EURO Decline -- Is it over? NO! No Evidence of Bottom Yet

FX:EURUSD   Euro / U.S. Dollar
This chart shows EUR/USD , the Euro Currency, on a Weekly timeframe . (NOTE: Updated chart below, accidentally clicked off the Dynamic Levels that were supposed to be in the above chart)

Plotted on the chart is SCMR Trends™, which sequences price to find the correct behavior and identify good setups. It is available (along with other indicators in the package) in the TradingView Marketplace App store.

The point of this post is to state that on the larger timeframe, the Euro has provided zero evidence that it is done trending down. No -- it is not yet reversing.

This is a relevant observation because the conventional wisdom is that the price is oversold -- and yes, it certainly is -- but that currently there is no actual evidence of reversal, so to bet on a longer term reversal here and now is not the right move. We would need more data from the market that suggests a reversal is actually underway (such a Blue unconfirmed reversal or an "O" plotting under price, a confirmed reversal). This may come to pass sooner than I expect, but the important thing is that it's not happening now.

Looking in the past, the Euro was in an uptrend and provided several good signals from confirmed reversals up ("O" under price) and the Pivot bars ("P" above price). Today though, all we see is red (a downtrend).

My take is that the market can trend lower for several more weeks before a true low (which is still theoretical at this point).


Let's look briefly at the economic and fundamental reasons for this move.

1.) EU recession. Recent data from the ECB shows that Eurozone has negative growth. The ECB is not allowed to print -- only issue bonds -- so there is a *huge* cost incentive to weaken the Euro to boost demand for these bonds, especially if they are settled in dollars.

2.) The other side of the coin is that a weaker currency can help boost foreign investment, which adds demand to a stagnating economy.

Both of these reasons, structurally and politically are why I believe the strong Dollar and weak Euro can persist longer than many expect.


1.) Perhaps the ECB will change its tune. I doubt this
4.) Not a recommendation to buy or sell, just an example the ways in which you can combine structural fundamental analysis with price action, which while oversold, is not yet actually indicating a reversal (even if only temporarily).

UPDATE: 2/3/15 --- still no weekly reversal yet

Euro Continues to get smashed, reference above for why:

Update, 12-17:

We had a lot of members trying to catch the falling knife. Most were EWT or harmonic pattern followers.

Like following your system.
+1 Reply
SPYderCrusher QuantitativeExhaustion
Thank you, appreciate the kind words.

Yeah, it is tough to jump in front of a trend this strong, especially given that as of yet there is still no real sign of an inflection point. I am a trend trader at heart -- don't fight the fed (ecb) and don't fight the trend!
+1 Reply
Wanted to update this with a daily chart that is now showing some signs of life.... daily chart is a confirmed reversal now.

The difference between the original note and this updates note is that now we have evidence of an actual bounce, whereas before we did not.

+1 Reply
SPYderCrusher SPYderCrusher
should add original is weekly chart...the daily chart is subordinate. So it depends on timeframe. On the daily can bounce now...will this be enough to ultimately change the weekly trend? that we will need more time to see. But before there was no indication, now we have daily up, weekly down, aka an improvement over the prior picture.
+1 Reply
SPYderCrusher SPYderCrusher
to update this DAILY chart, it looks the reversal is going to fail. We are getting a X, which means "warning, reversal is likely to fail" so the way to treat this is to effectively move the stop up to underneath the X bar low. This way if the trade recovers, great, but if not, we have cut our initial risk by ~40%.

+1 Reply
SPYderCrusher SPYderCrusher
On the weekly, (original post was regarding the weekly trend) can still see no change in trend, that prices are trending down

+1 Reply
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