EUR/USD rebounds on the Ides of March

After a year of the US Dollar rising in value against other currencies, including the Euro, it hit a peak on the Ides of March (well actually on Friday the 13th of March, the Ides being Sunday the 15th), from which it fell back strongly.

EUR/USD (as well as a basket of other currencies), acting inversely to the Dollar of course, rebounded from that auspicious date, but now reaches the peak of this upswing, from which it will undoubtedly fall back somewhat, but not to the bottom reached on the Ides of March. After that short downswing, we will see it emerge into an uptrend. The chart shows the 30-day moving average, which the price-graph now licks, indicating an end of the present upswing, which has been much stronger than other upswings during the year, indicating, I believe, the end of the downtrend.

EUR/USD and Shares spike on Yellen's speech

I started out the year with a resolution to watch out for spikes. Yesterday's spikes were signalled by my dreams of the previous night, which warned me of an opportunity to catch flying balls. The spikes that materialised were the surge in the value of the Euro and in American share prices following Janet Yellen's speech yesterday. I had foreseen these on analysing my dreams, but been cautions about the Euro.

The chart shows the EUR/USD (blue line) overlaid with SPXL (Direxion 3X leveraged ETF, red line, marking the S&P Index).

Both graphs spiked in response to Janet Yellen's announcement that there will be no rise in the FED interest rate this month or next. The EURO, having shot upwards in response to that news,  has come down off its spike this morning, while continuing its gentle upward trend. American share prices also shot up and will follow suit in the afternoon when the American markets open, falling down from their spikes, but continuing their upward trend. (The American share prices had dipped first yesterday in fear of an increase in interest rate. The long straight lines connecting bursts of red graph activity cover the long nights during which the American exchanges are closed).

EUR/USD medium term levelling

In my previous two posts, I dwelt on the long-term prospects of the Euro against the US Dollar, and predicted that the year-long downtrend would soon give way to an uptrend. Today, I focus on the medium-term. The downtrend has followed a pattern of plunges followed by levelling, as I illustrate with the triangle shapes in the chart. The plunge of the last 10 days having come to an end, we will now see a levelling, or slightly rising period, which could extend up to May. The graph also shows a 50 day Moving Average. The levelling tends to come to an end when the graph licks this Moving Average, which could happen before May actually arrives. Next time the graph and MA collide, however, will be a signal, not for another plunge, but for the uptrend to begin in earnest.

EUR/USD: Is this the bottom?

This time last year, the Euro seemed unstoppable in its ascent against the US Dollar, but I called that a downtrend was imminent. Now the down-plunge might seem unstoppable, and EUR/USD has plunged past the end-target I set in my last post (viz., $1.075), and reached this point several weeks earlier than expected. However, I feel that the market will form the view that it has fallen far enough (c. 23% since last April), and that now an upward trend will commence.

EUR/USD downtrend to end soon

Click image to enlarge.

The pattern of the Euro against the US Dollar since 1993, indicated by existing (dotted blue) and projected (dotted amber) trend lines indicate that the downtrend will end at around $1.075, to be reached, perhaps in April 2015. While economic forces at present seem to indicate pressure on the EUR/USD to continue downwards, economic data (such as energy prices) can change suddenly. For me, $1.08 is a cautious exit point to my short position, from where to watch for the commencement of the Euro bounce-back, the ensuing uptrend to continue through 2016 and 2017.

EUR/USD to plunge by 4% in next 7 days

Click to enlarge.

So, the Eurozone is facing a Deflationary threat and will increase its Quantitative Easing programme accordingly. The Euro should plunge about 4% against the Dollar in the next seven days.