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Monday’s video – A big market call…

Charlie makes a big call provided certain criteria are met….

Video Transcription

Hi, this is Charlie giving you Monday’s market commentary. I hope you’re very well. All I want to do here is have a quick look through a couple of the currencies and that’s going to be about it.

Euro-Dollar for the last few weeks now came off those lows, in the grand scheme of things it had a half decent rally into the 21 moving average here on the daily charts and it’s pulled back, but if you look at it in the grand scheme of things it doesn’t look like it’s doing too much.

Here’s my call for maybe the first six months of this year. What’s going on in the US is very much priced in with the rate height expected this year in the US.  So my call is actually that with the Euro, all of this price action in relation to the Dollar is priced in, in which case there is scope for a counter Dollar rally. Although there are a lot of expectations for the Euro to carry on rolling over, my suspicion is that actually we could see a half decent rally during the first half of this year; even though overall I’m bearish on the Euro-Dollar.

How would that come about?

What we would need to see is a break of this high here because what that would say to us is that we’re starting to make higher lows and higher highs. So a break of the last week’s highs would be that confirmation. There’s no point in trying to really do much with the Euro unless it does break that high, because otherwise it could just roll over from here. So this is sort of a call that I’m making…

If we break that high, I think we have the scope for a rally all the way to the weekly 21. Obviously, that weekly 21 is currently above 121 but obviously, that’s moving week by week so the call that I’m talking about is something that could take a few months to play out.

I think that at the moment it wouldn’t surprise me to see the Euro dip back down and do some retesting down into this zone, then we’re just going to have to see how it’s going to react. I think that it’s something that could take quite a while to play out, but if we do break these highs then I think we’ve got the scope for a good few hundred pips more to the upside if those highs were to get broken. Obviously, it’ll go up and down and chop around but I think in the main that’s something we could see we could be looking back in June saying, blimey, the Euro got to 118 or 119 or maybe even 120.

That’s my big call for the early part of this year…

If we break those highs then I do think we’ve got the scope to get into the 118 to 120 zone. I know the weekly 21 is up at 121 at the moment but obviously, it’d take such a long time that that 21 would be coming down, that’s why I’m targeting that 118 to 120 zone. It doesn’t make sense, but then logically most market moves don’t make sense when markets turn and at the time. So what I’m talking about is a relief of what is a longer-term rally in the Dollar.

If we go to the Dollar index, then here’s that beautiful trend in the Dollar index and so what I’m looking for is if, only if on the Dollar index we break this low here, if we break that low then I think we will have more downside in the Dollar index.  Overall it’s still in that trend, just like that Euro-Dollar, and the trend would remain intact but just be looking for a bit more of a retracement.

That’s how I’m seeing Euro-Dollar in early part of this year, provided we break that high, not if we start coming down. If we start coming down then it makes no difference, and the Euro starts sliding away from here then it doesn’t hurt. We have to get that price confirmation – so that’s that one.

Let’s have a look at the Pound-Dollar as well.

Now the Pound-Dollar obviously has been that much stronger but at the moment the Pound-Dollar has already had a really nice rally. It’s satisfied a lot of targets, as you can see it’s hit a daily 50 here, not on e-signal admittedly but on the weekly chart it’s hit my upper bands, and it has done that on e-signal as well. So I’d be quite happy to see the Pound-Dollar come back down and retest these lower bands now. For now, I think this is the first time that the pound’s had this rally into the upper bands on the weekly charts since we broke down all this time ago. So I won’t be surprised to see a reaction down from that.

Having said that, after any chop and we pull back down, maybe to 151, that sort of area, back into this whole price zone, that’s when I’ll start getting interested and watching the Pound to see if it finds support. If it does find support, I’d be looking to be a buyer on the pound.

Now there’s easier ways of buying the Pound, you don’t have to go against the Dollar. You could buy the pound against the Euro, i.e. short the Euro. So once the euro-Pound here has a bit of a rally you could then look to short that.

There’s other currencies as well like one of the traders mentioned in the week, the Pound-Yen, you could go long the Pound-Yen. There’s other ways of playing the pound against other currencies that may be weaker than the Dollar.

As I normally just… Sorry I’m drinking tea here this morning. I normally just look at the majors, the Pound-Dollar and the Euro-Dollar, that’s why I’m just looking at that.

I think I shall leave it at that for now, just a little bit of food for thought for this week.

People often ask about the indices and I think that at the moment the indices aren’t that clear. This is the S&P daily chart here; we see that we’re sort of in a sideways range. So they’re not that clear at the moment. Now if we were to come back down and break these lows then yes I could see a thousand point drop coming from there, but we’re not at that low level, and unless we were to break these lows on the S&P then yes maybe.

At the moment, we’re just chopping around within this range, just not really saying too much and at the moment we’re at the top end of the range, so then just pull back with this range again, it’s fairly choppy price action. I’m not having too much of a view on the stock market indices right now, so we’ll have to wait and see on that one.

Right, I shall leave that with you, seven minutes in, and be back on Friday for live trading.

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