FX Traders’ weekly EURUSD fundamental & technical picture, this week’s market drivers that could change it- the bullish, the bearish and likely EURUSD direction.
The following is a partial summary of the conclusions from the fxempire.com weekly analysts’ meeting in which we cover outlooks for the major pairs for the coming week and beyond.
Summary
- Technical Outlook: Near term neutral, longer term bearish as detailed below.
- Fundamental Outlook: Neutral Near Term, Bearish Longer Term & Why
- Trader Positioning: Longs Primed To Capitulate On Signs Of Further Weakness?
TECHNICAL OUTLOOK
First we look at overall risk appetite as portrayed by our sample of global indexes, because the EURUSD has been tracking these fairly well recently.
Overall Risk Appetite Per Weekly Charts Of Leading Global Stock Indexes: Bearish For EURUSD
Our sample of weekly charts for leading global stock indexes paints a bearish picture for the coming week and beyond for overall risk appetite, and this provides a bearish background context for the EURUSD.
Weekly Charts Of Large Cap Global Indexes April 14 2013 to Present, With 10 Week/200 Day EMA In Red: LEFT COLUMN TOP TO BOTTOM: S&P 500, DJ 30, FTSE 100, MIDDLE: CAC 40, DJ EUR 50, DAX 30, RIGHT: HANG SENG, MSCI TAIWAN, NIKKEI 225
Key For S&P 500, DJ EUR 50, Nikkei 225 Weekly Chart: 10 Week EMA Dark Blue, 20 WEEK EMA Yellow, 50 WEEK EMA Red, 100 WEEK EMA Light Blue, 200 WEEK EMA Violet, DOUBLE BOLLINGER BANDS: Normal 2 Standard Deviations Green, 1 Standard Deviation Orange.
Source: MetaQuotes Software Corp, www.fxempire.com, www.thesensibleguidetoforex.com
01 Aug. 02 21.49
Key Take-Aways: EURUSD Now Correlating Better With European Indexes Than With The S&P 500
As the world’s most liquid pair, it generally tracks the most liquid stock index, the S&P 500 better than any of the other leading global indexes. However since June 2014 it has correlated most closely with the leading European indexes, particularly those of the biggest EU economies, Germany and France, which have been moving lower since early June. The EURUSD has been in its most recent downtrend since early May, and began the most recent phase of that pullback in late June.
That said, this correlation applies over the past months but did not work at all well this past week, so the correlation is hardly a lock-step day-by day thing. The EURUSD’s main moves lower came on Tuesday and Wednesday, whereas EU stocks were flat Tuesday, and made their main drop on Thursday while the EURUSD moved little that day.
We also note that the leading US and EU indexes’ are falling at a slower pace, and remain in their double Bollinger® band neutral zone, whereas the EURUSD is plunging faster, as detailed below.
This change in correlations bears watching going forward.
EURUSD Weekly Technical Outlook: Downtrend Resuming Or Reversing?
EURUSD Weekly Chart June 24 2012 to Present
KEY: 10 Week EMA Dark Blue, 20 WEEK EMA Yellow, 50 WEEK EMA Red, 100 WEEK EMA Light Blue, 200 WEEK EMA Violet, DOUBLE BOLLINGER BANDS Normal 2 Standard Deviations Green, 1 Standard Deviation Orange. Green downtrend line from EURUSD peak of July 2008 to present, green uptrend line from August 2012 to present. White Fibonacci retracement lines for downtrend of August 2008 To June 2010, yellow Fibonacci retracement lines for downtrend of May 2011 To July 2011.
Source: MetaQuotes Software Corp, www.fxempire.com, www.thesensibleguidetoforex.com
02 Aug. 02 21.58
Key Take-Aways Weekly Chart: Bearish Medium Term Outlook
The medium term outlook continues to deteriorate from a variety of technical perspectives, chart patterns, support breakdowns, and strengthening downwards momentum. In addition, the pair is poised to resume its descending channel from May after a 5 week breakout above it. Here are the details.
- -Bearish Head And Shoulder Pattern: It’s hardly a classic H&S pattern given the head is dispersed over a few weeks and the somewhat asymmetrical and lopsided shoulders in December 2013 and June 2014 (the June shoulder’s a bit lower). However the principal behind the H&S pattern applies here. That is, a failed attempt to rally, followed by further declines that suggest the EURUSD’s rally that began in mid-2012 is officially over.
