Euro Dip?

Trade Ideas ·
Featuring Joseph Trevisani

Published on: August 8th, 2018 • Duration: 10 minutes • Asset Class: Currencies • Topic: Trading, Euro, Technical Analysis

Joseph Trevisani, Senior Analyst at FXStreet, updates his short euro strategy. He explains the technical and fundamental catalysts behind the trade in this interview with Justine Underhill. Filmed on August 6, 2018.

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Comments

YB

Yuriy B.

8 August 2018 @ 09:18

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I know nothing about technical analysis. But doesn't the chart of USD/EUR show a head-and-shoulders suggestive of an imminent strengthening of the euro?
- CM
  
  Christopher M.
  
  8 August 2018 @ 09:46
  
  4 1
  
  This pair is always listed as EUR/USD which shows a head and shoulders(H+S) topping formation meaning downside for the Euro against the dollar. If you had a chart of the inverse USD/EUR it would also show an H+S but this time an inverted H+S (man upside down) implying upside for the dollar. If you want to learn more about technical analysis watch Peter Brandt's videos here on RV, he is a TA jedi.
- MM
  
  Michael M.
  
  8 August 2018 @ 17:51
  
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  I don't think much of Peter Brandt or charting. They only show the past, no one knows the future. Brandt is the same guy who said in Jan that Gold and precious metals where going to be a great investment in 2018 based on his chart readings.
- PD
  
  Pat D.
  
  13 August 2018 @ 05:55
  
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  MM .......... 2018 is not done yet!
- DR
  
  David R.
  
  16 August 2018 @ 10:08
  
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  Pat D.... Exactly. And the dollar probably is done as of this week. Reversal set up for the dollar as well as the metals and currencies. Couple more weeks til labor day, then the narrative changes to the election, likely democrat win, US surge to the far left, and coming trump impeachment process by the victorious dems. Look at 1973+ to see what happened, it was one of the ugliest periods in history for US stocks and dollar.
JC

John C.

8 August 2018 @ 14:49

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Good trade idea. Euro seems to be blowing through the Demark indicators and the H&S pattern seems to be pretty well baked. Sentiment so high for the USD though right now..but sentiment doesn't do much on its own. EUO a good bet as we head into the Fall and we continue to see more EM problems
MM

Michael M.

8 August 2018 @ 17:45

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I've been hearing this for years how the euro is going to blow up. Maybe someday, but with the US debt ballon floating away into the sky, like Elon's Tesla, I've been doing well buying euro dips. Currencies use to be the best trending markets but no the seem to be stuck. Something got to give, maybe Trump gets his way again and it's the dollar.
- SH
  
  Steve H.
  
  8 August 2018 @ 18:24
  
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  Maybe. Or maybe it's the fact that the ECB has painted itself into a corner - where will the bid for peripheral sovereigns at current yields come from after December? Or maybe it's the fact that the EU is gradually disintegrating - UK, Italy, Visegrad Group. Or maybe capital flight towards the US will overwhelm concerns about the latter's twin deficits, at least in the short term. Trade ideas are always about 'maybe'. There are still plenty of trends visible in FX, but we now have to search for them on longer timeframes. EURUSD monthly is in an obvious downtrend from 1.60; on shorter timeframes there's plenty of opportunity to trade countertrend, as you have been doing. As for the EUR 'blowing up', it very nearly did in 2012 - for reasons which plenty of economists and others foresaw and wrote about back in the 90s. The question is how many more 'whatever it takes' rabbits can be pulled out of the ECB's head-gear when next they are needed. With meaningful policy tightening from current emergency levels looking close to impossible, the next economic or political existential crisis will be testing indeed for the EUR.
PW

Peter W.

8 August 2018 @ 18:52

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Agree with the general thesis, but would personally amend Joseph's risk bracket (s1.15x's, t1.10, stop 1.1725) as it's a strong candidate to get shook out before a 1.15 failure. Why not just wait for a significant hard volume (6E) break of 1.15, sell-stop layer 1 on initial waterfall, add layer 2 on any retrace that gets within 50 pip of break(ttop 1.690, target 1.115). Trade 2, single layer short of anything above 1.145 on a retrace from 1.11-1.12 zone.
DR

David R.

8 August 2018 @ 18:59

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Wow. The dollar is clearly completing a 5-wave impulse since Feb in a BEAR market rally against its primary downtrend since topping in Dec 2016. The 95.5 handled hasn't been breached and establishes that clearly the primary trend in the dollar remains bearish. Another beating yet again today for the recently beleaguered dollar. A bearish key reversal no less. Get used to them. Lots more ahead. Dollar going down, down, down.
RK

Robert K.

8 August 2018 @ 21:07

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... agree with the short EUR thesis in general. The theme is close to me - I must be the biggest EUR bear (was shorting EUR when it was hitting 1.5 and it was a very contrarian idea at that time). Dollar has a strong fundamental macro tailwind indeed. The horizon is about right for this trade (3 months) since after that we have the mid-term elections in the US. There we could see a dramatic political shift towards the mobilizing populist left wing which could initiate an unwind of this trend.
RM

Robert M.

9 August 2018 @ 07:58

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The starting or prior probability (a term from Bayesian probability updating which all traders should be using, see book Superforecasting inter alia) for a 5% up move within 6mths in DX is 29% (this is just counting all the 1-6mth rates of change instances in dly data since 1971 which are >5%). Sure, US growth will outperform EZ but how much? - the US ISM has very probably topped months ago. Also he needs to mention relative inflation (US will be higher). And the expected FFR hike path can easily slow/ top out if the current global and US PMI slowdown continues. My assessment doesn't see any compelling evidence getting this probability of a 5% rally in DX higher than its start point, instead I have reduced it further. Sideways is much more likely. As far as his comment "you need to be in a position in the markets if you want to make money" - shocking. The wise will tell you to manage risk first and last.
- RM
  
  Robert M.
  
  9 August 2018 @ 18:20
  
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  Actually the starting probability of a 5% rally in DX from to end 2018 is even lower at 16%. Because we are already up 5% in the 3mths to end May. So 16% is the number of instances as % of total trading days since 1971 where DX has rallied 10% in 9mths.
jd

john d.

11 August 2018 @ 03:31

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Nailed it.
DR

David R.

15 August 2018 @ 14:00

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Congratulations! If the euro breaks Will support hold at 113.05 or will 1.11 happen next. IF the latter breaks, then there's not much but air until 103-105.
- DR
  
  David R.
  
  16 August 2018 @ 10:00
  
  1 0
  
  Support at 113.05 held precisely. Euro and other currencies have a good chance to rise in a major reverse for months. The charts say so. The dollar remains in a bear market. Dollar index is 800 pips below its level twenty months ago. Unless the dollar turns around and breaks that level, the dollar's recent rally was no more than a bear market rally. Watch out on the downside for possible new lows, which would open the floodgates as the US twin deficits and economy are actually in terrible shape. Charts lead the way.
- DR
  
  David R.
  
  16 August 2018 @ 10:03
  
  1 0
  
  Bullish EUR/USD from 1.13.05
DR

David R.

15 August 2018 @ 14:01

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Thumbs up, as deserved.
DR

David R.

16 August 2018 @ 10:01

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US recession ahead in about a year or so?