This text is from blog famous currency strategist Joel Kruger .
TELEVISION AND MARKETS – Any of you out there watch the television series Homeland? Right now I feel like the main character whose whole state of being is thrown into question after she is so sure about something, but seemingly proven wrong. The main character has built her career on an extraordinary sense of intuition and instinct, and is broken down to near collapse when her theory is disproved. Her stunned reaction is likened to a reaction of one who is told by everyone else on the planet that 1+1 is no longer 2. The audience of course knows she is right, and are sick to their stomachs that they can not reach out through the television and let her know that she should not doubt herself. So what does all this have to do with FX and markets? The answer is a lot!!
See daily forex technical analysis video by Joel :
INTUITION AND INSTINCT – For months now I have felt extremely confident that USD/JPY is in the process of carving a major longer-term base after putting in record lows at 75.55 in 2011. But each and every time the market looks like it is on the verge of legitimately breaking higher, it stops and frustratingly reverses course. The defining barrier has been the daily Ichimoku cloud top. The market has not been able to establish a close above the cloud since April. Multiple attempts in August, September and now October have failed, with the price teasing and kissing the top of the cloud before once again retreating. On Tuesday, it looked as though we were finally on the verge of breakout, before the market once again failed. Still, I will take my lessons from Homeland and trust my intuition and instinct, despite the uncooperative market conditions.
FRESH EUR/USD SHORT POSITION – In truth…and right or wrong, this level of certainty extends to my entire outlook for the markets, where I see an extended period of across the board, broad based US Dollar strength. Many of you question this outlook, particularly now, when the Euro has broken out to the upside, back over 1.3100. While I have maintained no fresh EUR/USD position on my book until yesterday, I have been consistently looking for an opportunity to be short EUR/USD since the pair broke back over 1.2700 some weeks back. On Tuesday (early Wednesday) I believe this opportunity finally presented and I went ahead and established a EUR/USD short position. If I am right, any additional strength should now be well capped below 1.3200 on a daily close basis. If I am wrong…well…my shot still feels great even though the ball just aint droppin through the hoop. I will just keep on shooting until the ball starts to drop again 🙂 .
PAY CLOSE ATTENTION – Perhaps one of the most refreshing and gratifying developments in recent trade has been the relative underperformance in all other currencies against the Euro during this period of US Dollar weakness. While the Euro has managed to extend gains, other currencies have lagged. These are currencies which traditionally have outperformed the Euro in USD weakness. This shift in market dynamics is one that I have been projecting over the past several months and one which carries with it a much deeper message. I believe the underperformance in the other currencies is quite telling, as it indicates the Euro rally is much less tied to risk on trade, and more likely tied to some isolated demand which will not be sustained. This bodes extremely well for the Greenback in my opinion and should soon play out in the price action.
