Entry for 1/12/09

Currencies:

Just a quick note on the EUR/USD:

On the 9th of January I closed out of a short at 1.36911, due to bullish trend formations. However, it would seem that this is one time Dow theory failed me, or to be more exact where applied the wrong analysis. It would seem my unfamiliarity of the economic region of Europe and the general characteristics of the EUR/USD is quite apparent. Despite my poor trading decision, it has provided a great learning opportunity. At the time I was only trading based of 60 minute and weekly charts, in general I hadn't 'bothered to follow up with the fundamentals as in depth as I would if I were solely focusing on the dollar. It would have seemed if I were more experienced or if I followed the region more carefully a little fundamental analysis could have prevented this wrong decision. It would seem that sentiment from the 9th till now started pricing in Trichets decision of interest rate cuts. Today I see bullish trend patterns forming, however, the big question is whether or not the markets have priced in the rate cut enough, or if later on rates will prove to drop the Eur/USD. Concerning fundamentals, I have heard arguments of a 1.20 Eur, I believe that to be quite possible, and it is something that would definitely improve the export situation for the Euro region.

Currently, though on the weekly charts there seems to be strong bullish trends forming still. It would seem last week, that my closing out of the EUR/USD position was premature, and that this week may show price moves moving to the upper 2nd deviation BB. There may be a temporary whipsaw to the upside as the the 7 simple MVA has already crossed the 14 simple MVA and is about to cross the 21 simple MVA. It is also showing that the BB are coming to a squeeze. Furthermore, there is short term support from January 6th to January 11, along with long term support from June 2007 to January 11, 2009.

Again the bullish argument seems very attractive for the next two weeks or so, but the fundamentals pose a huge risk again, as sentiment may have not been fully priced in. However, its best at these times to stick with a discipline and learn from it if it is a mistake. I see there room for a temporary change in trend for this week and into next week, I will re-enter into a buy position and adjust accordingly by the end of this week. However, I think past a few weeks fundamentals will still reign and further downward movements will have to be considered...