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GBP continues to fall against the Euro.
Rightly or wrongly I have the Pound falling in a five wave structure from the recent 1.18 high with an eventual target of 0.96. In this short term wave the pattern seems to be targetting the 1.10/1.107 area which interestingly is slap bang on the line of key support.
If it gets to that area, that will likely complete W1 of 3 down and a rally can be expected perhaps back to the 1.12/3 area and give the impression of a ‘head and shoulders’ forming.
It seems reasonably clear that if key support at 1.10 breaks eventually then a sharp drop to around the 1.02 area will be on the cards.
USDKRW: the Korean Won has been trading sideways in a triangular pattern. Currently it is testing the upper resistance line at 1200/1210 which will complete an exact c=a from the bottom line. With the possibility of Fed interest rate cuts and reasonably strong financial markets over the next year, it makes sense to assume that the Won will rally from the 1200 area perhaps in another three wave move to test the lower trendline again in the 1075 area.
If we do get a period of financial instability in 2021/2 then the USD/Won should break upwards out of the top of the triangular pattern and might have a target in the 1400 area (size of the base added to the breakout of resistance).
I am a seller of USDKRW in the 1200 area (buyer of Korean Won) and looking to close out and go long USD in the 1075 area.
KOSPI: here’s the shorter term chart which appears to show a clean ABC decline from the top at 2600 to the recent low at 2000. Now trying to form a sideways B wave that will probably try to test the 2200 area at least once perhaps twice over the next year.
I’ll be watching for a sell opportunity in the 2200 area. I’m not a buyer for the counter-trend bounce as the risk of mistake is too high.
KOSPI: and in the extreme long term the chart pattern looks like a very large rising wedge thing with lots of overlapping price action.
It’s fairly obvious the potential for a drop to the lower rising trendline at some point in the next couple of years. As an export economy Korea tends to decline during world recessionary periods. With more and more economists predicting a recession in the USA and elsewhere, perhaps this KOSPI chart is warning of more difficult economic times ahead.
KOSPI: naturally living in South Korea I keep an eye on the local financial markets as well as the currency. At the moment I find the KOSPI chart (Korea’s equivalent to the SPX) interesting and worrying.
Here’s the long term chart attached. You can easily see the patterns for yourselves. What’s most interesting is that the decline from 2600 to key support at 2000 was 600 points (perhaps wave ‘A’). Another decline from 2200 of 600 points (for C=A) hits the lower rising trendline. Coincidence, or something waiting to happen?
If this is correct then the current sideways action is a B wave and might need another year or so to run. It might become a flat or a triangle. So for the moment I’m looking for key support at 2000 to hold and for the market to stage a rally back upwards towards 2200.
Unfortunately anything in Korea that is imported from overseas, and anything that is ‘western style’ is very expensive. Local food and products are reasonably priced, but anything ‘western’ is prohibitive.
Going out for dinner in a Korean restaurant is great fun and two people with plenty of food and drinks can get away with about $60.
But go to a ‘western’ restaurant and the situation changes. Mostly they are in the five star hotels. So a decent John Wayne t-bone steak, bottle of red wine etc can come to $300 for two people without even trying.
Zarif, it will be a great pleasure for me to visit you and your lovely family in Chester. And the curry mile? That’s just my sort of place. I do so love Indian food.
Here in Busan we have a few Indian restaurants but unfortunately they are sort of *Indian Korean Style* so not very authentic. We did try a local Indian called ‘Namaste’ but it wasn’t very good – expensive and small portions. There’s a restaurant called ‘Bollywood’ on our main strip and we really must try it – they do an unlimited Buffet Lunch on Sundays for $15. At that price it must be pre-packed rubbish, but we might be pleasantly surprised.
Here’s the Bradley chart for 2019. I’ve learned over time that these are mostly a load of nonsense, but sometimes they can be quite accurate/lucky.
The chart does, broadly speaking, show the sharp rise in the market in the first part of the year. It just about caught the top in May and correctly predicted a sharp drop into June. Might be more luck than judgement of course.
Now the chart shows/suggests a rise into late July/early August. That just about fits with the expectation of a Fed cut in July. And of course it’s better to travel than to arrive, so once the market has eaten up the cut it stops to think ‘why’ and then we get our correction down to Dow 23,000/24,000 in the second half of the year.
Might be a good prediction. Might be nonsense.
Cimac, my Dow chart to 27500 is correct (and it might be a load of rubbish because the market might have peaked already), then really the only route there is via a rising wedge as shown on the attached revised chart.
I certainly wouldn’t bet money on this outcome – I’m happy to sit back and see what develops. But *IF* this idea is correct, the current rise needs to be a ‘three’ so it needs to consolidate/drop a little to form wave (b).
I see little reason for the Fed to cut this week (and I think they’d be irresponsible if they did) so perhaps the market is disappointed by that and drops back a little. However, the market will then focus on the prospect of a cut in July and start to rise again in ‘hope’ phase.
These are just ideas. I’m happy to sit back and wait. Something else entirely might be developing of course.
Those are very beautiful girls Zarif. You must be very proud.
I do so love Indian and Pakistani people. Such nice people. I really must go to India some day.
Sorry, no contact with GWDann. I remember his handle from years ago, but have never had any direct contact.
You live in Chester? Historic place. I live in the city of Busan, Korea’s second largest city on the south coast near Japan. We live in the tallest pure residential building in Asia, and we can see the islands of japan in the distance. 88 floors. We live on the 13th floor thank goodness.
Good morning Zarif. I hope your Father is improving.
Long time no see.
Is that you in your photo with the pretty girls?
EURUSD
This is a rather interesting chart, and what it portrays is confusing and worrying.
Most economists and strategists I follow have been expecting King Dollar to remain strong, partly based on interest rate differentials, and partly on the strength of the US economy. However this chart suggests something else might be happening.
And at the same time economists etc are now changing their tune, arguing for interest rate cuts, recession on the horizon, bond yields going to zero etc etc. Suddenly everything is ‘pointing’ to much lower rates, perhaps even negative yields.
Notice that the chart pattern can be strongly argued as a completed ABC downwards with a triangle in the middle for wave B. If so, then the drop from B to C is exactly the same 35 points as the drop from the peak down to A. So we have a perfect C=A.
And after wave C is that a bullish five wave upwards move? It certainly looks like it. And if so, that must be wave 1 of a bigger five wave pattern that targets a new all time high slightly above 1.60.
If this is all true, the Dollar currently in the 1.13 area will drop 0.47 points or a move of 40%. Is that possible? Does the US economy go into recession, interest rate differentials collapse, and the dollar declines significantly?
SPX detailed analysis:
Black route – A, expanded flat B, C declines to 2590/2610 area
Blue route – simple ABC, where C target is 0.618*A also at the 2590/2610 area.
Top might already be in, now progressing to target 2590/2610 area, OR upper black target at 3010 might be needed first. To my eye the only way it can touch 3010 is via some sort of rising wedge thing.
