EUR/USD Visual Trading Update

Current Trading Plan:

Position: OUT
Last (03-02-2010) Closed position @ 1.3950 (-50 pips)
Long: --
Short: --
Exit by Stop Loss: --

Technical Indicators Notes:

Last time we said: "Friday price action did create the temporary bottom. If our count is correct, the pair is doing 2 of 3 now and we wait for some price action to position for the 3 of 3. Look how well the pair is moving inside the descending channel boundaries and its parallel lines.

RSI is over its trend line again, and MACD is about to move over its signal. We think that this corrective move will not extent beyond the descending upper boundary but we need to be sure before setting the entry level."

This is a general comment for nearly all assets, because they are correlated to the core. Dubai, Obama's war on the banks (Wolker "rule"), and finally, the European Union woes (Portugal, Italy, Greece, Spain) were the bricks for the creation of the trigger to the next leg of the financial crisis. Apparently, the politicians did feel, at the end of last year, that the economic situation was good enough to start bashing the scapegoat (Financial institutions), after telling us, for a while, that the worst was behind us.

We think it's not. For some time, we feel that the move from March 2009 was a bear market rally (no big news there…), but when the S&P500 eventually followed the EURO, in the general move of USD-Carry-trade-position-deleveraging, we had a grand scale confirmation of our opinion.

The initial suspicion came to us, when for every good piece of news we got in the real economic front; we saw a rise in the Dollar and a drop in its anti-assets. 

We now see the trend as down, and the medium-long term Elliott count map, towards a low near the March lows or worse. Going by this scenario, prices in the equity, commodities and anti-dollar currencies, have created the initial stages of the descent. In some, like the EUR/USD, we can see better the short-term Elliott Waves, but the overall direction is the same.

Why the EUR/USD is better mapped? Because it is the base of the current crisis stage. The need for closing the deficits was pressed the hardest there, while in the UK, US and Japan, monetary and fiscal policies could be sidelined for a bit more time.

In short, we have a short bias for the assets that we cover (AUD, EUR, JPY, GOLD, OIL, S&P500), and we want to enter when identifying highs reversals.

The red trend line is our current guideline to enter sub-wave 3 of wave 3 (Look at the EUR/USD for our detailed view.) In every asset the RSI-STOC combination is different, the MACD and ATR are in different locations, points to a different volatility status. But, we strongly believe, that the correlations are stronger than the exact technical situation.

Our initial red line is placed as a guideline. The exact entry level, will be defined later, when it will be obvious that most of the current corrective phase upward, has been performed.

Charts Legend:

In Price Window:

Simple Moving Average (20): Green
Bollinger Bands (20,2): Violet
Support & Resistance price areas: Pink and Light Green areas
Trend lines and Channel Boundaries: Blue
Elliott Waves Counts: Black and Blue numbers

In Indicators Part:
RSI (10): Blue, STOC(5,3,3): Green, ATR(5): Blue
MACD (12,26,9): Blue, Signal: Red, Histogram: Green
Indicator trend lines and effects: Magenta

Signals:

Long:  Above the Green line
Short: Below the Red line
Exit position: On crossing the Cyan line
SL in case of triggered level: Dashed Cyan Line

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