Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

German Economic Locomotive Being Dragged Down, Euro's Cyclical Path

Currencies / Euro May 24, 2012 - 12:42 PM GMT

By: Ashraf_Laidi

Currencies

Best Financial Markets Analysis ArticleMore evidence of the German locomotive dragged down by the rest of the European continent as German manufacturing PMI dips to 45.0, its lowest figure since May 2009. The French version of manufacturing PMI hit 44, also a 36-month low. EURUSD hits a fresh low on the year at $1.25, down 3.3% year-to-date, and down 7.0% from its February highs. Our warning that the PMIs were a more effective leading indicator than the IFO or ZEW was first made in March, stating the reasons in more detail.


As long as major central banks refrain from any new liquidity action in the form of FX swaps (as in Dec 2nd) and the IMF remains silent before the Greece June 17 elections, the path of least resistance for traders to continue selling the euro rallies and eventually targeting the 2010 lows under $1.18.

Euro's Cyclical Path

We first charted the euros cyclical paths back in November on here outlining that a retest of the $1.20 is inevitable. In order for EURUSD to reproduce the 22% declines in the prior two cycles of 2008 and 2010, the pair would have to reach $1.17-1.16, which would be the lowest since 2003. As long as major central banks refrain from giving any new liquidity in the form of FX swaps (as in Dec 2nd) and the IMF remains silent before the Greece June 17 elections, the path of least resistance for traders to continue selling the rallies. The 1.20 is becoming increasingly a matter of when rather than if.

Euro's Cyclical Path

Fundamental catalysts for further EURUSD downside may include:

  1. mismanaging a Greek exit;

  2. lack of resolution and deadlock between Athens & Troika without necessarily a Greek exit;

  3. unsuccessful interventions from global central banks (coordinated FX swaps, LTRO-3, BoE QE-4 and more BoJ easing)

  4. the Feds reluctance to issue a 2nd round of outright QE. Operation Twist is not deemed a sufficient generation of liquidity and a booster of risk-on trades if on its own.

Broadening the USD view into the US dollar index, we find that the USDX is testing levels not seen since September 2010. The importance of the USDX is highlighted in its use by macro hedge funds and Commodity Trade Advisers (small size hedge funds). As the index takes out the January high of 81.78 and hits a new 2-year high of 82.36, it risks extending algos orders and the execution of stop orders cascading the ascent into 82.40 (61.8% retracement of the decline from the 2010 high to the 2011 low), followed by 83.50.

Broadening the USD view into the US dollar index

As the cyclical waves over the last 5 years may suggest, a recurrence of 87 and beyond cannot be ruled out for later this year. The fundamental catalysts for such dynamics are listed above. On the downside, USDX support rests on its 200-week moving average, coinciding with the trendline support extending from the August 2011 lows.

Broadening these analysis into our Intermarket view, US crude would likely pursue the path towards $78.00-$80.00 per barrel, Brent crude would extend losses towards $94.00 per barrel and gold risks recalling the $1470s.

Get your free 1-week trial to our Premium Intermarket Insightson FX, commodities & equity indices

For more frequent FX & Commodity calls & analysis, follow me on Twitter Twitter.com/alaidi

By Ashraf Laidi
AshrafLaidi.com

Ashraf Laidi CEO of Intermarket Strategy and is the author of "Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets" Wiley Trading.

This publication is intended to be used for information purposes only and does not constitute investment advice.

Copyright © 2012 Ashraf Laidi

Ashraf Laidi Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in