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Draghi On The Tightrope
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Draghi On The Tightrope

by The MoleJuly 17, 2017

The ECB is scheduled to meet on Thursday, however it’s only an internal meeting and no new economic staff projections (ESPs) are expected. Bond investors in particular are looking for Draghi’s press conference for clues as to what interest rate policy to expect for the third and fourth quarters of this year. But given that the EUR/USD is now heading toward 1.15 I have an inkling that Mr. Draghi will choose his words very cautiously as he is now walking a precarious economic tightrope.

Over the past few weeks the ECB has been uncharacteristically quiet while the Federal Reserve pointed towards waning inflation and lackluster consumer confidence hinting that this may have been it in terms of interest rate hikes throughout 2017. Not surprisingly the Dollar has now dropped to its lowest levels since September 2016 while the Euro is reaching escape velocity, closing last Friday at 1.1450. However, the ECB’s technical assumption for the EUR/USD in 2017 stands at 1.080. And a few more weeks of Euro bullishness could blow many of the ECB’s economic assumptions right out of the window.

2017-07-17_EURUSD

Technically speaking the EUR/USD is now breaching an inflection point which, moving forward, could make life difficult for the ECB. Due to almost a year of sideways churn the 100-week Bollinger has been squeezed to the max while the monthly panel shows us a pretty well defined sideways pennant. IF the EUR/USD manages to pump its way beyond 1.16 then a veritable feeding frenzy could be triggered and we may see it near 1.25 by the end of the summer. This may sound like a gross exaggeration given that it traded near 1.03 six months ago but during my trading career I personally have seen currencies mercilessly squeeze the shorts (and the longs) on many occasions.

Of course the Euro long trade has been getting a bit crowded lately. According to the CFTC’s latest COT report, there were 83.8K net-long contracts held by speculators in the futures market for the week ended July 11, the highest level since the week ended May 3, 2011. So quite a few participants are probably expecting that the current advance has run its course and are awaiting ‘new instructions’ so to say. Thus should Mr. Draghi utter anything even remotely resembling a hawkish comment this Thursday then I suggest that you strap on your helmets and grab on to something because it would trigger massive moves across forex and of course equities, commodities, and bonds.

2017-07-17_seasonality

With the Dollar falling and week #28 seasonally being the most bullish until Q4 it’s no surprise that pretty much everything across the board has been on the rise. This week (#29) is usually blessed with a bit more follow through, thus I would not expect much pull back at least until this Thursday. Let’s look at a few key markets:

2017-07-17_copper

Copper is gaining strength again and may be touching its own bullish inflection point this week or the next. Note the tightly compressed weekly BBs which are now starting to point up and of course the monthly panel is looking increasingly bullish. If copper can make it to its upper 100-week Bollinger then I would be on the look out for a small pull back, after which of course a long position is on the menu.

2017-07-17_crude

Even crude has been finding a bit lately and the daily panel now shows it attacking its current Net-Line Buy Level (NLBL). This is a bit too early for me personally however and I’ll be holding off until I see a small correction which does not breach the previous spike low.

2017-07-17_corn

Corn is a setup I’m willing to get behind but only with a very small position size (e.g. ~0.25%). The previous sell off has been NASTY and I’ve got no problem with a little lottery ticket now that it looks like we may have a short term spike low in place. But again, if the Dollar suddenly gains strength then corn could drop even lower. Thus for now let’s deploy only some petty cash and see what happens here today.

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • Mark Shinnick

    ….just fascinating to watch volatility getting spiked down ….while short indexes are holding OK.

  • http://evilspeculator.com Sir Mole III

    Good morning everyone!

  • Ronebadger

    Hi Boss! My birthday today…one year away now from Medicare…

  • OzarkHillBilly

    Happy Birthday!

  • Mark Shinnick

    Happy new year too :)

  • http://evilspeculator.com Sir Mole III

    Yeah, you and Angela Merkel – LOL!!

    https://en.wikipedia.org/wiki/Angela_Merkel

    Happy birthday anyway 😉

  • http://www.captainboom.com/ captainboom

    Hippo Birdie Two Ewe!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Morning.
    Has it really been 5 YEARS?!?

    “..and believe me, it will be enough”
    https://www.youtube.com/watch?v=tB2CM2ngpQg

  • Ronebadger

    Wow, I did not know I share a birthday with that “nice lady”. I am a 4th gen American with 100% Kraut heritage…with names like: Koch, Weber, Schmidt, Neger, Geschwindner

  • ridingwaves

    Happy Birthday

  • yudhisthira

    Zero stuck at 836 Chicago?

  • Ronebadger

    I hear that Blue Apron will be called Red Apron soon…

  • Mark Shinnick

    It may all sound like a broken record, but I just endlessly marvel: Here we are in a world where ThereIsNoAlternative to equities, Buffet’s advice taken to heart by BTFD boomers, all sorts of longer-term buy-and-holders are holding fast…while the CB’s are in full disclosure they are selling out on trillions in assets ……while the risk-off exit doors keep narrowing… and we all get to see this amazing situation seeming as LaLa stable as can be.

  • Mark Shinnick

    Yep…the Commies in charge would never just roll-over in their ideals.

  • http://evilspeculator.com Sir Mole III

    Neger? Seriously?

  • http://evilspeculator.com Sir Mole III

    Must have been temporary – seems to be working just fine.

  • TerpFan

    Mole, not working (updating) for me unless I log out, and back in. Using Chrome browser.

  • Ronebadger

    yup

  • http://evilspeculator.com Sir Mole III
  • http://evilspeculator.com Sir Mole III

    $NFLX had a good quarter – trading > $172.

  • http://evilspeculator.com Sir Mole III

    Once you log in – is it working?

    Hosting firm switched servers last weekend and there may be glitches. If you keep experiencing issues please send me what EXACTLY is happening, preferably with screen shots. This needs to be replicable so that the hosting guys can figure out the root cause.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    bullish PnF, $195.

  • Mark Shinnick

    I see servers faltering quite a bit, each log-in then requiring another so that the server then gets reset….does not seem to happen automatically.

  • TerpFan

    The problem today was at my work computer. Could login, but no update past login. Will monitor and let you know as requested. Thanks!

  • Julie

    Hi Mole In Bull Markets the 80/40 rule for RSI was certainly in play for NDX.The recent bounce was at RSI 40 Charts are coming soon
    JULIE

  • Julie

    Hi Mole and Everyone GLD adheres nicely tp exp mov average crossovers 3,6 Confirmation is MACD 3.8.16 abobe or below it’s signal line
    JULIE https://uploads.disquscdn.com/images/05455afcd89e1517e36612b75db8e7565f78447bcf8246750f158005fda56a34.png

  • Julie

    CAT How I trade momentum the 5 ema 21 ema 55 ema should be in a bullish alignment. The CCI can also be used to play momentum in an uptrending stock such as CAT when the CCI goes to 100 or above an entry van be made. NOW this is short term only and keep everything close to vest i.e. moving stops up on intraday charts
    https://uploads.disquscdn.com/images/3fca2b5ab0e5fcdbece33102eb9339b9e91a18cff19376a874551ccf44bb9196.png

  • Julie
  • Julie

    Correction MACD 3,9,16

  • Julie

    F A rounded bottom going up into it’s 233 ema and resistance. Looking for a pullback to rising 21 ema or lower channel trend line
    JULIE

  • Julie

    Screwd up supposed to be a chart with the comment Sorry
    JULIE

  • Julie

    F A rounded bottom going up into it’s 233 ema and resistance. Looking for a pullback to rising 21 ema or lower channel trend line

  • Julie

    SORRY Unable to do
    JULIE

  • Julie

    F TEST

  • Julie

    I am all messed up even gave myself an up vote LOL ! Sheesh !
    JULIE

  • Julie
  • Mark Shinnick

    The system permits you to delete your postings you might not like..

  • Julie

    Ok Guys FSLR A trend change is confirmed on weekly chart The top is RSI 26. A confirned trend change (1) 17 ema goes above 43 ema (2) MACD 5,34,5 above centerline (3) Full stochs 50,3,3 above 50 (4) RSI (26) above 50
    JULIE

  • Julie

    Thanks Mark getting things down
    JULIE

  • Julie

    NDX the bounce off the daily 89 ema and lower boundary of the ichimoku cloud
    JULIE https://uploads.disquscdn.com/images/bd774412b2f106030b5e675e1ec3785ebbb9b73d3a0771be3f0f254364091be4.jpg

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    12 charts per day.
    that’s your limit!!
    😉

  • Julie

    OK !
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    You like diets, yes?
    {snicker}

    “less is more.”
    http://evilspeculator.com/information_diet/

    Tenet #2

  • Julie

    CAT looking to short with a bearish close below the 8 conversion line Ichimoku Cloud
    JULIEhttps://uploads.disquscdn.com/images/15740e2d6cf6b89bbd5d7242de674b24469da3daa22de0d068f851fa8d779198.jpg

  • Julie

    Sorry chart did not come up. Still learning not sure what I did wrong.I will not clutter this great site
    JULIE

  • Julie

    https://uploads.disquscdn.com/images/78496bf38f8a1ecb1a05cebbbdba37b647ffa5a1f9ac7bf9d80b8ee1fc9d74f3.jpg CAT looking to short with a bearish close below the 8 conversion line Ichimoku Cloud
    JULIE

  • Julie

    CAT A bearish 3 drives to the top pattern
    JULIE

  • Julie
  • Julie

    https://uploads.disquscdn.com/images/16fdae0b9b5b4c7bdaa437e48630595500d06c86875faf7fa6d058201d64eda5.jpg MOLE You Like VXX This chart is for you The bottom panel is the SPX Explanation when the VXZ VXX ratio drops below it’s daily 5 ema with $NYMOT going below 0 a pullback can occurr. Just the reverse for a bounce
    JULIE

  • Julie

    Sorry Chief I learned how to post charts and could not stop …… Promise not to clutter this great site. Do not know how to delete a mistake
    JULIE

  • Julie

    Sorry Chief I learned how to post charts and could not stop … I promise not to clutter this great site .. Do not know how to delete a mistake. Thanks Mole !
    JULIE

  • Julie

    Wave Runner ACRX weekly chart Price going up into weekly upper boundary of the ichimoku cloud and weekly 89 ema. Great Trade !
    JULIE https://uploads.disquscdn.com/images/721789cd2e3e50dc8c1c091de166c1f7c1ea1d81906be3619414afbf0d474875.jpg

  • Julie

    https://uploads.disquscdn.com/images/c270c4967c440e1616a6c77710c6caee17742d59c87b2f2940d19b6fc17ac40d.jpg $COPPER Detailing the importance of the daily 55 and 233 ema’s Also showing how the Stochs are better utilized when price is going sideways or consolidating . Also observe the importance of the Ichimoku Cloud boundaries J
    JULIE:

  • Julie

    $COPPER A bull market is confirmed when the 21 ema ( not shown so use the 21 baseline ichimoku cloud) is above the 55 ema and the 55 ema is above the 233 ema on the daily chart. Time for sleep guys ! Thank You Mole and Everyone for your patience,
    JULIE

  • Julie

    https://uploads.disquscdn.com/images/b7fb8e9eeadbf6ae0d6d7eeaf1efe3217b1cc8dcdc48523fa975e1edaac265bb.jpg USO Combining Bollinger Bands with the Ichimoku Cloud boundaries and the daily 55 ema. Very strong support at 9,41 and overbought. Breaks below 9.41 on 30 min or 60 min chart and ……. !
    JULIE

  • http://evilspeculator.com Sir Mole III
  • http://evilspeculator.com Sir Mole III

    Julie figured out how to post charts – unfortunately we were all gone already! 😉