Dow and Euro decoupling correlation

 

• The impulsive moves out of the January squeeze brought the Euro is back in familiar territory against the dollar as we can see from a broader view;
• Another successful bullish offensive overcoming the high made on the 11th can propel the pair out of the ascending channel resistance and shoot towards 1.16 and above;
• The risk, like we have seen in gold recently, is that a bounce turns into a major squeeze towards 1.22;

 

• My personal bias is bullish as long as we stay within this channel, specially in the upper half of it;
• The mid-term downside risk implied by an eventual failure below the ascending channel base at 1.0900 offers a potential recapture of the previous swing low at 1.0400:
• As a cautious reminder heading into next week: a trend line cross coming in around the 26th-29th could mark the next turning point or acceleration date;
• In volatility terms we are expanding, so mixed with directional changes it can become interesting and all together this pair can try to relocate temporarily to a new auction zone;
• Looks like global capital, in Dow Jones terms, has been painting a predominantly negative correlation to the EUR/USD, specially in recent trading days. If conditions become tense and anxious for the Euro, we may see both assets decoupling the correlation. Dow’s technical landscape suggests the negotiaon of a new bull move towards 17,000 is in the making. The Dow is flirting with the 16,500 highs from recent weeks. A perfect negative correlation would see the EURUSD now at 1.0900. Just saying...

• My bidding interest aims for a bit lower execution and just bought at 1.1075. Next buy comes at 1.0902 and 1.0850
• A sell limit is awaiting for a brief retracement to 1.1250 to get executed. Follow me on twitter for real time execution updates.

 

 

The trading methodology reported in this analysis is based on a non-directional approach. It is meant to capture the most amount of pips from the constant price oscillations, either up or down. Each trade has a take profit of 50 pips, a stop loss of 500 pips. The size of each trade is regular, but trades can be stacked around key support and resistance zones, increasing the overall position size around certain price zones. The system can perform either in trending or range bound markets, but it suffers when there is an extreme unidirectional price advance. Buy and sell positions are taken with two separate real accounts.
To learn more about the method, you can watch these special webinar series:

Exploring the Coast Line of Foreign Exchange Land - Part I

Exploring the Coast Line of Foreign Exchange Land - Part II