EUR/USD fractal outlook

[Paul Koszarny]

EUR/USD fractal outlook

EUR/USD posted a local low last Monday and on Tuesday bounced off regained support 1.0853. Profit taking on Wall Street and weaker than expected GDP lifted EUR/USD still higher just under resistance 1.1052. Weekly picture looks very bullish and we did not see any profit taking ahead of this weekend. Therefore the new week will begin exactly at Monday's pivot 1.1036, not a particularly good place to do anything unless you know the next direction. Monday is also a model day where it's possible to have a new local high somewhere near strong resistance 1.1123. I suspect the market will struggle below this level and then reverse, yet firm hourly closes above will prompt great caution with shorts despite the model day. Fractally and technically the recent rallies have been very moderate and 'under control' enabling trades both ways with little danger. During the last two sessions I held a short at 1.1040, TP 1.0970, then long at 1.0977 closed at 1.1040 and there was no need to multiply exposure. The hourly model shows Monday's 0:00CET resistance 1.1042 (support 1.1020) and it is the first model hour. From the point of view of Europe it will be more important to watch the market at 11:00-12:00 followed by 19:00CET. USDindex closed at 98.27 which is below two support lines and this model suggests a new low will be there in the course of this fortnight and the Fibonacci 97.60 will likely be broken now. What it means to EUR/USD it's easy to understand. Assuming USDindex touches only former low 97.60 then EUR/USD should be seen somewhere in vicinity of 1.1109. Mixed picture on NYSE indices. Dow Jones closed in the red zone. It's a low on fractal Friday. Normally I would expect some come back, however this time it's the first close below the basic upward trendline since March 12. So while fresh below the line it's dollar negative.

[Paul Koszarny]

EUR/USD reached 1.1075 early European Monday and near the open of the first model hour 11:00CET it was bouncing off its local low 1.1010 to retrace almost 61.8% of the slide. This movement seems to have come to an end and the market is swinging slightly below the pivot 1.1036. Europe's bourses generally in the positive territory. DAX has already retraced 38.2% of the losses from April 23-25 and no wonder since it had completed extended wave before today's opening. So Fibonacci levels rule and the markets look really very technical and quiet. The next movement will surely come from Wall Street. Dow Jones may find interim support at 8256 and recover to find resistance 8383. All it needs is to gain a little more than 1% today to regain lost trend support. Should this happen we may have already had today's top on EUR/USD.

[Paul Koszarny]

Dow Jones has already tested today's resistance 8383 and gold is down. This is potentially in favor of the dollar but not much change yet in the euro/dollar.

[Paul Koszarny]

US indices have had the biggest rally in a month following Friday's low. Dow Jones was required to rise more than 1% in order to regain lost trendline support. The fact is that Friday was fractal for Wall Street, Monday is fractal for EUR/USD. Both the model days sparked sharp reversals of local trends. EUR/USD lost 100 pips from its high 1.1075. We have seen an example how FMA highlights the thrill of going against the market contrary to common wisdom. And there's more evidence that a lot of human behavior is predetermined in certain hidden structures on the surface of which we obtain prices and volume.

[Paul Koszarny]

EUR/USD tried staying above 1.1000 early European morning but failed to and instead slipped 50pips lower to find interim support 1.0950. Local downtrend will come to a halt with hourly closes better than 1.0975. From the point of view of the first two days of the week Tuesday's close above 1.1005 would suggest a resumption of rises. So between 1.0950 and 1.1005 we may see gentle corrective movements. Strong daily support comes at 1.0900 which may be a good buying opportunity. The nearest model hour is at 13:00CET with resistance 1.0985 and support 1.0916. Strong positive divergences on sochastics and RSI.

[Paul Koszarny]

EUR/USD is being traded in a lower tone due to gains on Wall Street. The market seems determined to lift indices higher and about 1.2% from Monday's close we will have a new technical situation on Dow's weeklies. This helps the dollar enormously and it is possible that EUR/USD will plummet to big figure 1.0900.

[Paul Koszarny]

There was little reaction to minor lows after 13:00CET which was the first model hour of today, however strong positive divergences on stochastics and RSI looked dangerous. So we tried first long at 1.0960 which was stopped three hours later due to a decline to 1.0930. However, positions opened at 1.0950 are safe enough. It would be untrue to say that I had expected a bounce of this strength and price action. It was triggered by quick profit taking on Wall Street. Just one glance at hourly candles on Dow Jones says everything. Dow looks solid enough to sustain the current levels but the dollar lost its lustre all across the board. Today's sharp reactions cannot be attributed to only thin volume and pre-weekend air. Dollar sellers had been waiting patiently until the last moment only then to crush wrongfooted investors. There cannot be any doubt that big names and big money stand behind today's movements. And it may not matter much that it's overdone and overbought as we are in an entirely new area for the rest of the week.

[Paul Koszarny]

There may be some truth in seeing a covert war among NATO alliances. The recent initiative of Germany and France of forming their own military forces to combat they know what has met with sharp criticism from the UK government. Cracks visible on NATO shell don't help the dollar. Furthermore, a US official reportedly told his counterparts in Brussels that a stronger euro versus the dollar is in retaliation for Europe's opposition against the war in Iraq. Soon we may see trade forms of retaliation no matter what WTO declares. In Iraq mobs cheer in support of Saddam and dinar. The Iraqi currency has gained about 50% versus the dollar in the free market due to simple supply and demand law but the fact is enough to ignite fresh anti-American demonstrations. EUR/USD hit 1.1135 which is daily resistance for today. Gold is breaking higher today after 6 sessions of consolidation. It reflects dollar weakness and also may be a harbinger of further profit taking on equities. The first model hour is at 12:00-13:00CET with support 1.1087 and resistance 1.1128 followed by 19:00CET. Long positions closed.