The Euro bounced as Business Confidence improves

Commercial Content Analysts
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The upbeat German business confidence assisted in a Euro rebound against the dollar away from its month’s low. The business climate index rose for the first time in seven months to 104.7. It gives some hope to the Eurozone against other weak data. The Euro Dollar was around 1.2440 this morning – still weak considering the slump of last Friday. Traders can keep their bearish view on Euro as long as it remains below the lower boundary of the flag pattern.

We can also see some trading opportunities in the Euro crosses. EURJPY for instance, left an evening star in the daily chart on last Friday and a doji in the weekly chart. Considering the Dollar Yen has been close to the 120 level and the Euro is expected to be under pressure from ECB’s further easing, the Euro Yen may fall in the mid-term.

Traders maintain their doubts for the next move of gold price as gold closed as a harami in the daily chart. Some hedge funds added their wagers on a bullishness after China joined Japan and Eurozone in the team of monetary easing. However, other participants are still keeping their bearish bets as the Fed is heading to rate hike and demands from China and India are weak compared with last year. The Harami pattern may imply that the rebound is over.

Most Asian stock markets closed higher after the China rate cut. The Shanghai Composite surged 1.85% to a 3-year high of 2533. The ASX 200 also advanced 1.08% to 5362. In the European stock markets, the UK FTSE was down 0.31%, the German DAX rose 0.54% and the French CAC Index gained 0.49%. The US market kept climbing. The S&P 500 gained 0.29% to 2069. The Dow rose 0.05% to 17818, and the Nasdaq Composite Index rose 0.88% to 4754.
On the data front, BOJ Governor Kuroda will speak at 12:00 AEDST. Canada Retail Sales and US Prelim GDP will be released at 0:30 AEDST.

Have a great trading day!

Anthony

NB: Please note all references to rates above are approximate

To learn more about Anthony Wu, read here.

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Interesting observation. There is one thing I do not understand and I sae this in another analysis here. Mid-term or medium-term cannot be determined from the daily chart. Medium-term is several months, even a quarter. The daily chart is often used for swing trading ,which is several days. Instead for mid-term it should be short-term. Your opinion will be appreciated. A small thing about EURJPY, it was worth mentioning that Japan is heading for elections in December, which may cause investors to be unsettled with their net short JPY holdings.

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Hi Pollar,
Thanks for your comment. You are probably right about the daily chart not being useful for judging medium term directions. For EURJPY, the main reasons we think it may fall in the mid-term are:
a) doji on weekly chart,
b) ECB’s further easing, and
c) Yen’s depreciation halts, although we didn’t mention the re-election, but thanks for bring it up.

However, the daily chart is very useful for traders to decide for an entry place, stop loss and take profit levels. For example, after we see a reversal sign, 50% of the bear candle is a good level for sell limit order. SL can be easily set at the top of bear candle or doji and TP can be set as 1 or 1.618 times of the length of the bear candle. Therefore, the profit-loss ratio also looks good.

Hope this is helpful for you.
Best regards,
Anthony