Inside the Currency Market: EU Forecasts

When EU achieved the 3300 level, its been contained in a dead neutral zone hence the reason for its 100 pip range bound movement over the past 9 trading days. The dead neutral zone is the 50% confidence interval zone drawn from the 2800 to 3800 95% confidence interval parameters around Jan 1st. At 1.3300, 500 hundred pips separates the upper and lower boundaries of the range and leaves our EU stuck dead center. When EU hit its 1.3044 lows Jan 4th?, it didn't have a choice but to bounce from the lower end of its range. Couple this dilemma with buying of EJ, E/CHF, E/CAD and EUR/GBP and we have a questionable circimstance as to where the next move may be heading. I've performed my own tests to share since I see many as well as myself have to look deeply for our answers.

I began by taking EU monthly averages each month since last May and found an average of 1.27733, obviously taken to 5 decimal places for perfect accuracy. What I found was my 95% confidence interval based on this average is found at 1.3351 in the upper end and 1.2194 on the lower end. I don't hold much credence to this lower end forecast. What is important in 1.3351 is it coincides with prior sell points but to where. Well I know longer term based on this average, we are absolutely heading back to 1.3068 and in line with all prior forecasts over the past two weeks. Question is where are we going short term.

Next I took an average of all my 7 averages, essentially I'm comparing Standard Deviations for my full distribution of prices since a Standard Deviation is an average of an average. In order for this distribution of prices to be perfect, prices must drop from the 1.3310 close Friday to 1.3293. Market prices always, always revert back to their perfectly aligned parameter in any price distribution.Yet an excellent sell point is 1.3349 and in line with the above 1.3351 sell price. Further, any price rises are sells based on my numbers as we get more and more overbought with any pricre rises. Possible sell points further are found at 1.3368 and 1.3386 but I don't hold any credence in the 68 nor 86 point hitting. Confidence intervals at the 95% range equates to 1.3472 to 1.2739.

If I take probabilities and ask what is the probability EU will fall between 1.3200 and 1.3300. Well, 24.26% to be exact and not much help. But I see 50%, .5 that prices will fall between 1.3318 and 1.3195. Okay a little better.

Now if I look at EUR/CAD. What is EC, its the same exact pair as EU, different name. Well EC is clear, its heading to the 3100's shorter term to 1.2900's longer term.

if EUR/GBP is any guide, this pair is in wildly overbought territory and is heading back to 0.8225 from its present 0.8394 level.

My own forecasted numbers reveal EU is heading back to 3200's then 3100 and much lower. My sell points : 1.3285, 1.3298, 1.3304,1.3333, 1.3314, 1.3354 Targets: 1.3252, 1.3218, 1.3195, 1.3127 and 1.3064. Hope this helps. I'm in trades generally for longer terms with scalps caught along the way.

I'm Brian Twomey, not in the signal, coaching or any other business so I respectfully ask to please address inquiries elsewhere.

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Comment by Jason on January 20, 2013 at 2:49am: Morning Brian
Thanks for ths informative and enlightening post.
Think you have hit the nail on the head.
The rejection on Friday at 1.3367more or less coincides with your 1.3354 sell point. On the daily chart the 8 day EMa is at 1.3278 which also coincides with fridays low.
Hope you are spot on and let's set how things go on Monday.
Have a good weekend.

Comment by Srinivas dev on January 20, 2013 at 3:02am: This analysis is beautifully done. It Seems to me, You have carefully worked out the analysis and the correlation between the Sell points and the mapped Targets. It definitely helps both for scalps trades and Swing trading as well. There is no doubt whatsoever in my mind that trend traders would

definitely should benefit from this analysis. I wonder whether Euro would turn upside anytime this year end. thanks for your time Brian

Comment by Srinivas dev on January 20, 2013 at 3:04am: I have a slight issue Brian. I don't seem to find you on the Chat. I know your email box is full . Let's see.

Comment by Dipak Patil on January 20, 2013 at 5:19am: Hi,

this is the analysis to which i agree,
but still targettin 3150 not below that.

regards:-).
Dips

Comment by Brian Twomey on January 20, 2013 at 9:30am: Hi Sri, Seasonality favors EU downside because its time for USD to begin its yearly rise. The seasonality matrix in currency pairs has held long ago when EU was the German Deutschemark so don't look for any great rise in EU. Its next ascent begins this summer, peaks in the fall and trails off December/January. EU 3400 in January is the third and rare occurence that EU made a trend top since its introduction in 1999. Normally its done by the first week of January, late December

Comment by Brian Twomey on January 20, 2013 at 10:04am: Hi Grigore, thank you and much appreciated, more posts are planned but off the forecasting topics, many here Haitham, Scott Barkley, fx bootcamp regularly do a fine job

Comment by Brian Twomey on January 20, 2013 at 10:07am: Sri, Thank you for that e-mail alert, i deleted older messages so i'm hopefully clear.

Comment by Brian Twomey on January 20, 2013 at 10:23am: Hi Jason, Dips, interesting to see where EU ends its journey, 3200, 3100 and 3000's are in the cards in coming days but what will be the impetus that arrives at those prices, BOJ, deleterious European economic announcements, debt ceiling or natural season effects

Comment by Peter jcp on January 20, 2013 at 11:06am: Morning Brian - Just reading this blog again to fully understand your thoughts. Its seems to make good sense to me along with your levels. As you know I am not much of a forecaster and generally stick with the shorter term intraday - but will be following your thoughts here and looking for that bias.

I do think the two main barriers for higher are 3368 and 3390 and if they are not breached during the first part of the week we will be doing what you say

Have a great week

Regards

Peter

Comment by Brian Twomey on January 20, 2013 at 11:24am: Hi Peter, Not that a 3200 EU takes it out of its 3300 neutral zone, we're still stuck. But we're heading lower no doubt yet we may test the middle 3300's first and the lower move may very well be a slow painful drift rather than a clear trend. I blame the wacked out matrix and uncertainty of currency pairs on UJ

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