5/2/2007 11:38:41 PM
By Vadim Pokhlebkin
You've heard us say on these pages before that the main factor that determines a trend in currencies' exchange rates is not the news, but the mood, the expectations, of forex traders. Their reaction to the news is more important than the news itself.
It seems we're not the only ones who recognize this fact. Speaking about the current set-up in the euro/dollar, for example, one currency strategist said this to Reuters early on Thursday morning (May 3): "The market's built a big speculative short position in the dollar and it needs a steady diet of bad news to justify it."
In other words, there is a bias against the USD among forex traders right now. Trouble is, "the economic news from the States has actually been a bit better recently," and justifying long EUR/USD positions has been tough.
Maybe that's why the rate has gone sideways all day on Wednesday: Not enough bad news from the U.S. to keep adding to those EUR/USD longs?
With several key economic numbers due out on Thursday and Friday mornings, bears are hopeful, though. "What the speculative bears need is a [U.S.] payrolls gain under 100,000 and maybe a tick up in the jobless rate," thinks the same currency strategist.
The question is what will the bears do if the news on Thursday and Friday is dollar-positive? Will they sell, or will they keep on buying the EURUSD, considering their already "big speculative short position in the dollar"?
From an Elliott wave perspective, the answer is rather obvious: That dollar-bearish bias is already showing in the EUR/USD charts. That's why, as of today (Wed., May 2), our Currency Specialty Service analysts think that the EUR/USD is ready to rally regardless of what the news says Thursday and Friday:
By Vadim Pokhlebkin
You've heard us say on these pages before that the main factor that determines a trend in currencies' exchange rates is not the news, but the mood, the expectations, of forex traders. Their reaction to the news is more important than the news itself.
It seems we're not the only ones who recognize this fact. Speaking about the current set-up in the euro/dollar, for example, one currency strategist said this to Reuters early on Thursday morning (May 3): "The market's built a big speculative short position in the dollar and it needs a steady diet of bad news to justify it."
In other words, there is a bias against the USD among forex traders right now. Trouble is, "the economic news from the States has actually been a bit better recently," and justifying long EUR/USD positions has been tough.
Maybe that's why the rate has gone sideways all day on Wednesday: Not enough bad news from the U.S. to keep adding to those EUR/USD longs?
With several key economic numbers due out on Thursday and Friday mornings, bears are hopeful, though. "What the speculative bears need is a [U.S.] payrolls gain under 100,000 and maybe a tick up in the jobless rate," thinks the same currency strategist.
The question is what will the bears do if the news on Thursday and Friday is dollar-positive? Will they sell, or will they keep on buying the EURUSD, considering their already "big speculative short position in the dollar"?
From an Elliott wave perspective, the answer is rather obvious: That dollar-bearish bias is already showing in the EUR/USD charts. That's why, as of today (Wed., May 2), our Currency Specialty Service analysts think that the EUR/USD is ready to rally regardless of what the news says Thursday and Friday:
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"First, with five waves down from $1.3679, a rally attempt is due.
"Second, with three waves down from $1.3683 we may be witnessing the end of a corrective setback, cementing the recent low as a price floor.
"Third, it's possible the setback from 1.3683 is wave C of a triangle unfolding from 1.3637 (April 20). If that's correct, we will see additional consolidation in waves D and E, but at higher price levels." Bottom line, "There are several reasons for favoring the upside." Like any other forecast, this one may end up being wrong too, but it sure cuts through all the bull-bear guesswork, doesn't it?
"Second, with three waves down from $1.3683 we may be witnessing the end of a corrective setback, cementing the recent low as a price floor.
"Third, it's possible the setback from 1.3683 is wave C of a triangle unfolding from 1.3637 (April 20). If that's correct, we will see additional consolidation in waves D and E, but at higher price levels." Bottom line, "There are several reasons for favoring the upside." Like any other forecast, this one may end up being wrong too, but it sure cuts through all the bull-bear guesswork, doesn't it?
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