Kruger Insights Wednesday – November 27, 2013 by FirstMacro

BinaryOptionsNow | Published on November 27, 2013 at 11:00 am

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Not All That Bullish – In recent updates I cited EUR/USD 1.3580 as the key level to watch above, and the market has since broken through this level. However, as per my analysis, I also said we would need to see a daily close above 1.3580 to officially force a shift in the short-term structure. We have yet to see a daily close above 1.3580 and it will be interesting to see how the market trades on Wednesday. Still, the truth is, even if we were to close above 1.3580 on Wednesday, there is more medium-term internal resistance from October at 1.3650, which should invite fresh offers. As such, I still can not get behind any Euro bullishness at current levels, and continue to favor a sell on rallies approach. At the moment, we would need to see a break and close back under 1.3515 to confirm this bias and open the door for renewed downside pressure.

kruger insights november 27, 2013

Isolated Event – But remember – trade is expected to lighten up significantly for the remainder of the week, with US market participants running for the exit today to get a jump on the Thanksgiving holiday. I never like trading around holiday sessions and would recommend proceeding with caution. In fact, some of the best opportunities present post thin holiday volatility. Another interesting insight with respect to the Euro is how isolated the price action has been and that the single currency has not been having its traditional influence over other major currencies relative to the US Dollar. While the Euro has been running higher, most of the other currencies are still well offered against the Buck. This only helps to reaffirm my general bearishness of the Euro, as I contend the broader price action still favors the US Dollar.

Full Circle – Overall, the underlying theme in markets still centers on the performance in the US equity market. Throughout 2013, the one major constant has been the relentless surge in US equities to fresh record highs. While all other assets have for the most part been confined to ranges (I know the Yen is an exception, but no surprise given correlation), US equities have been the primary beneficiary of continued ultra accommodative Fed policy. Interestingly enough, I don’t think the disconnect here is as disparaging as some might think. In the end, this is all a part of the ripple effect from the initial crisis in 2008. Money flowed out of the US Dollar and into Europe and then out of Europe and into the commodity bloc and emerging markets, and then out of the commodity bloc and emerging markets into equities. Equities are the final stop on this train before everything comes full circle again and we finally get back to sensible conditions. Soon money will flow out of equities and the pullback will be substantial as market participants finally look to book profit in anticipation of Fed policy normalization. In 2014, the incentive to be invested in equities will be substantially reduced.

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