In an effort to keep an eye on the markets while I take my year end relax period, I thought I would take a look at the charts.  I’m noticing that EURUSD was able to fall below that 1.2947 key level.  On my charts this puts the 1.2450 level in play.  There is a 1.2460 level that was put in play when price broke 1.3145.  I discussed the last two levels a few days ago through my twitter stream (@4xguy).  There is an important cycle completed almost to the pip as of this writing at 1.2856.  When this happens there is a possibility of a market turn.  So, my take is that at this point 2450-60 is still in play but there may be a significant retracement before it gets there.  If price breaks and holds below 2840’s, 2450-60’s become that much more feasible.  As you have surmised my charts are bearish on EURUSD.  Remember that price does not move in a straight line.

I heard some great commentary this morning by Tony Crescenzi of PIMCO on the Euro situation.  He asked a great question:  If you are a Greek person that hears that tomorrow morning your Euro’s will be turned into Drachma, what will you do?  The answer is obvious, I’ll run to the bank and make sure I move my Euros.  I may move my Euros to another country, or heck, I may even move them into another currency.  What does this mean?  It means that Greek banks will be in major trouble.  Taking his thought a little further, assuming this happens in Greece, what happens the day after the Greek run on the banks in Portugal, Spain, Italy, Ireland, and France?  If you said that people will anticipate contagion and cause a bank run you are probably right.  So, Europe is so screwed it can’t even get out of being screwed.  They can’t let a single country leave or their financial system risks collapse.  What can they do?  Unless someone comes up with some miraculous new option, they have to keep going down the same it’s-not-QE QE road and cross their fingers hoping that economies eventually catch up with their crazy policies.  The math does not add up, but who cares about real math, this is social government math.  Euro demise is not in the minds of anyone creating policy.  This doesn’t mean that it can’t happen.  A collapse is a collapse whether you want it to happen or not.  However, Europe is in a deep hole hanging on a rope.  If they let go, its the end.  They have to keep trying to pull themselves up.  But the rope can break.  If the rope breaks, it aint gonna be pretty.

As a side note, I can’t figure out why the US would even consider adopting European social policies after watching them paint themselves into a corner.  From where I sit, it’s like watching a group of people drink poisoned kool-aid, seeing them kill over, and begging to have some.  I’m not drinking the kool-aid.

Trade smart and be careful out there,

4xguy

Comments

  1. quaiyum says:

    thank you for the post expecting a retracement to 1.3050 level b4 further down