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Trade Desk Thoughts:
The opening and closing of the three global commercial markets will be critical in trading forex through August, and probably will be far more important to gauge order flows than at any other time of year. The European markets are on their extended summer holiday breaks, and as such order flows are going to be sporadic, although possibly not thin. Automated trade has its place right now, and we will be looking to bank near-term targets as our August goal.
The price points, trend, momentum flows, and daily chart analysis, along with the full Elliott Wave detail that makes up the member's section of this trade plan, reveals a set-up that repeats once every six to eight weeks. The six major trade plans, and the four global commodity plans are all saying the same thing; this week will be a massive swing point.
This is a big week of economics, although not in the number of red-flag releases, moreover in the sheer number of macroeconomic reads that have to be absorbed. The fundamentals on the euro pair do not start until Tuesday, and as such we get to see the market-wide reaction to the Non-farm Payroll and unemployment rate issued from the U.S. on Friday. The initial reactions were to test long resistance price points at 1.4400, a move that failed to garner increasing order flows and lead to a reversal instead to test orders at the 20 day Simple Moving Average support area around 1.4200.
We now have a very clear road-map with which to trade the euro; long up to 1.4400, and short down to 1.4050, just below the 50 day Simple Moving Average support area. In between these channel ranges we have a lot of market noise, and no really strong argument for expecting either area to easily break. Therefore, until the fundamentals light a fire under the technical set-up, we will look to 25-30 pip runs that have a large percentage banked, and a runner left in place to pick up the scraps that range-bound markets produce.
The trend is mixed in regard to near-term plays, and the daily and 4 hour chart channel prices are firmly back in focus. EUR/USD is above the $1.3700 read that it had at the start of the financial crisis two years ago, and the current price action matches the average value of $1.4250 that has been set over the same period; it looks as though fair value has been found on the pair. A much stronger euro would serve little economic purpose globally, especially in a period of questionable economic growth, and understanding that a stronger euro equates to a stronger oil market, in general.
A rise in the euro above 1.4400 would also negate the wider premium of U.S. Treasuries over German bunds, something that neither the ECB nor Fed will ideally want to see. If the market has dammed up the long side of the order flow process, the order flow waves may have no choice but to see what lies below, around the 1.4050 area.
Long Instigators:
Take care going long, and expecting to easily get through 1.4450 as a break-out area; it would be better to look for a reversal that finds support to then use 1.4400 as the ultimate target. The 1.4050 area will be the first stopping point to possibly buy from. The key to long-euro trading will be to take long positions in the sessions that both equity and oil markets are also moving heavily higher; that correlation will be critical when buying Euros.
Short Instigators:
If equity markets do not move higher, and oil reverses off 71.00, the short side of euro may be in play, possibly from 1.4000 towards 1.3900, and 1.3850. This reverses the long criteria set out above, and looks to sell the pair on reducing stock and oil trade. Watch a long test of 1.4250 that then fails to hold, because that would set up a great area to short from if equity and oil markets are moving lower at that time.
Calendar:
Mon 04:30 EDT Eur. Sentix Investor Confidence. Expected -25.9. Previous -31.3.