EURUSD: Weekend Analysis

Big Picture

 The monthly chart continues to show consolidation with the overall direction of the MMA Wave bullish - indicated by the blue arrow at bottom of chart (defined by it's own red 50% trend being greater than the full white trend). But with that momentum study sat where it is, one has got to be cautious of upside follow through in my opinion.

The weekly chart continues to show a bullish trend with the recent price action doing little to detract from the overall direction. The momentum study obviously shows the retracement and it diverged negatively from the price action, but whether that shows the strength of the trend or suggests the bullish action of late is a faker, is the question wracking the markets. Price and the momentum study are sat at a break out point quite clearly, but will it push through or pull back?

Intermediate Picture

On the daily chart, the 640 day MMA Wave is also bullish and has been since Sept 2012, following the pivot low in July 2012. There has not been a clean 'nested low' in momentum (sub-chart) since April 2013 and the recent 80day cycle low (see later) did not achieve one. I have placed a blue box ahead in time to remind me of this fact, not for exact timing. I have marked out orange numbers 1,2,3 - compare the price action to the thick light blue /80day cycle. In '1' the price was no where near the 80day cycle line; in '2' price rode up the back of it; in '3' price spent half the time under it and has just broken above. It appears to me, given the placement of the momentum study in the sub-chart, that the 80day trend and therefore the 640day is weakening. I, for one, do not trust the upward weekly and monthly bullish trends at this stage, and want to see a 'nested low' in the daily chart first.

 The 80day cycles are mapped out on this daily chart from the July 2012 low. They are pretty uniform, albeit I always have to contend with cycles running long or short. One can keep rolling averages of the actual length of the cycle and some analysts include the weekends in the rolling count, but I do not and the results are clear to see. The vertical dotted lines counts the exact 80 day cycle from the July 2012 low and the horizontal lines are the actual cycles, low to low, highlighted with arrows as appropriate. I have recently synthesized the momentum study in the sub-chart to provide a clearer indicator of whether the 80day cycle low has been and gone and it appears the 3rd February low was the actual low and the recent bounce has come out of the subsequent 20 day low. Price is already pushing into the daily, weekly and monthly bolly bands tops, although there 200 pips or so to the latter, with the first mid-line annual pivot sat above at 1.3834 ( R1 sits at 1.4198). I am intrigued by the negative divergence on the momentum study running into the 80day low, combined with the price action as described in the chart above. As such, I have decided to attempt selling into the 40day low, due at the end of March, rather than play the break out for now, although anything over 1.3834 and I'll be flat as a pancake - see chart 2 for clear reasoning!! The 40day low is my next place to consider a long shot and only then if the storyboard supports the bullish case is holding out.


Moving down into the 4hr chart, locate the February 80day low in the sub-chart, to tie in with the daily above. I have re-positioned the 20 day cycle to commence at that date and the striking moves up last week coincided with the first 20day low. However, although I was able to benefit from the move into that low and the move up out of it, for reasons already explained I am aiming at the drop into the 40day low to clarify any weakness in the underlying 80day trend. The 1.3744 grid line looks like a good place to start that assessment as the 10day and 20day FLDs sit there. Note also, how the 40day trough is already below those 10/20day FLDs, so any move down into the 40day low is likely to test the 40 day FLD, coming up at an angle from left to right. My best guess is that price action is going to follow the blue 80day FLD down into the trough where the 40 day low resides at 1.3560, also a grid line. We should see the brown momentum study create a low at that point as well, if all goes well. So, for now, I am not following the move up and going back to the daily chart (3), I won't until there is a nested low behind me!