Update on Euro......Rebound still on the way

Update on Euro......Rebound still on the way

                   I wrote a post (here and here) to explain why Euro is time to rebound but it had been keeping falling after that. It suggests that risk management is critical anytime in your trading life. Catching a falling knife is not my trading style and I am patient to wait a reversal to take a position. In this trade, I cut loss several times with discipline and control the loss. Even though my marketing timing is not perfect, I still have enough capital to make a mistake and follow the trend lastly. Euro formed a double bottom on April and breakthrough short term resistance at 1.10. At this moment, I expect Euro still have room to keep the rebound alive.

          Figure 1: Euro price chart with my call (Red line).

Source: Barchart.com

                 Figure 2: Euro sentiment still is at extremely pessimistic. There still is a room for investor get more optimistic.

Source: SentimentTrader

                 Figure 3: Commercial hedger still accumulate a significant long position on Euro. It means the rebound on Euro still is likely to be on the way.

Source: SentimentTrader

                 Figure 4-6: The latest credit data shows that the fundamental condition in Europe is improving.

Source: Danske Bank

                 Figure 7-8: DAX Index and 10 Year Bund start a correction. More stock and bond investors will close their position on hedge against Euro and it triggers a rebound on Euro. I expect a correlation of DAX and Bund between Euro tend to be negative.

Source: Bloomberg

          All in all, Euro rebound is further to go when sentiment is still at pessimistic and Fundamental factor is improving. In addition, over stretched DAX and Bund start to pullback. It also can fuel the rebound. So stay on the boat.

Update on Crude Oil

Update on Crude Oil

           

                    Now is the time to update on my pervious call in coming days. Firstly, I go though the call on long crude oil (post). In my previous post(red line on the figure 1), I say ‘My bottom line is that Crude oil had been likely to reach a bottom and significant rally will take place. However, the rising trend tends to be unstable at the beginning after a waterfall decline. Bears and bulls fight against each other at this moment so the trend may fail to breakthrough several times so don’t forget a stick risk management in following the trend. ‘.

                    Figure 1: My call on crude oil(Red line).

Source: Stockchart.com

Finally, Crude oil undergone a pullback to test previous Feb bottom and made a double bottom to resume the rebound over 30%. It raises the question: Is it the end of rebound? My answer is no.

Figure 2: The world economy keep improving when we see Manufacturing PMI diffusion index (It means the number of countries getting higher PMI than previous 1 month is more than that getting lower.). Demand for Oil is likely to keeping up.

Source: Gavekal Capital

                      Figure 3: US 5 year Breakeven Inflation Rate get convergence with rise of crude oil. Credit market view the uptrend of crude oil is not temporary.

Source: St Louis Federal

                         Figure 4: Crude Oil sentiment still is near pessimistic level. If investor is getting optimistic, it will fuel the rally of crude.

Source: SentimentTrader

                          Figure 5: On the contrary, US dollar still is at extremely optimistic level. I expect it will take a correction and favor the rally of crude.

Source: SentimentTrader

                

                               Figure 6 and 7: US oil production seems to begin to decline and inventory is likely to hit a peak.

Source: Bloomberg and Soberlook

                           My takeaway is that the rally of crude oil still is on the right track. Especially, the price refuses to hit new low when there are more bad news such as the record high inventory and Iran 5+1 negotiation. It is a bullish reaction to crude oil.