European stocks are showing the continuing benefits of the recent euro EUR/USD Rally. A bullish EUR/USD and a positive EU PMI data package provide an excellent outlook for European stock investors.
When you consider that every time there is a European Economic Report that gives us a solid indication that the EUR/USD is going to continue to be bullish, then you would be hard pressed to make a wrong call. However, things are different this time around. Stocks are showing a very strong upward momentum due to some very positive news, not only for the stock market but also for the USD/EUR region.
This past week saw quarterly contract trade volumes grow at a 9% annualized rate over the last six months. This new record volume level has not been experienced by the EUR/USD in a long time. While this is not the fundamental data that will drive the EUR/USD to new highs, it is one of the better indicators.
There is a very large positive component to this news. We have seen the EUR/USD rise by about 50% since early July. And this amount of gain was once considered unusual.
If you are bullish on the EUR/USD, you have to wonder how long one of these records can continue. Allowing for just a single set of numbers to be revised. That is very unlikely. So it is easy to see why the EUR/USD is having trouble sustaining any gains.
Another thing to consider is that the OPEN EUR/USD is now above the recently established long term support level. That means the EUR/USD is at a stage of growth where one small correction could result in one more upside move in the course of the next week or so.
One thing to remember is that technical analysis is not always perfect. It is influenced by the human element. Just as it was when the markets first showed signs of life after the GFC.
In the early days of the markets, people were quick to jump into the charts with their sold trades before they had actually made a trade. In this case, there is nothing wrong with that. The only thing that you should do is keep your trades separated from the market.
Trading from two or three trades is a good place to start trading. You can buy cheap short term EUR/USD (or EUR/CAD) and then dump when the market is consolidating.
Once you have made a couple of trades on a EUR/USD trade, it is a good idea to sell long term trades on a short term trade. Then you can take profits on a profit trade and combine them to trade one short term trade. You can then go back and buy the other three.
In summary, let’s keep one thing in mind – the EUR/USD is going to continue to make gains over the next few weeks. So we can expect the EUR/USD to double at least once this year. It will likely make double over the next four years.
When you consider that over the past twelve months, there has only been one reversal from oversold territory (only three times), then you can see why the market is behaving like it is. This is the first time since January 2020 that the EUR/USD has stopped climbing. So, things are pretty bullish in the Euro area right now.