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EURUSD and DJIA Decoupled Significantly !!
By Marek W. Stupka | January 9, 2010
Today I want to start with citation of my August’09 forecast (which I confirmed in my September technical post): “EURUSD rising as far as to the important psychological resistance of 1.5000 after crossing the all-year resistance 1.4337 is my preferred outlook for this instrument…”
Now in the 1D chart above [ click on the chart to get a bigger picture ], one can see EURUSD price development with start in April 2009 and end today, the 9th of January 2010. Note that the most frequently traded FOREX pair traded just as I have prophesied already back in August 2009, t.m. in a long-term ascending channel (red), from October onwards capped by long-term ascending trend line (brown). Also note that it wasn’t until December 2009 till the pair: A. met the predicted 1.5000 psychological Resistance, B. broke below the bottom of the ascending channel, C. descended to the Ichimoku Kumo Cloud and below (more about Ichimoku Kinko Hyo, channel and trendline breakouts in the 1-on-1 Training Course), and started to post a reversing price pattern since that time…
In reference to my very last article posted on this blog, I do not want to go deeper into why I predict the EURUSD to mostly trade sideways in a broad range of 1.3000 and 1.5000 in 2010, and thus generate excellent trading opportunities for the CANAAL (short-term) and the CONFIRMATOR (mid-term) Trading Systems, both proprietary to Gepard Investments, Inc. What I want to focus on, however, is the rather substantial correlation decoupling between the benchmark Foreign Exchange instrument and the benchmark equity index instrument…
Note that the chart you see above [ again, feel free to click on the picture to get a bigger chart ] is rendered over the very same time period as the EURUSD chart in the beginning of my today’s post. This chart, however, is for the Dow Jones Industrial Average (if you tried to plot charts for both the S&P100 and S&P500, you end with pretty much the same price curve).
One interesting thing to recognize when comparing both charts is that, starting from December 2009, EURUSD has been significantly decoupling from the DJIA and the S&P. The correlation between the two, based mostly on the investor pattern generally known as “Flight to Safety” or “Flight to Quality” and representing pouring money into the greenback’s safe haven whenever investors smell a risk-aversive behavior in equities, has now been considerably weakened. One good reason for this is that neither USA nor Europe - or China (and China in particular, since it is now the investing party in a great sweet portion of the US national debt, while -unluckily for Uncle Sam- it now perceives America as its most treasured investment) - would want a weak-greenback scenario again. Weak dollar, implied predominantly by the irresponsible actions of the US Government and the FED in-between 2004 and 2008, has been one of the primary reasons why we have experienced the 2008-2009 Great Recession in the first place …
Topics: FOREX Trading Analysis |
May 11th, 2010 at 7:40 pm
I am still a little bit confused how to earn much money on Forex Trading, i know several people who earn thousands of bucks from forex trading.
Daniel
May 18th, 2010 at 6:00 pm
Hallo Daniel,
it is true, you can make thousands, and even millions on trading FOREX.
Keep in mind, on the other hand, that there’s also a possibility you will lose these same amounts.
It is absolutely vital for you to take a good quality investment course before you start trading live on your own…
Marek W. Stupka