Well what a range bound week that was on the forex markets, focusing on the EURUSD which had a range of 100 PIPS more or less between just over 1.3560 and 1.3460, so what are the reasons of his trepidation in the forex markets.
Forex, The US Dollar, The Democrats, The Republicans and Obama.
As the voting for the budget agreement looms in the US, the market really doesn’t know what to make of it, the situation that will probably pan out over the coming weeks that there will eventually be a resolution, in practice there is no other option, and what that solution is will not impact the markets, it will be the fact that a solution has been found that will make the impact. Early 2013 we had the Greek-Cypriot crisis, I say the Greek Cypriot it was actually emanating from Cyprus this time, but the Cypriot banks had so much exposure to Greek debt that the two were intertwined, and besides Greek-Cypriot has a nice ring to it. We can see the similarities in the forex chart, in March the EURSD was hovering around the 1.2800 support, it stays there for a few days at the height of the crisis, but soon as there is a resolution the Euro goes up, and now we are back at the top of the long term range as we have a crisis at the other end of the scope.
Forex In Range.
Focusing on the EURSD but it applies to most other forex EUR based pairs, so all this last week we have the scenario where the market is anticipating this resolution, it held in range for over a week, waiting for the vote, but it didn’t shoot up when the bill wasn’t passed because it’s unimaginable to have the US defaulting on it’s debts. You won’t see many traders going for much higher prices because we know that soon as there is a resolution the dollar will surge since it will have been heavily under priced. The big variable is the timing of the resolution, and you may well be able to identify it from the charts, the Greek-Cypriot Crisis was obvious even without hindsight. But the EURUSD this time is a bit more tricky, but as a simple strategy you could try matching a support and resistance area with the announcement that everything is going to be all right, so if we’re at resistance, keep an eye on the news, and if the announcement comes then look out for the next resistance levels and I expect the USD will reverse it’s decline and this will be the end of the bullish trend on the EURUSD for the time being.