to downside at 15:30.
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Referencing back to our 4-hour Gann Box plot on post #805, page 81:
Support at the blue HLine3 (horizontal) of 1.3195 area is the 50% retrace level of the upswing from Nov 30th to Dec 5th. The 12:00 candle closed at 1.3194. We can also see previous price action respect that level.
There is also the blue 1/2angel fan line just below the current price, which is where price is supposed to find support after breach of the red 1X1 line.
Since we fitted the start point move's top to be at the center of the box in height (50%), the 1/8th lines labeled 18, 36, 54, etc., are more proportional.
Based on this plot, the next vertical 1/8th line (#72) at Dec 17th 20:00 period, has a high probability to represent a turning point.
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An even larger picture with the Nov 4th high to Nov 30th low has:
- the 38.2 fib as the peak reached on Nov 14th
- the 23.6 fib is near the Gann Box lower 1/3 horizontal line (yellow)
- Fibo Fan plot provides S&R, including its 61.8 fib catching the area of the Nov 14th peak
EUR/USD just achieved its 138.2 extension at 1.3274. Plot from end European low to U.S. high.
1) EU leaders "agree on mechanism" for crisis handling, but news lacking details.
2) U.S. House of Representatives quickly approves tax plan and forwards to the White House for signature.
3) Moody's downgrades Ireland, and reviewing Greece.
Watch trend line for possible break to downside on EUR/USD.
Can use indicator AutoFibAutoTrend
Moody's downgrade of Ireland detail is from rating of Aaa1 to Baa1, That is a reduction of 5 "notches".
Should EUR/USD confirm below current support of 1.3296, support levels below that, based on Gann_SQ9 are:
45-degree = 1.3268 and
67.5-degree = 1.3240
90-degree = 1.3211