15 October 03:48 AM
Warren Buffet, a billionaire and one of the major investors of modern times, has recently made a preview of the perspectives of the common European currency for the next few years. According to him, the “Bulls” should be careful while watching the uptrend as EUR is going to face hard times. The common Euro currency will have to take a series of strength tests after the rapid price growth.
The quarterly growth of EUR (11%) has been the most considerable over the last 8 years. It started after the EU allocated 750 billion euro for solving its budget-and-debt problems. Mr. Buffet supposes that it is these actions of the EU that may jeopardize EUR as they cannot solve the problems that caused the fall of EUR in 2008 (You can find a more detailed overview of the problem in the article called “Why is it EUR that Soros has decided to drop? The EU’s unknown problems and the mysteries of the European politics”).
That is why the world’s most influential investor has decided to watch the EU states (with different cultures and attitude towards budget policies) trying to share the common currency. According to Buffet, even though the financial crisis is over the global economy, especially the one of the EU, is going suffer its consequences for a long time.
Bloomberg and Market leader news agencies report that previously buffet was against USD but during May’s annual meeting with the shareholders of his holding company he announced that the EUR currency rate would be even worse than expected as it was difficult to accept the uniform monetary policy rules in the EU and to weaken the strong pressure of USD. “You’ll never go bankrupt until you print your own currency”. Gerald Martin of Kogod School of Business said: “Probably, Buffet is going to get involved in currency trading once again as it is very unlikely that Euro will grow further”. However they instantly published a denial saying that in 2005 Buffet suffered pure losses while trading currencies. Currently there are no derivatives on the balance sheet of the Fund, except those connected with the stock indexes of other countries.
What is going to happen to EUR? How to interpret the great Buffet’s hint? According to Maxim Gun, the head of the Department of Volume Analysis of Masterforex-V Academy, over the last few days the uptrend of EUR has been rather sluggish. There are favorable conditions for mid-term reversal. In this case Buffet’s long-term forecast perfectly reflects the current market conditions and gains support of small-scale timeframes.
At the moment EURUSD is being traded above the volume level of the current contract at 1.3920 (22.600 lots). The breakout of 1.3920 with further settlement below it, followed by the breakout of the major support level at 1.3770, will provide us with a “bearish” prompt. In this case, according to the new tech analysis by Masterforex-V, the price will start forming “the moment of truth”. Maxim supposes that until the mentioned conditions are not met, the upward dynamics of EURUSD will hold true.
Vadim Zhunko, who is in charge of the Department of Spectral Analysis of Forex and Currency Indexes, Masterforex-V Academy, shares his opinion about the current situation on EURUSD: the monthly spectrum chart indicates that trend lines with periods 55 and 89 are looking down. Lines 13 and 21 have intersected each other at the point between the last 2 bars, which indicates the minimal point for these 2 lines. “Light” spectral lines with periods 5 and 8 are located at the top and looking upwards. The “fastest/lightest” line 3 is at the bottom and looking forward to rising as its half-period is 2 bars. Consequently, 3 spectral lines are pointed at the bottom while the other 5 are aimed at the top. The remaining potential of line 13 equals some 1800 pts.
On the charts of currency indexes the simultaneous low is followed by a synchronous upward impulse without the signs of its termination. The lower histogram of trend power indicates downtrend while the upper one shoes flat.
According to the results of the ultimate analysis, EUR is expected to grow within the next few months. Supposedly, EURUSD will reach the culmination of the uptrend in the 2nd quarter of 2011.
Evgeniy Antipenko (ATEI), the head of the Department of ГОСТ, Masterforex-V Academy, supposes that the following levels are going to be the key ones:
1. Upward scenario
The 1.3774 support level is critical for this variant of movement. If the level is broken through the scenario is canceled.
Resistance levels:
Saks Channel indicator 1.4032 – 1.4158.
Local maximum 1.4011. The “buy” target-grid of the basic indicator 1.4011-1.4157-1.4248. Extra levels: 1.4149 - R3 Saks Channel Н4.
2. Flat zone
Support level 1.3774
Resistance level 1.4011
During the process of forming sideways price movement these levels are crucial. On forming the patterns of widening flat, false breakouts of the support/resistance levels of the flat zone are likely to take place, however the limit is 161.8% - 1.5661. Thereby, in this case the price shouldn’t come out of the buy/sell zone. The 161.8% support level inside the buy zone and the 161.8% resistance level inside the sell zone are crucial for this variant of movement. If the levels are broken through the given variant is canceled.
3. Downward scenario
The 1.3944 resistance level is critical for this variant of movement. If the level is overcome the scenario is canceled.
Support levels:
Saks Channel indicator 1.3905 - 1.3778 - 1.3653
The “Sell” target-grid of the basic indicator 1.3819 - 1.3728 - 1.3582. Extra level - 1.3802 R1 Daily. Local minimum - 1.3774.
In order to estimate current market situation in a more objective way we offer you to take part in the survey at the forum for traders and to share your own opinion on the matter:
• EUR currency rate will grow
• EUR currency rate will fall
• EUR currency rate will go flat
You are free to discuss this article here: forum for traders and investors
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