Violent reversal

Dominic Picarda

It was all going very nicely at the start of yesterday, with European equities heading in the direction that I had been predicting. The DAX’s action was particularly impressive, even generating a change-of-trend buy-signal on its swing-chart. Then, all hell broke loose in the afternoon, as the reality of Italian political deadlock dawned upon the markets. This was a much-needed reminder that the European crisis has not gone away, but merely papered over with vast amounts of ECB cash.

Once again, though, I would caution against changing tack based on one day’s action, however dramatic. While EURUSD is likely to come under further pressure near-term, I am waiting to see if a proper downtrend in equities establishes itself. For now, I’d content myself with trying to short EURUSD and GBPUSD.

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