There is no doubt in anyone’s minds these days that the global economic crisis is still in full gear and has not let its foot off the gas.Â What is interesting is considering how dire the news has been about pretty much every economy from the US to Europe to even Greenland, the FX markets are not selling off as heavy as they were in the 2nd half of 2008.Â This raises some interesting questions.Â Such as;
Was the massive FX moves in JPY and USD pairs due to the surprise it caught people off guard?
Was there a massive unwinding of positions that is now done?
Are people no longer shocked at how bad things are?
Why are the pairs not selling off even though the DOW has gotten hammered in 09′?
Regardless of what the answers to these questions are, the bottom line is many pairs have yet to make any new meaningful lows, one of them being the EURUSD.Â It begs the question as to whether the pair has found a bottom.
Taking a look at the daily chart below, we can see how the pair has basically been unable to have any daily close below 1.2500 despite starting the year in a strong sell off.Â The 08′ low was 1.2315 (give or take a few pips) and we have yet to see these levels in 09′ which is intriguing since the GBPUSD, NZDUSD, EURJPY and the GBPJPY have all made new lows in 09′.Â But, what is to be noted is that all of these pairs have since bounced from the new lows and have not been able to revisit these levels.
Turning our attention back to the EURUSD, we have to note some key technical aspects to this chart.Â The first is that the CCI has printed its first positive reading (albeit a tiny one of 14.97) for the entire year.Â General CCI theory states that when a pair has 6 consecutive bars positive/negative then that signifies a trend.Â I prefer to add the filter having at least 1 bar hit +-100 to add more strength to that claim.Â But, it should be watched for 5 more bars assuming this pair can muster such a feat.
If you also notice, we have not had one daily close above the 20EMA since the 2nd week in January which is quite a long time.Â If today accomplishes such a feat, this will give technical bulls some impetus for some small buying.Â A close above the Kijun (red line) would give more technical fodder for the bulls and add more to their case since this has not happened since the second week in january as well.
Does all this mean we should be looking for longs on the EURUSD?Â If the aforementioned events happen, i’d still only recommend intraday shorts or if you are a long term trader, buying off the low 1.25 region.Â We still have the very large Kumo/Cloud above which is quite thick and declining.Â This suggests any upside moves will have a real hard time breaking the resistance and it could set up a tremendous rally point to sell the pair again.Â The obvious 1.3000 handle could also offer such an opportunity so we prefer to sell rallies for larger moves down at the moment or take small intraday longs if the pair can close above the 20EMA and Kijun line.Â One last note is the momentum which is starting to build up small divergence but this momentum model rarely resembles a good bottoming formation in the near term as its a very banal angle and has managed little time above the zero line.