Nobody Likes Tuesdays: EUR/USD and S&P 500 Doomsday Predictions

October 18, 2016

Nobody likes Tuesdays…

The good memories high from the previous weekend has faded and the following weekend’s fun seems too far away to matter. So what better day to feature some bold doomsday calls from the founding architect of the Euro, Professor Otmar Issing and billionaire investor Carl Icahn!

On Twitter yesterday, I shared this interesting UK Telegraph article warning that the Euro is nothing more than a house of cards and that it is a matter of when rather than if it will all come tumbling down.


If you ignore the fact it’s a negative Euro story in a post-Brexit British newspaper, it is an interesting read none-the-less.

“Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly.”

This is definitely a common consensus that many economists, politicians and traders share, but coming from the founder was a bit of a shock to hear.

Bringing up our MT4 platform and flicking to a higher time frame chart…

EUR/USD Monthly:
161018_eurusd_monthly
Click on chart to see a larger view.

…we can see that while price is sitting in what looks like an innocent daily range, it really is a HUGELY significant monthly support level. A level that some might say is significant enough to be a doomsday level!

If that level does in fact go, it will be interesting to see the liquidity voids that the market could experience. Something that is fresh on trader’s minds thanks to last week’s Cable flash crash.

Moving onto the big story affecting indices markets to start the week, Carl Icahn had the following to say on CNBC:

“I’ve been concerned for a few years, and more and more concerned. I think it’s very difficult when there (are) so many people in the middle class that really don’t have the income that they counted on, pension funds are way underfunded … in a market, economy that has inflation.”

In the mother of all bull markets, this is a typical CNBC headline to tick up ratings of course, but when someone like Icahn speaks, it’s never a bad thing to at least hear him out.

Taking a look at the charts and we ended last week highlighting this S&P 500 daily pin bar on higher time frame support:

S&P 500 Daily:
161018_sp500_daily
Click on chart to see a larger view.

How often do you see pin bar candle patterns form in one direction and then immediately in the other, one candle after another. It is such a common misconception for new traders to believe that a pin bar automatically means that a reversal is coming.

All a pin bar like this really means is that there is indecision in the market and battle forming between the buyers and sellers for control.

Pin bars on support are a great addition to a trader’s arsenal, but as with all technical analysis tools, are strengthened by being used in conjunction with other forms of analysis for confirmation.

Cheer up everyone, Tuesday’s aren’t THAT bad. Have a great trading day!

———

On the Calendar Tuesday
AUD RBA Gov Lowe Speaks
NZD CPI q/q
AUD Monetary Policy Meeting Minutes

GBP CPI y/y

CAD Manufacturing Sales m/m
USD CPI m/m
USD Core CPI m/m

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Dane Williams – @VantageFX

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