the EUR/USD is in wave 3 up and will need to form a clear 5 waves before it tops out. As far as I can tell, wave 3 is either just starting to top out around this 1.4720 resistance, or it has a bit more to go before a period of wave 4 retracement/consolidation comes in and the following final wave 5 thrust higher. As we saw back in December, it's quite possible we will see a very strong spike up on the EUR/USD to cap off the end of the move, so instead of focusing on a specific level to get short the EUR/USD, I recommend waiting for an ending pattern to emerge and time the short when a clear potential top is in place. In the meantime, shorter term longs on the EUR/USD could still see some upside, but they're getting riskier and riskier. If we get a decent dip today (as long as 1.4560 holds), that would be a risky but good buying opportunity to make some pips, especially if the final wave 5 is a sharp blowoff rally like it was in December.
Keep in mind though guys that the big money will be on the short side at some point soon. On the EUR/USD it looks like we are topping off Primary wave 2, intermediate C, minor 5, minute wave 5, and we're now working in the shaky waters of the minuette degree 3-4-5 finish to top off all of those degrees and enter a primary wave turn which mathematically should see the EUR/USD sell off harder than it did from mid 2008 to early 2009 which means something below 1.1300 on the Euro if it tops out around 1.4800.
The EUR/GBP long idea I mentioned yesterday is up slightly and likely consolidating a bit before making another sharp rise. I recommend getting long or holding long on EUR/GBP looking for 0.9200. A stop loss somewhere between 0.8800 and 0.8850 seems appropriate for the trade. As far as shorting GBP/USD is concerned, you could try to get in early here, but I'd rather wait until the USD as a whole bottoms out and ride the double momentum of GBP weakness and USD strength. Of course I'll let you know when I jump in long USD.
Gold continues to push to new highs, now around $1019. As the Euro works to a top, Gold should push higher but top out around the same time the Euro does give or take a few days. Until then, I'm holding long but $1035 should be enough for me to get out with decent profits and get neutral to await the turn.
Stocks have continued their terminal climb and I have taken a bit more profits around the close today from my 1029 swing trade long on stocks. Now I'm only in 1/4 of that trade. It looks like the S&P 500 could have enough mometum to hit 1100. Right now the last of the bears and cautious institutional money that has sat out most of this rally is finally, frustratingly getting pressured into buying this market for fear of missing out. This is very typical of a bear market rally to fool the common investors into finally getting long at the top before the next plunge. Once the dumb money buying pressure wears off, we will likely form a significant top and start a 60-70% decline over the course of a year or so. Trying to time this top hasn't been perfect, but bear market rallies are typically hard to time the end of precisely.
In economic news Wednesday, unfortunately all the data we were watching came out too close to expected to get much market reaction. In news Thursday:
0430 UK Retail Sales m/m (0.1% expected) - Sometimes this indicator can spark a very large move on GBP/USD, and other times it's a bit more subdued. One common feature either way though is that the move in line with the number tends to max out around 40-50 minutes after the release (around 05:10 TO 05:20 EST). If the move in the first 1-2 minutes is muted and it only moves about 30 pips, then I would wait for a nice deep retracement to get in the direction of the surprise. If the move in the first 1-2 minutes is a very sharp 50 pips or more, then a steep retracement may not happen and you might want to consider getting in on a slight retracement or just chasing it down and following the momentum.
If it comes out at 0.6% or higher, the GBP/USD should rally 40-50+ pips.
If it comes otu at -0.4% or lower, the GBP/USD should fall 40-50+ pips.
0830 US Housing Starts (598K expected) - This number has not had a huge reaction in currencies lately, but it does help drive sentiment and pressure from a more gradual perspective. This number should help pressure EUR/USD, USD/JPY and EUR/JPY up slowly on a good number, and down slowly on a bad number. I think a good way to play this is to let the first 1-5 minutes of volatility die down so you can get in closer to prerelease, then swing trade one of those pairs in the direction of the number (if the trigger is hit) and hold it for 45-90 minutes. As stocks get ready to open around 0930, the housing numbers will likely lead to a premarket move, or a move shortly after the open which is inidicative of a shift in risk appetite and will be reflected in most or all of those currency pairs. Also, make sure the building permits number comes out in the same direction (expected at 583K).
If the number comes out at 648K or higher, EUR/JPY should gradually rally 50-100 pips.
If the number comes out at 548K or lower, EUR/JPY should gradually fall 50-100 pips.
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