The Weekly Update: The Euro will Recover

Digital Derivatives MarketsResearch, Weekly Market Analysis

Weekly Technical Analysis

This week we focus on Euro-Dollar daily chart for potential recovery and European indices such as the CAC40 and IBEX35 that are beginning to turn bearish.

To recap last week’s technical analysis, USDCAD was held in a tight range on the daily chart with a flimsy profit seen as the Non-Farm Payrolls (NFP) was released. Our bullish projection for USDCAD remains valid for the upcoming week. Bitcoin (BTCUSD) gained as expected (from $589.39), trading over $630 at the time of this writing.

EURUSD Weekly Analysis

In our former weekly analysis we expected EURUSD to reach 1.3900 from current levels (1.3535). Euro-Dollar gained over +160 pips before posting a harsh correction. Nevertheless, we view the recent weakness as dip-buying opportunity for Forex traders.

EURUSD Daily Chart

EURUSD painted a reversed Head-And-Shoulder (H&S) on the daily chart. We do not wait for a neckline-breakout confirmation but are comfortable taking the long trade from current levels. The pair may drift lower towards 1.3572, ahead of a firm support level at 1.3559. If you refuse to take the long position at current levels we forecast 1.3572 to offer an attractive entry for the market bulls, protective stop layered below 1.3559, targeting 1.3700. We would also like to highlight that EUR is also expected to firm against the Aussie (EURAUD) and against the Kiwi (EURNZD).

European Equities

We are finally seeing cracks in European Indices, particularly in the IBEX35 (Spain) and CAC40 (France). Extreme caution is taken as many traders and known analysts forecasted monstrous declines in the past. We choose to focus on the IBEX35 and exercise a breakout strategy.

IBEX35 Daily Chart

Please click on the chart to enlarge:

IBEX35 Technical Analysis

IBEX35 Daily Chart

The top H&S is beginning to shape on the daily chart. Executing a short trade at current levels (when the market opens) will require a hefty protective stop, which we are not fond of. One way is to wait for a breakout (bottom diagonal line) and then take the short trade, targeting 10,391. Another option is to combine multiple time frames. If the price corrects to the upper diagonal line, an intraday entry may be found on the hourly/4hr charts, protective stop layered above the upper diagonal line, targeting 10,880 initially.

Key Economic Figure

Without a doubt, the Canadian Employment data is the key figure for this week. Focus will be on all CAD pairs and crosses. We repeat that outlook for CAD remains bearish.

07/07/14 UPDATE: EURUSD, EURAUD and EURNZD gained as expected. Euro-Dollar current price: 1.3601.  Moderate weakness was noted in the IBEX35.

08/07/14 UPDATE: The CAC40 and IBEX35 retraced nicely as expected. We take extreme caution in saying we may have discovered the reversal point of the leading indices.

09/07/14 UPDATE: As we expected, EURUSD is trading higher, currently at 1.3637 while the indices incurred heavy losses.

10/07/14 UPDATE: EURUSD posted a moderate recovery as expected despite recent correction. The indices retraced nicely, allowing a decent profit to be realized as it nears our bearish target. Please note the current IBEX35 daily chart when compared the chart provided at the beginning of the week in this post:

Current IBEX35 Daily Chart

IBEX35 Daily Chart

IBEX24 Daily Chart 10/07/14


Last Updated on December 31, 2016