Wkly 3rd wave down has been forth coming since march the 1st and within
the decline we can count 5 waves leading into the the end of the 3rd
ending @ 1.2046. the rally on friday is presenting a rise into a 4th wave
which can rise all the way up to te 1.2610 , 1.2745 zone
We have a wkly shift so we could have a 5 wave push up in to the 4th wave
zone setting us up for a 5th wave decline.
The £ Bounce beutifull of the declining Poseidon medium line center with a bullish engulfing and searchs for the impossible reaction and the upper wall.
I've drawn a channel path way up for guidance a break of the trend line
will signal a breakdown in price. look for upthrust or rising prices with
no volume.
Now we must be aware that if there is a lack momentum to carry prices to
the extreams of the wave 4 zone our 5wave count could end may reach 1st
the 1.230 61.8 and then the 1.25480 1oo% Expansion.
with a tokyo shifht in the wkly we may see the extream. of the 161.8 @
1.2696
in the news it will probably be dollar stregth or weakness that will
decide.
In the 4hr time frame we have a intrday count of 5 wave with the 5th ending at the daily 100% exoansion @ 1.2506
Spanish GDP: Monday, 7:00. Spain is still the epicenter of the debt crisis, so every figure matters. And this is an important one. Spain is already in recession, having contracted for two quarters in a row, each time by 0.3%. Another quarter of negative growth is expected in Q2, this time with a drop of 0.4% in output. Tourism could have helped the country, that is otherwise at deep freeze.
Retail PMI: Monday, 8:00. This measure of consumer activity through purchase managers has been in contraction zone for 8 month. The recent score of 48.3 was better than the previous two months, but a rise above 50 points, back to growth, isn’t expected for the month of July. A lower figure is more likely.
Italian bond auction: Monday morning. 10 year bonds are the common benchmark for the ttrust a country has. Italy actually saw lower yields in the last auction, after crossing the 6% line twice beforehand. Given the hope in the markets, another result of bond yields under 6% is expected now. If the yield rises above 6%, it will be a worrying sign that Draghi’s words are not trusted.
German Retail Sales: Tuesday, 6:00. Europe’s locomotive saw a slightly disappointing drop in the volume of sales last month: 0.3%. A rise of 0.6% is expected now. Some figures point to contagion also to Germany, but the situation there remains positive for now.
French Consumer Spending: Tuesday, 6:45. The euro-zone’s second largest economy saw two consecutive months of rises in consumer spending, and it also enjoying relative stability in its bond yields. Another small rise of 0.2% is expected now.
German Unemployment Change: Tuesday, 7:55. Germany disappointed with three consecutive rises in the number of unemployed people, standing out after a long period of seeing unemployment drop. A fourth rise is expected, this time of 8K.
Italian unemployment rate: Tuesday, 8:00. Italy is not far behind Spain in the debt crisis, and its economy is contracting too fast. The unemployment rate is expected to remain above 10% for a third month in a row, edging up from 10.1% to 10.2%.
CPI Flash Estimate: Tuesday, 9:00. The first release of CPI for the month of July is expected to remain at the same annual level of 2.4%, above the ECB’s 2% target. Given all the economic negativity, a drop in the rate cannot be ruled out. This can help the ECB take bigger steps.
Unemployment Rate: Tuesday, 9:00. After standing at around 10% for nearly two years, recent months saw a rise in the euro-zone unemployment rate, that reached 11.1%. Yet another rise is expected now. There is a big divergence between the different euro-zone countries, with Spain and Greece having very high rate of over 20%, while Germany and some other countries are enjoying low unemployment rates.
Spanish Manufacturing PMI: Wednesday, 7:15. This forward looking indicator of the manufacturing sector reflects the Spanish deterioration strongly: the figure stands at 41.1 points, reflecting rapid contraction, the worst since the summer of 2009. Another slide is expected.
Italian Manufacturing PMI: Wednesday, 7:45. Also in the euro-zone’s fourth largest economy, manufacturing is squeezing, according to the PMI, but at least it is off the bottom. A drop from 44.6 to 44.3 is predicted now.
Final Manufacturing PMI: Wednesday, 8:00. The initial release of this indicator showed a drop from 45.1 to 44.1 points. The final figure takes the Spain and Italian numbers into account, and updates for other countries. No change is expected.
Spanish Unemployment Change: Thursday, 7:00. Thanks to tourism, Spain actually saw a drop in in the number of unemployed people during June, by 98.9K – a third drop in row. Tourism could have resulted in another drop in July. So is the situation improving? Probably not – this phenomenon is clearly seasonal and was seen in previous years.
PPI: Thursday, 9:00. Producer prices are expected to fall for a second month, and drop by 0.3% after a slide of 0.5% beforehand. This is released just before the rate decision.
Rate decision: Thursday, 11:45, press conference at 12:30. This is one of the most important decisions in a long time, and holds very high expectations after Draghi promised to do everything and said “believe me, it will matter”. The benchmark interest rate will likely remain unchanged at 0.75% after last month’s cut, but another cut is certainly on the cards. Also a shift of the deposit rate from 0% to a negative value is possible, as well as another LTRO. The ECB could also take a loss on its holdings of Greek debt. The really big thing the ECB can do is resume the SMP program: buying Spain and Italian bonds to lower their yields, enable them to fund themselves in the markets and encourage others to join in. Such a move will have a decisive impact if it is done in a large scale, and if it is done without sterilizing the buys: a full QE program. Will Draghi make this bold step? See more details for this critical event in the ECB Preview.
Final Services PMI: Friday, 8:00. Note that as with the manufacturing PMI, Spain will release its number at 7:15 and Italy at 7:45, but they are of lower importance, especially after the manufacturing numbers and the rate decision. The initial figure of 47.6 points will likely be confirmed now.
Retail Sales: Friday, 9:00. The volume of sales has been like a see-saw, moving from drops to rises. After a rise of 0.6% last month, a smaller rise of 0.1% is expected for the month of June. A small drop will not be a big surprise.
* All times are GMT
EUR/USD Technical Analysis
€/$ began the week with a gap lower, falling over the 1.2150 cliff (discussed last week) It fell as low as 1.2043, before staging an impressive recovery thanks to Draghi. The close under the 1.2330 line shows that the markets are cautious.
Technical lines from top to bottom:
The very round 1.30 line is a very important line in case of huge rally. In addition to being a round number, it also served as strong support. 1.29 is also notable on the upside, followed by 1.2814.
1.2750 capped the pair after the Greek elections and also had a similar role in the past. It is now of higher importance. 1.2670 was a double bottom during January and was the high line of the recovery before the Greek elections in June. It also capped the pair at the beginning of July 2012.
1.2623 is the previous 2012 low and remains important despite recent battles over this line. Below, 1.2587 is a clear bottom on the weekly charts but is only a minor line now.
1.2520 had an important role in holding the pair during June, in more than one case, but it’s much weaker now. 1.2440 provided support for the pair at the same time. and worked as double bottom.
It is closely followed by 1.24 that provided some resistance in June 2010 and switched to resistance in July. It is now of higher importance after capping a recovery attempt at the end of July. 1.2360 was temporary support in July 2012 but quickly switched to resistance.
Further below, 1.2330 is another historical line after being the trough following the global financial meltdown in 2008. It’s stronger after working as strong support. It should be closely watched. The now previous 2012 low of 1.2288 is of higher importance now after being reached twice.
1.22 is now minor resistance, after serving as such in June 2010. 1.2144 is already a very strong line on the downside: it was a clear separator two years ago, when Greece received its first bailout. Also in July 2012, it worked as a separator.
The new 2012 low of 1.2043 is the next line, although it may prove to be weak on a downfall. Next we have the 1.20 line, which is a round psychological figure.
The post crisis low of 1.1876 is the final frontier before lines last seen in the good years. The launch price of 1.17 is the next line.
Small downtrend Channel Broken
As the chart shows, the pair made a breakout of out of the short term downtrend channel, breaking above downtrend resistance.
I am neutral untill the 4th wave up planning to sell into the 5th
Draghi created huge expectations with his strong words. He has the power to deliver and turn a corner in the crisis, sending the euro far higher. However, high expectations can result in big disappointments and a total plunge. Against the tools that Draghi has, there are also many obstacles, coming from German politicians and the German Bundebank. Currently, it’s hard to tell how this will end. Hopefully we will see some solutions, but recent history points to the other direction.
Until Wednesday, the optimism should keep the euro well supported. Another non-QE3 decision in the US could slightly weaken the pair on Wednesday, and then it all depends on Draghi.
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