The mess is the fact the euro zone (principally Ireland, the UK, Iceland, Spain etc, but the rest were involved as well, it's just they had their own industrial base) grew extremely wealthy on a great fiction - the US expansion based on their housing bubble. The US economic expansion and disintegration has been well documented. I will add it was obvious at the time what was happening, but nobody wanted to see it...
Do you know what this was all like on a geopolitical stage this time - the tech bubble - dubious revenue booked, on balance sheets and in the imagination of investors. It was obvious at the time this was well dodgy, but nobody wanted to see it.
What worries me is the fact there is another little inflationary exercise (all started in recent times by Paul Volcker, some say) going on - the $ carry trade predicated on cheap dollar loans. For many months nobody wanted to see this either, but it was happening. It is why the market mysteriously went up and has now slumped down. The market is at the mercy of the ebb and flow of...money, not investing principles.
*Honestly value the euro zone, what is your own answer - honestly value the US economic zone, what is your answer - which one of those zones has a mighty industrial base and amazing companies ? I do believe there is real growth happening in the US because of this, but it is being masked by the consequence of low interest rates.
As for the euro zone, apart from Germany it is hard to see where there is something for a fundamental valuation to truly hold on to. I will explore this interesting question, it remains open...
***Please note these are analytical comments, as I said I do not give trading advice. But as an analytical observation, when I trade based on analysis, I always look for the technical outlook, trading on fundamentals is a recipe for disaster in leveraged trading, you can be right, but get stopped out (or margin called a few pips from a major turn, the money makers in forex).
A good way of doing this is to look on a 1 day chart, look where the candles are and simply go left on the chart until you find regions of support and resistance in the chart.
These tend to provide support or resistance cascading down the time frames, now. And always look for those spikes, especially on higher time frames (1 day, 4h) they give you a good indication of where the market is in terms of valuation right now.
Once the programs get a sense of valuation they will tend to move in that direction. But note what I said about the different interpretations of spikes. It is best to be dynamic with the forex market in your analysis, because it is a dynamic market.
Let's say the market bounces off a fundamental move on a 1 day support, bounces up to a spike. Look on 30 min, because you have a probable trade, i.e. you have information - look for support structure on the left on 30 min and higher and then check Fibonacci levels. Enter at a level which makes sense for your leverage, but 30 min is recommended by many traders to trade on.
Keep an eye on fundamental changes which can turn the spike into a probe and remember different time frames are more receptive to different fundamental windows, but remember the pressure of higher time frames.
© 2010 Guy Barry - All Rights Reserved.
