Kruger Insights Thursday – December 5, 2013 by FirstMacro

BinaryOptionsNow | Published on December 5, 2013 at 11:00 am

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Just An Inside Day – All of that wild price action on Wednesday and yet the Euro still held within Tuesday’s range against the buck. So in reality, not a lot happened and there was just a bunch of noise. What this does do however, is it makes the recent range more significant and a break of this range more influential as far as being able to determine shorter-term and potentially medium-term directional bias. So what are the key levels to watch right now? Keep an eye on 1.3620 above and 1.3520 below. Look for a break and daily close above or below to open the door for a breakout. Still, I am of the view that a downside break with have a more meaningful impact and potentially expose more significant declines than any bullish momentum from an establishment back over 1.3620.

kruger insights december 5, 2013

Attractive Downside – There is some very solid internal resistance in EUR/USD at 1.3650, and beyond this point, I would also highlight the 78.6% fib retrace off of the October to November high-low move, which comes in at 1.3720. So if we do see a breakout beyond 1.3620, look for gains to then be well capped in the 1.3650-1.3720 area. On the other hand, if we manage a break and close back under 1.3520, I see a much bigger risk for the move to the downside to be a good deal more meaningful than a bullish break, with deeper setbacks towards 1.3100 not to be ruled out. Fundamentally, markets will spend the day preparing for and then digesting major event risk in the form of the European Central Bank rate decision. This will likely offer itself as the primary catalyst for Euro moves. Market participants will be looking to see if Draghi and co. show any signs of being more upbeat than they were at the previous meeting, when the ECB surprised with a rate cut.

A Lot More Going On – But the focus shouldn’t only be on the ECB into the end of the week. There are other things going on right now, and broader price action suggests that we could soon see a significant rise in volatility across all markets. We have been getting signs of potential exhaustion in US equity markets, while currencies like the Yen and Franc are also finding relative strength. A potential pullback in USD/JPY could be in the works, while the EUR/CHF break to fresh 2-month lows is warning of additional stress in the market place. The SNB hasn’t really needed to worry a whole lot about its 1.2000 barrier defense, largely because extended ultra accommodation from the Fed has indirectly helped to keep EUR/CHF propped. But with the prospect for the start to Fed policy reversal looking quite high, this could put some serious strain on the Swiss central bank, and as highlighted Wednesday, could in turn have a more significant, risk negative ripple effect. Let’s also not forget about Friday’s monthly US employment report and some Fed speak from the more hawkish Fed’s Fisher and Plosser, which could do a good deal on their own to inspire some serious activity.

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