📶 Forex Trading Analysis July 2013

The summer has yet to bring new developments in the Forex market and currency fluctuations. There is a sense in the air that the global monetary “status quo” is about to change within the next 3–4 months. The FED is altering the rules of the game and preparing world markets for a new monetary policy. In our last Forex Report (two weeks ago), we forecasted that the good days for the Euro against the US Dollar were coming to an end.

At that time, EURUSD was trading around 1.3120, while today it trades near 1.2830. The mid-term trend for EURUSD is bearish, but the short-term outlook is much more complex (see the TCI analysis at the end of this report).

Here’s what’s coming next:

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📝 A Brief Analysis of What Lies Ahead

Following its recent announcements, the FED is preparing global markets for higher US interest rates. With improving unemployment figures, the FED’s main concern is shifting toward managing upcoming inflation. This will likely lead to higher interest rates after summer 2013. Higher rates (currently at 0.25%) will make US bonds and the US Dollar more attractive to both domestic and foreign investors, strengthening the US Dollar—especially against the Euro. A stronger US Dollar also causes commodity prices, which are valued in USD, to decline. This happens because, as the USD appreciates, commodities must devalue to maintain their real value and preserve the balance between real demand and supply. This mechanism explains why gold prices have dropped over the past few weeks as the USD has strengthened.

■ US Interest Rates (↑) → USD (↑) → Commodity Prices (↓)

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📈 EURUSD Historical Channel & Long-Term Forecast

Researching EURUSD quotes from 1989 to 2013 reveals a broad price channel between a high of 1.60 and a low of 0.82.

■ High: 1.6036 (7/15/2008)

■ Low: 0.8225 (10/26/2000)

■ Pivot: 1.2130

After completing this 8-year EURUSD cycle (2000–2008), the pair now appears to be trending downward—possibly testing the lower range over the next 3–4 years. For 2013, it is likely that EURUSD will test the demand level at 1.2500, or even the pivot at 1.2130. These long-term targets will require several months to materialize. Mid-term bearish trends are often interrupted by short-term bear-market rallies, so it’s important to be cautious about timing entry into this ongoing EURUSD downtrend.

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⚙️ Using TCI Technical Analysis to Forecast EURUSD, GBPUSD, and USDJPY

Based on TCI technical analysis, key short-term dates have been identified. Overall, the US Dollar is expected to appreciate for about two calendar weeks, followed by a strong corrective move to balance short-term USD overbought levels.

The New Version of TCI Is More Precise Than Ever

The following Forex signals are based on the latest version of TCI, which is more sensitive to short-term trends and incorporates a time cycle model based on the Fibonacci sequence. Back-testing shows this version outperforms previous iterations. Generally, TCI can be used to determine overbought/oversold levels or to assess the strength and duration of a price trend. As a tip, it’s better to focus on the rate of change in TCI rather than the absolute numerical values. Remember, TradingCenter’s Forex signals are designed for position traders—not day traders—since intraday trends remain unpredictable.

TCI on EURUSD

TCI indicates a bearish two-week period for EURUSD, followed by a strong corrective rally. According to TCI data, three weak reversal points and two strong reversal points are expected. Weak reversals will likely cause intraday corrections, while strong reversals may trigger multi-day upward rallies. While TCI cannot predict the future, it can identify the natural pattern of upcoming price movements.

Date	Close	High	Low	Volume	Δ%	TCI-SHORT	TCI-LONG
2013.06.25	1.30798	1.31498	1.30644	57224	-0.29%	0.53%	2.18%
2013.06.26	1.30095	1.30863	1.29841	63298	-0.54%	0.39%	-0.35%
2013.06.27	1.30366	1.30562	1.29994	55889	0.21%	0.57%	3.05%
2013.06.28	1.30082	1.31022	1.29904	59940	-0.22%	0.07%	2.75%
2013.07.01	1.30622	1.30659	1.30043	41044	0.41%	0.66%	3.51%
2013.07.02	1.29768	1.30772	1.29629	47947	-0.66%	-0.58%	0.69%
2013.07.03	1.30078	1.30305	1.29223	45656	0.24%	0.07%	1.99%
2013.07.04	1.2912	1.30225	1.28824	39893	-0.74%	-1.25%	-3.16%
2013.07.05	1.28277	1.29157	1.28053	50184	-0.65%	-2.36%	-7.75%
(TCI Forecast Begins -Focus on the TCI rate of change-)
(+1 trading-day) LOW --Weak-Potential TCI Reversal Point AFTER--						-2.17%	-7.14%
(+2 days)						-1.68%	-8.46%
(+3 days)						-1.99%	-7.79%
(+4 days) LOW --Weak-Potential TCI Reversal Point AFTER--						-2.34%	-8.47%
(+5 days)						-2.00%	-8.72%
(+6 days)						-2.23%	-8.02%
(+7 days) LOW --Weak-Potential TCI Reversal Point AFTER--						-2.28%	-8.68%
(+8 days)						-2.27%	-8.77%
(+9 days) LOW--Strong-Potential TCI Reversal Point AFTER--						-2.66%	-9.04%
(+10 days)						-2.27%	-7.05%
(+11 days)						-2.28%	-6.87%
(+12 days)						-2.40%	-6.10%
(+13 days)						-2.30%	-5.05%
(+14 days)						-2.34%	-4.04%
(+15 days)						-2.35%	-4.39%
(+16 days)						-2.33%	-2.77%
(+17 days) HIGH --Strong-Potential TCI Reversal Point AFTER--						-2.59%	-4.29%
(+18 days)						-2.01%	-6.42%
(+19 days)						-1.89%	-7.38%
(+20 days)						-1.28%	-6.82%

TCI on GBPUSD

According to TCI data, three weak reversal points and one strong reversal point have been identified. In the short term, the British Pound appears even more oversold against the US Dollar than the Euro. However, GBP is expected to weaken further against USD before a genuine trend reversal takes place. On the long-term outlook, GBPUSD is approaching historic lows, and appreciation is anticipated over the coming years. This will likely be covered in a future report.

TCI on USDJPY

TCI data identifies three weak reversal points and two strong reversal points. The Japanese Yen is also oversold against the US Dollar in the short term. Similar to EUR and GBP, the Yen is expected to become even more oversold before a true reversal occurs.

 

■ Giorgos Protonotarios, Financial Analyst

Free Forex Trading Signals

For Trading Center, 5th of July 2013