Breaking down this week it comes as no surprise that finally the EUR/USD made another big push to consolidate at the 1.19 handle.
The week started brightly and then what happened? North Korea. How quickly reality can become distorted and before you know it all sense of proportion was lost and before we knew it funds were clearing out the weaker longs and we were defending he 1.17 handle. US equities took a dive and crude WTI became sticky at the 49 level That being said the bluster and fluster now seems to be waning and the more sensible traders yesterday were starting to repick their entry points for a long position and all that was needed was the US CPI.
Overall the sum of all inflation; US CPI (MoM) Jul at 0.1% down from 0.2%
So the US economy is slowing down. No doubt about that. But is that a wonder? The last 12 months traders have seemed to expect new stellar growth rates in the jobs market. The economy is at peak level in the business cycle of economic activity. The US economy can only grow at a rate of diminishing returns from now on.
I advocate trading the 15 minute charts within context of the daily charts. 15 minute charts give a good snapshot of the emotions going on around the dealing rooms across the globe.
In the chart above we see the usual lull and then the data release is marked by the huge green candle. Usually what happens after a huge spurt is a little drift back to the 50% Fibonacci and then an upward consolidation near the top of the day. Or the opposite if the case of a huge red candle downwards and then a price climb and gradual consolidation near the bottom of the day.
Sentiment is gradually becoming negative over US markets. The FOMC is repeatedly becoming dovish in statements and speeches and it seems that the US economy is in the final phase just running on vapour with an empty tank.
Across the ocean all the potential is in Europe. Economic reorganization is well underway with political consensus. Where hedge funds drove the EUR/USD down from 1.40 to 1.05 from 2014 to punish Europe for the lack of direction now hedge funds are set to reverse that move and pile back into the EUR/USD as the value currency for 2017.
EUR?USD closed strongly and a push above 1.19 will certainly come sooner than later once all the Korean bluster saga fizzles out and economic reality comes to the fore again!
