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The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

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EURUSD: I Expect a Larger Rebound

Monthly time frame:

  • After a steep decline from December 1979 to the low reached on March 1985 price has formed a rising channel
  • Time wise there is a similarity in the length of the moves:
    • Decline from December 1979 to the bottom of March 1985 = 6 years and 3 months
    • Advance from the March 1985 bottom to the top of September 1992 = 7 years and 6 months
    • Decline from the September 1992 top to the October 2000 bottom = 8 years and 1 month
    • Advance from the October 2000 bottom to the July 2008 top = 7 years and 9 months
    • So far the decline from the July 2008 top = 6 years and 7 months
  • It seems probable that price is attempting to establish at least a short-term bottom at the trend line that connects the June 1989 with the August 1997 lows, which coincides with the 0.618 retracement of the rally from the October 2000 low to the top reached on July 2008

EUR Monthly Chart
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  • After the January sharp decline so far we have an Inside monthly candlestick
  • An Inside candlestick is suggesting a bottoming attempt
  • If a short-term bottom is in place above we have the following resistance zones:
    • 1.1630
    • 1.1873
    • 1.2033
  • Trend line resistance that connects the lows of November 2005-June 2010-July 2012 which coincides more or less with the 0.382 retracement of the decline from the May 2014 high
  • If the decline from the May 2014 is not over yet a countertrend rebound should be capped by the 0.382 retracement

EUR Monthly Zoom Chart
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Weekly time frame:

  • From the May 2014 top we can make the case that the decline has unfolded a 7-wave down leg
  • So we know that the decline is not impulsive and so far we could count that price has unfolded a Double Zig Zag
  • If a short-term bottom is in place an oversold rebound could easily reach the 10 wma
  • If the 20 wma were reclaimed then the probability that price has established a sustainable bottom would substantially increase

EUR Weekly Chart
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  • If a short-term bottom is in place last week low must hold, in order to achieve a sequence of higher high/higher low
  • If this is the case the equality extension target of a Zig Zag higher would be located at 1.1700
  • A potential target box for a countertrend rebound could ba located in the range 1.1669-1.1836 (0.382-0.5 retreament of the down leg from the December 2014 high)
  • Weekly Oscillators are poised for a rebound: Oversold RSI with positive divergence and an oversold Stochastic with a bullish signal cross

EUR Weekly Momentum Chart
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Daily time frame: I am going to skip the analysis

60 minute time frame:

  • There is a potential Triangle wave (B) that could have been completed
  • If this is the case the measured target is located at 1.17
  • If the Triangle pans out the following thrust can be either the wave (C) of a Zig Zag (The rebound would end) or the wave (W) of a Double Zig Zag (A much larger rebound would be in the cards)

EUR 60-Minute Triangle Chart
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  • In the 15 min chart we can see that the impulsive up leg form last Friday's lod strongly suggests that we should expect more follow-through to the upside hence the Triangle should pan out

EUR 15-Minute Triangle Chart
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