The Previous EUR/USD Trade Signal Confirmation

The previous TCI signal proved to be quite accurate. In our last TCI analysis on EUR/USD, we warned of an upcoming US Dollar gain against the Euro. At that time, EUR/USD was at 1.3089 (February 25, 2013). We targeted the 1.2910–1.2920 area and suggested that a strong turnaround would likely occur once EUR/USD reached this level.

◘ Previous TCI Signal Details: 

-EUR/USD (2/25/13): 1.3089

-Target Price: 1.2910–1.2920  {» What is Trading Center Indicator?}

The New TCI Signal on EUR/USD & TCI Charting

Here is the EUR/USD historical Line Chart (since 1999) along with the corresponding TCI chart for the same period. Today, the TCI is around -8.0%, indicating oversold conditions.

Chart: EUR/USD Historic Line Chart & TCI Chart (January 1999 – March 2013)

Read more: EURUSD MARCH 2013

 📶 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:

📝 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 (↓)

Read more: Free Forex Trading Signals EURUSD JULY 2013

The Struggle of Humans with Change

Humankind has always struggled with change, and it is even harder to grasp how much the macroeconomic landscape has shifted in the past few years. The unseen economic impact of the pandemic led central banks to cut interest rates and increase market liquidity to record levels. In this environment of extreme liquidity and near-zero risk-free returns, the rally in equities and other hard assets was both reasonable and expected. Equally reasonable and expected was the recent market correction. It’s important to remember that from the March 2020 lows, equities rose over 100% without a significant pullback.

Read more: The Stock Market in 2021-2022

The EURUSD exchange rate is falling as economic and political risks in the Eurozone increase. Recent events, including uncertainty after the Italian elections, are pushing the Euro lower against the US Dollar. The Eurozone is expected to face a recession in 2013, with growth not anticipated before 2014, making a cut in the Euro interest rate likely.

Technical Analysis on EUR/USD Using TCI+ Indicator

The Trading Center Indicator (TCI) is a technical analysis tool that can be applied to any financial market. In this analysis, a new version called TCI+ is introduced, designed specifically for the Forex market. Two EUR/USD charts follow, covering the same period from January 1999 to February 2013. (» Trading Center Indicator)

Chart: EUR/USD 1999-2013

Read more: Free Trading Signals: TCI ON EURUSD February 2013

Dow Jones Industrial and the Duration of the Bull Market

The Dow Jones Industrial Average (Dow 30) is one of the best stock-market indices to test a technical analysis system. Being such an old index, it offers unique insights from historical data. Recently, the Dow Jones reached a price area near its historical highs. Using both fundamental and technical analysis, we will explore what might happen next. But first, let’s look at the signal.

From a Macroeconomic Point of View

The US economy is in much better shape than two years ago. Growth is steady, unemployment is falling, and confidence in the US financial system is improving. However, two main factors could threaten this positive outlook:

Factor 1: The European Crisis

The European crisis remains a major concern for the global economy. In 2013, Europe is officially in recession, and political instability in Southern Europe made the economic outlook uncertain. For now, the latest chapter of the European crisis (the Cyprus Crisis) seems to be ending, and things in Europe may return to normal in the coming weeks.

Factor 2: A Stronger Dollar

As unemployment falls and the US economy grows, the FED’s focus is shifting toward inflation. US interest rates are likely to rise. Higher US rates, combined with Europe’s weak economy, could strengthen the Dollar against the Euro, possibly down to 1.20 or even 1.00 over the next few years. This could threaten the US economy’s growth. For now, however, the Euro is already oversold against the Dollar and is expected to stay above 1.2900 for some time. So, in the coming weeks, a stronger US Dollar is unlikely to harm the US economy or the Dow Jones Industrial Index.

Read more: Dow Jones Industrial March 2013