EUR/USD view for week SEP/17/2007

I. Important news from the week:

1. ECB holds the rate.

2. EUR/USD hit new record 1.39.25 (or whatever it was)

3. Gold still @ 700+ USD

4. Many analysts still believe that FED will lower the rate.

Some words for future FED meeting - there are several possibilities:
Note the markets awaiting FED's decision. FED is in complicated situation. Even if the lower the rate, it may still be view as disappointment, and stocks may plunge, and dollar to rally.

1. Not to cut the rate - this will be bullish for the dollar.

2. Not to cut the rate, but to cur discount rate some more - this is generally bearish, but may be still considered bullish for the dollar. Dollar probably fall, but not that much.

3. To cut the rate with 0.25% - this is generally bearish, but may be still considered bullish for the dollar. Dollar probably fall, but not that much.

4. To cut the rate with 0.25% + to cut discount rate again this is bearish for the dollar.

5. To cut the rate with 0.50% - this is what the business wants. Very bearish for the dollar.

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II. The wedge in USD index and EUR index:

USD index weekly chart:
Almost down the way. A rally will follow, but not before it hits the support.

EUR index weekly chart:
Similar to USD index. Not yet...
We have bearish divergence on MACD. We had this on all wedge charts published here.

EUR index 1 day chart:
This is based on a chart of Doug Gnazzo. Thanks. We see the EUR index "consolidating". The two support lines show possible downsize.

I believe upper line will NOT hold, but second one will - because the corresponding line in EUR/USD is broken (not show on EUR/USD chart)

EUR index / USD index ratio weekly chart:
Almost up. Probably even completed. We will see.

Before, I wrote following, and once again I copy/paste it:

As you can see, back in 1992, USD was down once 78.43, so the drop that the wedge suggest is not in uncharted waters at all (at least to 78.43 :-) )

Before, I wrote following, and once again I copy/paste it:

For first-time readers, and those who do not know, the
wedges are reversal patterns. This wedge is bullish for USD index, no matter
what people say for US economy, debt bubble etc. I am sure that at the end of
the year, the USD will be lower, but wedge suggest we will have one bounce
before that.

This is still valid, but probably we will first see USD index down to the support, and then another rise, probably will break the wedge top.

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III. Wedge in EUR/USD:

EUR/USD 3 days chart:
Going up. Currently some consolidation. How down it will go? 1.39.50 is answer from Doug's chart. 1.39.20 is the answer from Boris Peshev (attached bellow). After that rise to 1.39.69, then down to ~1.35.

EUR/USD 1 hour charts:
We have downtrend channel. You may trade speculative, but not really recommended for the moment. We may had the top @ 1.39.25 and we may have bear market now. Or we may have top ahead of us. Who knows.

EUR/USD Elliot wave count from a Boris Peshev:
This is Elliot wave count on EUR/USD. Is made from a friend, I generally agree with it. We have wave 4 down, then we will have wave 5 up. Downsize will be 1.39.20 - 50, based on Fibonacci.

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IV. Summary:

EUR continue to rise, USD to fall,
but reversal is near, we need to see 1.39.69 before that.

Two scenarios we discussed with friends.

1. EUR drop, then FED lower rates, and EUR raise to upper wedge border, then EUR begin fall.

2. EUR drop, EUR up to upper wedge border, then FED holds rates, or cut 0.25%, then EUR begin fall

Happy week and trade!!!

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V. Carry trade with AUD/JPY:

Will not be updated this time, probably tomorrow.