Turbulence in Egypt is causing a variety of reactions across all markets which taken with the technical picture of the charts is likely to wrong foot the majority of traders and investors.
With so much going on it is sometimes difficult to know where to start but for my first post I want to focus on the forex market,and the euro dollar in particular, as last week saw the pair once again attempt to breach the key USD1.3750 fib level before falling back to close at USD1.3624 ending the week as a small doji candle which just managed to peek over the 100 week moving average. The doji on the weekly chart neatly encapsulates the struggle currently going on in the pair and a look at the monthly chart also shows the pair perched atop the 100 month moving average. Euro bulls also appear to be in the ascendancy with CME data confirming a large switch in futures contracts from bearish to bullish. To this mix must be added the rallying cry of President Sarkozy at Davos last week when he uttered the immortal words: “[Germany’s] Chancellor Merkel and myself will never – do you hear me, never – let the euro fall,” – it was positively Churchillian in tone as he threw down the gauntlet to the speculators, warning them to be prepared for big losses. Perhaps no one had told him that most of the speculators had already switched their bets from short to long and that perhaps the consequences of a stronger euro may, in the end, prove detrimental to Europe and its export markets. A clear case of being careful of what you wish for!