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Yesterday the EURUSD bearish momentum seemed very limited. The trend line support on daily chart around 1.4695/1.4703 level should be the key level at this phase. A break to the downside could trigger further bearish scenario towards 1.4590. Initial resistance is seen at 1.4757 followed by 1.4807. CCI in neutral area on daily chart.
EURUSD Daily Supports and Resistances:
S1= 1.4696
S2= 1.4639
S3= 1.4584
R1= 1.4808
R2= 1.4863
R3= 1.4920
GBPUSD Outlook Yesterday the GBPUSD made indecisive movement by opened and closed at almost the same price (1.8518 and 1.8526). My model goes mixed with neutral bias. Immediate support is seen at 1.8450 followed by 1.8405. CCI seems rejecting the -100 line on 4h and daily chart suggesting the pair might have a strong support area at this phase. However, I think the pressure to the downside is not over yet.
GBPUSD Daily Supports and Resistances:
S1= 1.8424
S2= 1.8322
S3= 1.8239
R1= 1.8609
R2= 1.8692
R3= 1.8794
USDJPY Outlook The USDJPY bullish momentum was rejected yesterday. The pair bottomed at 109.02 and closed at 109.30. Resistance level at 110.66 area seems to be a key level at this phase. My model goes mixed with neutral bias. Immediate support is seen at 108.90 followed by 108.50. Initial resistance at 109.80. CCI in neutral area on all 3 time frames (hourly, 4h, daily).
USDJPY Daily Supports and Resistances:
S1= 108.78
S2= 108.27
S3= 107.52
R1= 110.04
R2= 110.79
R3= 111.30
USDCHF Outlook The USDCHF is moving in ranging market between 1.1030 and 1.0840. We need a breakout to find a clearer direction. Immediate support is seen at 1.0950 followed by 1.0920. Initial resistance at 1.1030. An upside break from that level could trigger further bullish scenario towards 1.1105 area. CCI in neutral area in all 3 time frames (hourly, 4h, daily).
USDCHF Daily Supports and Resistances:
S1= 1.0907
S2= 1.0860
S3= 1.0798
R1= 1.1016
R2= 1.1078
R3= 1.1125
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Tue, 26th of August, 2008 By Setyo Wibowo (analyst@fxinstructor.com)
EURUSD Outlook Yesterday the EURUSD bearish momentum seemed very limited. The trend line support on daily chart around 1.4695/1.4703 level should be the key level at this phase. A break to the downside could trigger further bearish scenario towards 1.4590. Initial resistance is seen at 1.4757 followed by 1.4807. CCI in neutral area on daily chart.
EURUSD Daily Supports and Resistances:
S1= 1.4696
S2= 1.4639
S3= 1.4584
R1= 1.4808
R2= 1.4863
R3= 1.4920
GBPUSD Outlook Yesterday the GBPUSD made indecisive movement by opened and closed at almost the same price (1.8518 and 1.8526). My model goes mixed with neutral bias. Immediate support is seen at 1.8450 followed by 1.8405. CCI seems rejecting the -100 line on 4h and daily chart suggesting the pair might have a strong support area at this phase. However, I think the pressure to the downside is not over yet.
GBPUSD Daily Supports and Resistances:
S1= 1.8424
S2= 1.8322
S3= 1.8239
R1= 1.8609
R2= 1.8692
R3= 1.8794
USDJPY Outlook The USDJPY bullish momentum was rejected yesterday. The pair bottomed at 109.02 and closed at 109.30. Resistance level at 110.66 area seems to be a key level at this phase. My model goes mixed with neutral bias. Immediate support is seen at 108.90 followed by 108.50. Initial resistance at 109.80. CCI in neutral area on all 3 time frames (hourly, 4h, daily).
USDJPY Daily Supports and Resistances:
S1= 108.78
S2= 108.27
S3= 107.52
R1= 110.04
R2= 110.79
R3= 111.30
USDCHF Outlook The USDCHF is moving in ranging market between 1.1030 and 1.0840. We need a breakout to find a clearer direction. Immediate support is seen at 1.0950 followed by 1.0920. Initial resistance at 1.1030. An upside break from that level could trigger further bullish scenario towards 1.1105 area. CCI in neutral area in all 3 time frames (hourly, 4h, daily).
USDCHF Daily Supports and Resistances:
S1= 1.0907
S2= 1.0860
S3= 1.0798
R1= 1.1016
R2= 1.1078
R3= 1.1125
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ForexGen offers Forex trading in the major currency pairs and crosses.
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USD-CHF @ 1.0984/88... Resistance at 1.1035 held again. -------------------------------------------- R: 1.1000-25 / 1.1040-50 / 1.1100 S: 1.0975-50 / 1.0900-880 / 1.0850 / 1.0800 A rise in the pair has once again been restricted to 1.1035, where it faces a strong Resistance. Since then, a dip towards 1.097 has been seen.
Later in the day, expect a further dip towards 1.0955 where the pair has some Support and a rise from there could be seen once again to test the Resistance. A sip below 1.09, unlikely for now, could attract buying interest in the 1.0840 region.
GBP-USD @ 1.8495/99... Could rise towards 1.8564 ------------------------------------------------ R: 1.8500 / 1.8560-80 / 1.8620-60 S: 1.8420 / 1.8365-50 / 1.8300 A small rise since morning has been seen in the pair. For the day, Cable could see a further rise towards the Max High for the day at 1.8564. The Support at 1.8480 is essential for the rise towards 1.8564 to materialize.
Overall the pair continues to remain in a downtrend and is expected to slide further towards 1.83 in the days to come. The UK economy has seen no growth in the last quarter and could continue to face further growth related and housing related issues.
BOE has still not shifted focus from inflation to growth. However, now there could be some rate-cutting action in the days to come, which could eventually take the pair further lower.
AUD-USD @ 0.8674/78... Could rise towards 0.88 ------------------------------------------- R: 0.8721 / 0.8765 / 0.8800 / 0.8850-65 S: 0.8650-25 / 0.8600 / 0.8581 Aussie had faced major Resistance on a rise to 0.88 last week. However, since then a fall towards 0.8614 has been seen. For the day ahead, a rise towards 0.8721, Max High for the day could be seen. Similarly a further rise towards 0.8750-0.88 cannot be ruled out completely as the Moving Averages are flat and indicating towards the possibility of a rise again.
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The Dollar surged on Friday, recovering from the previous day's losses, as gloomy British growth data backed views of a slowing global economy and raised prospects of interest rate cuts outside the United States. A sharp drop in US crude oil prices to below $115 per barrel and comments by influential investor Warren Buffett that he has no bets against the Dollar also added to the US currency's upward momentum. Federal Reserve Chairman Ben Bernanke's comments that a stable Dollar and falling commodities should help slow inflation this year and next. His remarks on Friday prompted analysts to reduce expectations of a US interest rate increase this year.
News and Events:
The Dollar surged on Friday, recovering from the previous day's losses, as gloomy British growth data backed views of a slowing global economy and raised prospects of interest rate cuts outside the United States.
A sharp drop in US crude oil prices to below $115 per barrel and comments by influential investor Warren Buffett that he has no bets against the Dollar also added to the US currency's upward momentum.
UK data showed the British economy stalled on Q2, suggesting a recession might be looming, and added to the outlook of a slowing European economy. It raised the possibility of European Central Bank and Bank of England monetary easing.
EurUsd dropped to a session low of 1.4758, edging toward a six-month low hit earlier last week at 1.4631. It was last trading at 1.4788, down 0.68%. UsdJpy jumped 1.52% to 110.09. GbpUsd dropped 1.32% to 1.8517. UsdChf rose 1.06% to 1.0988.
Federal Reserve Chairman Ben Bernanke's comments that a stable Dollar and falling commodities should help slow inflation this year and next. Bernanke's remarks at an annual Fed symposium in Jackson Hole, Wyoming, prompted analysts to reduce expectations of a US interest rate increase this year, which could diminish the Dollar's appeal to investors. But analysts said even without an interest rate hike this year, the Dollar would probably continue to recover.
Persistent problems at US mortgage finance companies Fannie Mae and Freddie Mac and speculation over the future of investment bank Lehman Brothers could make the road to recovery difficult.
Today's Key Issues (time in GMT):
00:00 GBP Market Holiday 07:30 DKK August Consumer confidence -8 vs -9.7 07:30 SEK July Trade balance 8.2b (mom) 09:00 EUR June Industrial new orders -6.3% vs -4.4% (yoy) 12:30 USD July National Activity Index -0.6 14:00 USD Existing home sale 4.92m vs 4.86m 22:45 NZD Merchandise trade 4b vs 3.81b 22:45 NZD Merchandise trade – expo 3.44b vs 3.59 22:45 NZD Trade Balance Month -526m vs -223m 22:45 NZD Trade Balance Year -4.2b vs -4.48b
The Risk Today:
EurUsd: Market dropped as low as 1.4631 last week, new initial support. Further weakness will put the focus on strong support 1.4366 22nd January low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.
GbpUsd: Cable hit 2.0158 high 6-weeks ago and 1.8505 low last Friday. On the downside, further weakness would open the way down to 1.8395 end July 2006 low and maybe 1.8091 June 2006 low. Initial support holds 1.8414 today low. On the upside, initial resistance holds 1.8795 last week high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.
UsdJpy: Last 6-weeks recovery pushed the market up to 110.67 high. Further advance would open the way toward 111.92 early January high. On the downside, a return below 108.59 former resistance and 108.14 last week low will undermine the current advance. Profit taking might bring back down to 105 level and may open the way toward 102.73 support and 100 pivot point. Initial support holds 108.14 Thursday low.
UsdChf: Continuous Dollar strength consolidated over 1.0800 last week and hit 1.1041 6-months high on last Wednesday. Initial resistance holds 1.1107 13th February high. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.
Resistance and Support:
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You can determine the expected strengthening or weakening of each currency and display the result by currency pair to form a fundamental context of each currency trade. Economic Surprise Index charts use cumulative weekly unexpected surprises from over 500+ daily economic events from eight countries that determine the magnitude and direction of the unexpected surprise component of news announcements.
ESI charts are independent of price, and are a leading indicator of price because they determine the expected strengthening or weakening of a currency pair using a standardized measure of how much and in what direction a country’s economic announcements are moving.
Shown below are the ESI and price charts for the USD/JPY. The ESI context of the trade changed in favor of the USD in March 2008, thus strengthening the USD/JPY. ESI charts display the cumulative unexpected economic surprises of a specific currency pair. You can also determine expected currency pair strengthening or weakening between any two points on the chart as of any given Friday throughout the year. For a more complete explanation of ESI charts and their usage, email info@quartustrading.com, Subject: ESI
Using the available Excel workbook, you can make, display, and print ESI charts for all currency pair from Australia, Canada, the European Union, Japan, New Zealand, Switzerland, the U.K., and the U.S. Select 2, 3, or 4 month cumulative surprises from over 500+ daily economic events formed as the news is released. Choose your own events from each country or use the supplied event lists. Also in the ESI workbook are standardized unexpected event or SUE scales for each of the 500+ announcements that you can print as a visual aid for trading the news. A weekly one hour workbook usage webinar is available free to subscribers.
Best regards and good trading, Quartus Trading LLC
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ForexGen offers Forex trading in the major currency pairs and crosses.
Low capital start, with $250 as a minimum account size.
Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.
ForexGen offers a free trial Forex demo account that allows you to test your skills and practice without risking real money.
Technical analysis-Comments G. Antonakos Head of Analysis Dept.
DISCLAIMER
1. The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market.
2. We assume no responsibility for any kind of losses, profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions.
3. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action.
4. We reserve the right to change the terms and the characteristics of the analysis.
5. The contents of the analysis are solely intended for personal use. They may not be re-transmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights
Why ForexGen?
Lowest spreads in the market with 0-1 pips in 10 pairs, no commissions, no swaps and instant account Activation.
Scandinavian quality with Swiss precision, funds secured and local agents in 18+ countries.
ForexGen offers Forex trading in the major currency pairs and crosses.
Low capital start, with $250 as a minimum account size.
Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.
ForexGen offers a free trial Forex demo account that allows you to test your skills and practice without risking real money.
Technical analysis-Comments G. Antonakos Head of Analysis Dept.
DISCLAIMER
1. The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market.
2. We assume no responsibility for any kind of losses, profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions.
3. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action.
4. We reserve the right to change the terms and the characteristics of the analysis.
5. The contents of the analysis are solely intended for personal use. They may not be re-transmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights
Why ForexGen?
Lowest spreads in the market with 0-1 pips in 10 pairs, no commissions, no swaps and instant account Activation.
Scandinavian quality with Swiss precision, funds secured and local agents in 18+ countries.
ForexGen offers Forex trading in the major currency pairs and crosses.
Low capital start, with $250 as a minimum account size.
Liquidity and 24/5 availability are the characteristic factors of the Forex market compared with other financial markets.
ForexGen offers a free trial Forex demo account that allows you to test your skills and practice without risking real money.
Mixed Performance of Euro zone and Satisfied data from US economy last week has let Euro to take satway Trend, where higher fuel price is a bitter experience for the Global Economic Growth.This week data from Euro would release saying Business conditions are shivering but still expecting for a better future, US got improvement in housing sector which is making greenish in consumer sentiment with good forecast as last Quarter GDP increased and forecast is higher.
Heads n Shoulders.
In weekly chart the clear "Head n Shoulder" would be interesting Trend. Before Euro rise back to 1.5 ish, it would fall to 1.4513 followed by 1.4279.
Can you grade one level of support relative to another? Is a pause at a specific price point more important today than the same support level a month ago or 6 months ago? I think that there are ways to estimate one support level as more important than another. A good example is what is going on right now on the AUD/USD. Clearly we are at a long term support level having been here before in December and January during the last disruption in oil prices. However, what else is true is that we are at a level of extreme price movement based on a reading from the CCI or commodity channel index.
I use technical indicators like the CCI to grade support and resistance levels. When support coincides with a historically low level on the CCI where the market has reversed significantly before, I take note. That is the situation now. Support in the price action on the AUD/USD is occuring at the same time that we are clearing an extreme reading on the CCI. I have found that this is a good indicator that a continued trend is at risk and a bounce may occur.
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Comment : Euro formed an upward reaction last week, after the lows at 1.4600 area, reaching the area of 1.4900 on Thursday. Bears gained momentum at those levels, as expected, and euro was led towards 1.4700 area again. A move resumption to lower levels is possible, as we will see in the chart analysis below. After such a sharp decline, which didn’t give much opportunity to be followed, the first reaction towards 1.4900-1.5000 was expected to meet sellers, as we had mentioned in our analysis last week. We should keep in mind that the target that emerges from the double top formation, which was breached downwards, is found at 1.4500-50 area, while the basic trend line that links 2005 lows is reached at 1.4450 area.As we have mentioned in our previous analysis, the ranges for the decline are found at 1.4550 area, and the most extreme scenario-according to current facts- would be a reach of 1.4300 area. The most likely scenario would be a formation of an important low between 1.4450 and 1.4550. From those levels, a correction (from 1.6040 tops) around 38.2% and 50% would be possible and a retracement to the previous base of 1.5300, which should be tested as resistance, is likely. For the time being, the downward move is been continued from the 1.4900 reaction, and first targets are set at 1.4660-70 and 1.4620-40. A move to new lows will lead euro to the first important target area (1.4500-50), followed by the area of 1.4430-50. Intraday resistance emerges at 1.4760-70 and 1.4800-25, which is more important. This negative outlook will change after a move above Thursday’s tops at 1.4910…
TRADING EUR/USD SWING TRADING : Sell positions, that were opened at the retracement towards 1.4900, where our first targets were set, could have as first target a pullback to 1.4630 lows. The upper part could remain open for the reach of the basic targets at 1.4550 area. Below those levels buy opportunities will emerge for the short term, adding positions per 50-70 pips until 1.4370-00 area, with stops below 1.4300. First target will be at 1.5000 and according to the conditions that will be formed, we will follow until 1.5200-5300 area. INTRADAY TRADING : The short term trend after the reach of 1.4900 is bearish and should remain at least until the area of 1,4660-80 or 1,4600-30. We will use the first reaction towards the middle Bollinger in the hourly chart for intraday sell positions, adding more at 1.4790-4805, and stops above 1,4835. Short term (small) buy positions could be tried at 1,4660-70 and 1,4630-40 support levels, with tight stops and targets.
Comment : The beginning of the week finds the pound still weak, as the decline was continued on Friday, below the important support levels of 1.8500. Our targets are set at 1.8300-5, where our target after the break of the big consolidation (we can see it in the daily chart) and the two equal waves from 2007 tops (AB and CD in the daily chart) are found. As a result, after a move below 1.8350 area, we will examine the formation of an important short term low scenario. We will abandon this scenario after a move below 1.8270, and if these levels are breached, next important targets are set at 1.8000. This would be an extreme but yet possible short term scenario… Important intraday resistance is found at 1,8500-30 and 1,8580-8610, which is more important.
TRADING GBP/USD : The sharp decline on Friday was continued in the beginning of the week, leading to the 1.8400 area. For the short term, we will use any reaction towards 1.8500-30 area for sell positions with stops above 1.8560 and target at a retracement to previous lows. Sell orders could be tried again at 1,8590-8610 with stops above 1,8650… A move below 1,8350 will be used for buy positions, adding more at 1,8300 and stops below 1.8250. Our target for these positions will be wider at 1,8900-1,9000…
USD/JPY
You can find the complete analysis at the pdf...
Technical analysis-Comments G. Antonakos Head of Analysis Dept.
DISCLAIMER 1. The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market.
2. We assume no responsibility for any kind of losses, profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions.
3. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action.
4. We reserve the right to change the terms and the characteristics of the analysis.
5. The contents of the analysis are solely intended for personal use. They may not be retransmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights
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After some trend continuation on the USD and Oil on Friday, Asia made a break of support on most USD pairs leaving London wondering where to go. Being a holiday in England was already going to reduce liquidity and without nearby support or resistance, some time was needed to lay some framework for a trade plan.
Watching the Majors closely we were able to find these clues. In this video I focus on just one of these plans involving the GBP/USD. After a series higher lows, cable showed a break of the 15m 21ema. Once this occurred we did a Fibonacci study and simply awaited some level of confirmation on a 1m chart in the 38.2-61.8 range. Sure enough within 30 minutes this entry presented itself in the mid 1.9420's.
As for profit targeting it was quite simple. A retest of previous support now resistance at 1.8500-8510, which also happened to be the hourly 21 was our first real stop. So ultimately we were risking maybe 15 pips for a 75 pippish goal from our fib entry, certainly a quality risk vs. reward setup. Although it seemed to take literally forever to play out, there was never a reason to get out. Slowly we 'Rode the 5ema' and made our way to the 1.8520 area before abruptly returning to 1.9485 or so (another fib). Boring night for sure, but a decent 65-95 pip move even from the fib area here made the waiting well worth it.
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Friday's strong reversal was due to a double hit of much weaker commodity prices (as global concerns begin to cool off) and a Bernanke inspired rally on the USD. The Fed chief seemed to indicate that the Fed is ready to fight inflation in the future as oil prices decline and the USD stabilizes. Those are mighty bold statements since forecasting energy prices and the USD that far in advance seems a little speculative but nonetheless, traders liked what he had to say. Equities surged, followed by the USD and a weak JPY. Overall, across the majors it was as though Thursday's price action had not even occurred. Risk still seems high and clearly volatility will give most traders a rough time in the near term.
PREVIEW: 25 AUGUST 2008
We start the week with Trade in New Zealand and start looking forward to the remaining economic announcements including FOMC minutes and GDP in the US. If there is one thing we can count on, it is volatility. Therefore, traders should be watching the intermarket environment for signs of trouble. In particular I think we should be paying attention to equity prices. Despite the dramatic reversal in favor of a weak JPY, equities are still trapped within a consolidation pattern and face a significant prior down trendPFX Forex Trading Outlook
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Gold hit the resistance area on Friday that was highlighted in our analysis, and along with a big drop in oil prices, pushed Eur/Usd lower. The euro now starts the week around 1.4700. The market may try to trade lower this week if the price of gold and oil continue their decline, and that may be lead by sentiment initially, but fed by a week of important U.S. based economic data. The moves on the euro automatically equate to new highs on Usd/Chf which bounced from the trend-line support that we have been looking at in recent posts, on Friday. We have an update on the one hour chart swissy chart, and have gone to the weekly oil chart to really get to the bottom of the technical story on oil. After all, who needs headlines when we have daily Elliott Wave analysis on the movers of the market?
OIL
Most currency pairs are highly correlated with Oil and Gold, they have to be in the respect that over 90% of all currency tickets has the Usd on one side of then or the other, as the Usd is the currency that international markets price oil in, traders should be watching commodities closely to find the right way on euro or swissy trends. We have kept this chart simple because that is the way that we like most charts to be; we have four clear waves with wave five to come. The chart is looking for technical support in wave four on Oil, which should slow down the short moves on Eur/Usd and push the Usd/Chf lower. Before that, we may need to see...
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8/25/2008 – EUR/GBP – Price on the EUR/GBP pair (a daily chart of which is shown) has reached the very top resistance line of a large symmetrical triangle consolidation that has been forming since late March. Each side of this triangle (represented on the chart by the yellow converging lines) has been touched by price around three times during the triangle’s life. Now that price action has reached the top of the triangle once again, oscillators like the displayed Stochastics are indicating severely overbought conditions, but not yet turning down. In the event that price turns down at or near triangle resistance, clear support to the downside resides around the bottom of the triangle. A clean breakout of triangle resistance, on the other hand, should target immediate further resistance around the 0.8030 region.
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The fall of the euro from the heights does not mean that traders have resigned from recent currency history. Even after its unprecedented fall the united currency has only now returned to the middle of its rising trend against the dollar that has prevailed for six and a half years, since early 2002.
Very little in the Eurozone economic situation or world economic history had warranted the euro’s presence north of 1.5500. But nothing in the United States present economic condition indicates that it has broken its long term disability against the euro.
The Eurozone economies were never as immune to the sub prime contagion as dollar detractors proclaimed. And they have proven equally susceptible if not more to economic damage from high energy prices. But neither is the United States bound to respond to 325 basis points of central bank rate reductions with its usual vigor and in the normal time frame of six months to a year.
The old scenario which had the European Monetary Union (EMU) proceeding with moderate economic growth and a steady or hiking European Central Bank (ECB) paired with a recessionary America and an easing Federal Reserve has been abandoned. The new assumption has the benefit of initial proof, negative GDP in the Eurozone second quarter and positive US results, but it is essentially untested.
The American economy retains considerable known problems: the prolonged housing slump, the drag from gasoline and energy prices, the contraction of commercial credit; and several dangerous unknowns: the possibility of large failures in the financial system, a return to $140 or higher oil prices, and the degree to which the economy was bolstered by the Federal cash stimulus in the second quarter. Any one or combination of these could easily derail what positive economic momentum exists in the US. There is also the uncertainty attached to the presidential election and the candidates’ competing and quite different economic prescriptions. The proposed economic plans of each party stress voter friendly initiatives; few will be good for the dollar.
The ECB governors seem a bit surprised that mundane economic reality still applies to them. It was a scant three months ago when government and central bank officials were proclaiming their expectations for continued moderate economic growth in 2008. The Europeans have their share of problems as well. If the two major countries, Germany and France are not suffering the aftermath of a real estate bubble, that is not true of some of the smaller members, primarily Spain and Ireland. Energy costs are as great a drag on economic well being as they are in the States and they certainly have a greater effect on consumer outlook and spending. Russia, newly assertive and unmistakably threatening, sits astride European energy supplies, supplies for which there are no domestic alternatives. Finally any worldwide financial catastrophes will leave casualties in Europe, Asia, and America equally.
The change in economic outlook in the EMU has been enough to boost the dollar substantially as it put paid to unrealistic expectations for European autarky.
It is now the US economy that is expected to sustain a recovery first, or at least to grow faster than its European counterpart. Neither central bank is in a position to change its rate policy.
The ECB is constrained by inflation, its own rhetorical history, and institutional credibility. The members of the ECB governing board and President Trichet are intelligent, analytical and persuasive individuals. In setting a public inflation target they and their predecessors had to have known that a time might come when they would be forced to choose between inflation control and economic growth. That time is now. If the pending recession, which Trichet warned about six weeks ago, could not prompt an adjustment of ECB policy, another quarter of negative growth will not do so.
Likewise, the Federal Reserve cannot raise rates to combat 5.6% inflation. The US economy is weak, 2nd quarter GDP notwithstanding, with glaring vulnerabilities in finance and energy costs. For the next few months central bank rate policy is not likely to be the determining factor in the relation between the euro and the dollar.
The debunking of one unrealistic assumption in Europe does not mean another, almost equally unrealistic, the return of the US to robust growth, is about to happen. From November until February the market traded back and forth between 1.4400 and 1.4900. That is precisely the position now. A prolonged muddle could be ahead while traders wait for statistics to resolve their questions. The dollar run is not over, but its continuation will require further proof. An extension of dollar strength will have to go quite a bit further, to below 1.4000, before its six year fall against the euro can be broken. That is not a project that will be completed in the next few months.
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Because the markets are largely sitting on key support and resistance levels right now it makes technicals much more important and critical than some of the fundamentals we may normally be interested in. Market sentiment at these levels can be extremely volatile so I am watching those announcements that are likely to have the biggest impact on forex traders in the short term.
From that perspective it is tempting to get a little over focused on the USD, and with GDP and FOMC releases due this week that temptation is somewhat justified. Traders in general have been increasing their outlook for growth in the US recently as evidenced by the trend in equities. If the GDP prelim. numbers or consumer confidence or even the FOMC minutes appear soft we could get a rejection at resistance on the USD and therefore a continued reversal across the majors. Check out the video for our take on the rest of the week's news and what we think will matter most.
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EURUSD Outlook The EURUSD failed to maintain it’s bullish correctional momentum on Friday. The pair bottomed at 1.4757 and closed at 1.4792 and the bullish channel on hourly and 4h chart was violated to the downside. The pair continued it’s bearish momentum early today in Asian market, traded around 1.4735 at the time I wrote this comment. My model goes mixed with downside bias. Immediate support is seen at 1.4675. Initial resistance at 1.4795. CCI heading down towards -100 line on 4h chart.
EURUSD Daily Supports and Resistances:
S1= 1.4733
S2= 1.4674
S3= 1.4591
R1= 1.4875
R2= 1.4958
R3= 1.5017
GBPUSD Outlook The Sterling slumped against Greenback on Friday. GBPUSD failed to continue the upside correctional move and violated the bullish channel on hourly and 4h chart. The pair bottomed at 1.8504 and closed at 1.8529. Early today in Asian market the pair is traded around 1.8440 at the time I wrote this comment. My model is mixed with downside bias. Immediate support is seen at 1.8380. Initial resistance at 1.8520. CCI about to cross -100 line down on daily chart suggesting a potential bearish view.
GBPUSD Daily Supports and Resistances:
S1= 1.8428
S2= 1.8328
S3= 1.8152
R1= 1.8704
R2= 1.8880
R3= 1.8980
USDJPY Outlook The USDJPY back to it’s bullish trend on Friday. The pair topped at 110.14 and closed at 110.07. My model goes mixed with upside bias. Immediate support is seen at 109.80 followed by 109.50. Initial resistance at 110.66. CCI heading up towards 100 line on daily chart.
USDJPY Daily Supports and Resistances:
S1= 108.94
S2= 107.82
S3= 107.22
R1= 110.66
R2= 111.26
R3= 112.38
USDCHF Outlook The Swiss Franc slumped against Greenback on Friday. The pair topped at 1.0997 and closed at 1.0984. My model goes mixed with upside bias. Immediate support is seen at 1.0930. Initial resistance at 1.1040 followed by 1.1105. CCI in neutral area on daily chart.
USDCHF Daily Supports and Resistances:
S1= 1.0898
S2= 1.0812
S3= 1.0763
R1= 1.1033
R2= 1.1082
R3= 1.1168
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Investors hunt Yen and Swiss Franc on renewed US Financial worries.
News and Events:
The Dollar fell broadly on Thursday as worries of wider credit-related losses at some US financial firms made investors abandon risky trades, starting a rally in the Yen and Swiss Franc. They tend to attract flows during periods of uncertainty as the low interest rates reflect the capital surplus of their respective countries.
Worries over the US financial sector were back on investors' radar screen, with Citigroup cutting its Q3 earnings estimates for Lehman Brothers. It also lowered estimates for Goldman Sachs Group, Merrill Lynch & Co Inc, and Morgan Stanley, citing expected losses on hard-to-sell assets and lower client trading volumes.
ECB policymaker Klaus Liebscher said on Thursday that euro zone growth was expected to come in at the bottom end of expectations this year but an all-out recession in the region was highly unlikely.
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The Usd continued to decline in the Asian session as worries over the US financial markets and surging crude prices weighed on the Dollar sentiment. The EurUsd climbed to the 1.4900 levels, before retracing slightly to 1.4876, while the UsdJpy declined and is now trading at 108.90. Crude rose across the board, with wti moving up $5.00, above $120.00bll. With concerns of a production cut swirling around the September 9th OPEC's meeting and Wednesday’s inventories lower than expected still lingering, crude has picked up a bullish tone. And given the high level of the Usd this commodity will be the prime driver in currency pricing today. In addition, 5-year swap spreads are now hoving around 100bp, the widest level since the Bear Stern disaster and before that you would have to go to 2001 and the equity market collapse to find spreads this wide. A gloomy sign if ever was one. Outside Bernanke’s scheduled speech in Wyoming (given the uncertainty surrounding the financial market, traders will be on a heightened state of alert) the market will be without any real events or data releases, so traders should be particularly aware of price-action in other assets classes.
Daily Forex Pivot Point AUDUSD R 3: 0.8846 R 2: 0.8797 R 1: 0.8757 CURRENT: 0.8735 S 1: 0.8626 S 2: 0.8593 S 3: 0.8503
EURJPY R 3: 163.88 R 2: 163.10 R 1: 162.39 CURRENT: 162.07 S 1: 160.88 S 2: 160.14 S 3: 158.61
USDSGD R 3: 1.4265 R 2: 1.4219 R 1: 1.4201 CURRENT: 1.4082 S 1: 1.4025 S 2: 1.3891 S 3: 1.3819
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EURUSD Outlook Yesterday the daily CCI gave us a valid warning about an upside correction potential of EURUSD. The pair topped at 1.4907 and closed at 1.4896. I am expecting further upside scenario towards 1.4975. We have a valid bullish channel on hourly and 4h chart. As long as these channels are not violated we still have a potential further bullish scenario. Immediate support is seen at 1.4820 followed by 1.4750. Initial resistance at 1.4925 followed by 1.4975. CCI just cross 100 line down on hourly chart and in overbought area on 4h chart suggesting a downside risks as the pair is traded near the bullish channel resistance line.
EURUSD Daily Supports and Resistances:
S1= 1.4782
S2= 1.4668
S3= 1.4606
R1= 1.4958
R2= 1.5020
R3= 1.5134
GBPUSD Outlook Yesterday the Sterling recovered against Greenback. The GBPUSD was corrected higher, topped at 1.8793 and closed at 1.8776. Technically this fact open the door for a further upside correction move towards 1.8960 area. Immediate support is seen at 1.8740 followed by 1.8666. Initial resistance at 1.8850. We have a valid bullish channel on hourly and 4h chart. As long as these channels are not violated we still have a potential further bullish correction scenario. CCI just cross 100 line down on hourly chart and in overbought area on 4h chart suggesting a downside risks towards bullish channel support line.
GBPUSD Daily Supports and Resistances:
S1= 1.8657
S2= 1.8539
S3= 1.8471
R1= 1.8843
R2= 1.8911
R3= 1.9029
USDJPY Outlook Yesterday the Greenback slumped against Japanese Yen. The pair bottomed at 108.13 and closed at 108.47. My model is mixed with downside bias. A consistent move below 108.50 would open the door towards 107.35. Immediate support is seen at 108.11. Initial resistance at 108.90 followed by 109.50. CCI about to cross -100 line up on 4h chart suggesting an upside risks.
USDJPY Daily Supports and Resistances:
S1= 107.79
S2= 107.11
S3= 106.10
R1= 109.48
R2= 110.49
R3= 111.17
USDCHF Outlook Like all other major currencies, yesterday the Swiss Franc was traded stronger against Greenback. The pair breakout to the downside from ranging area, bottomed at 1.0842 and closed at 1.0864. My model is mixed with downside bias. Immediate support is seen at 1.0828. Initial resistance at 1.0896 followed by 1.0930. CCI about to cross -100 line up on 4h chart suggesting an upside risks.
USDCHF Daily Supports and Resistances:
S1= 1.0805
S2= 1.0746
S3= 1.0651
R1= 1.0959
R2= 1.1054
R3= 1.1113
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Market is looking for Euro-zone and Britain for more evidence of slowing growth.
News and Events:
The Dollar rose on Wednesday, reversing a two-day losing markets, supported by views that slowing global economic growth would prompt a wave of interest rate cuts outside the United States. It gained in quiet trade despite a rebound in Crude Oil prices to $115.51 a barrel.
Data from Europe and Japan are increasingly pointing to deterioration in the growth outlook for those regions, leading investors to anticipate early rate cuts from both the European Central Bank and the Bank of England.
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Forex Market Overview 21 August 2008 The Usd was weaker across the board in the Asian session, as continued concerns over Fannie and Freddie weight on sentiment. The EurUsd climbed from 1.4741 to 1.4812, while the UsdJpy fell sharply from 109.90 to 108.79. The GbpUsd traded in a 1.8620 to 1.8669 range, before breaking out in late session trading. The Jpy fueled carry trades continued to come under selling pressure, as risk aversion has crept back, with the EurJpy trading down to 161.07 and the AudJpy to 95.06. Wall Street closed in the black, but Asian regional indexes have been unable to hold on to the positive momentum, with loses across the board. European stock indexes are all pointing to a lower opening, with the exception of the FTSE. Crude & Gold continued to gain ground (pressuring Usd) with wti trading at $116.83bll and gold up 0.93% to $821.28oz.
The Japanese trade balance was only 91.1bn vs. 234.9bn exp, as import value grew (18.2% y/y) driven by oil related-price increases. It's interesting to note that exports to Asia grew, while US and Europe destined exports remained weak. Machine Tool Orders dropped -8.9% vs. -8.9% prior reading.
On the continent, the market will be watching Eurozone's PMI surveys for continued evidence of deteriorating business activity. Should the figures come in line with market expectations, this will suggest that the region is in the midst of a technical recession. Sharp declines were printed in July for both manufacturing and service PMI for the second consecutive month.
In the UK, the market will be focused on Retail Sales. With CBI's falling off the map to lows not seen since 1983 and with the BRC's measure that also fell, we expected retail sales to follow…however not to dire levels.
Daily Forex Pivot Point AUDUSD R 3: 0.8846 R 2: 0.8797 R 1: 0.8757 CURRENT: 0.8750 S 1: 0.8626 S 2: 0.8593 S 3: 0.8503
EURJPY R 3: 163.88 R 2: 163.10 R 1: 162.39 CURRENT: 161.04 S 1: 160.88 S 2: 160.14 S 3: 158.61
USDSGD R 3: 1.4265 R 2: 1.4219 R 1: 1.4201 CURRENT: 1.4102 S 1: 1.4025 S 2: 1.3891 S 3: 1.3819
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EURUSD Outlook Yesterday the EURUSD attempted to push lower, bottomed at 1.4672, but failed to continue this bearish momentum by closed higher at 1.4743. Early today in Asian market, the pair is traded around 1.4780 at the time I wrote this comment. The pair is making a new soft bullish channel and CCI about to cross 100 line up suggesting a possibility of another soft bullish correction on 4h chart. My model goes mixed with neutral bias. Immediate support is seen at 1.4720 followed by 1.4672 (yesterday’s low). Initial resistance at 1.4820 followed by 1.4875. CCI just cross -100 line up on daily chart suggesting a potential bullish correction.
EURUSD Daily Supports and Resistances:
S1= 1.4674
S2= 1.4606
S3= 1.4540
R1= 1.4808
R2= 1.4874
R3= 1.4942
GBPUSD Outlook Similar to EURUSD, yesterday the GBPUSD attempted to go lower, bottomed at 1.8539 but closed higher at 1.8613. We have a ranging market between 1.8722 and 1.8536 on 4h chart from the beginning of this week and need a breakout. I am expecting an upside breakout as a correctional move at least at 1.8750 resistance level since we don’t have a significant upside correction so far. Immediate support is seen at 1.8580. CCI just cross -100 line up on daily chart suggesting a potential bullish correction. Eyes on UK Retail Sales data today.
GBPUSD Daily Supports and Resistances:
S1= 1.8540
S2= 1.8467
S3= 1.8396
R1= 1.8684
R2= 1.8755
R3= 1.8828
USDJPY Outlook Yesterday the USDJPY made no significant movement. The pair topped at 110.27 and bottomed at 109.60. My model remains mixed with neutral bias. We have a soft bearish channel on 4h chart and CCI just cross -100 line down suggesting a soft bearish correction potential. Immediate support is seen at 109.30 followed by 108.50. Initial resistance at 110.27 (yesterday’s high).
USDJPY Daily Supports and Resistances:
S1= 109.54
S2= 109.23
S3= 108.87
R1= 110.21
R2= 110.57
R3= 110.88
USDCHF Outlook Yesterday the Swiss Franc wad traded weaker against Greenback. The pair topped at 1.1039 and closed at 1.0985. We have a ranging market between 1.0872 and 1.1039 since 14/08/2008. My model is mixed with neutral bias. Any breakout from ranging area would give us a clearer direction. CCI just cross 100 line down on daily chart suggesting a potential bearish correction.
USDCHF Daily Supports and Resistances:
S1= 1.0908
S2= 1.0831
S3= 1.0766
R1= 1.1050
R2= 1.1115
R3= 1.1192
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Crude Rises on hurricane fears in the US, Dollar rises after yesterdays data-led correction
News and Events:
US Housing starts initiated a Dollar correction against majors yesterday, while hurricane fears in the U.S pushed Crude higher. Gold rose above $810/o.z on both strong demand and dollar slump. Today's trading to be influenced by continued dollar strength and news from Canada on retail sales and leading indicators.
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The Usd was stable in the Asian session, despite the upside surprise in US PPI and slightly better than expected housing data. The EurUsd remained range bound between 1.4806 and 1.4742, and the UsdJpy traded between 109.90 and 109.62. Wall Street was lower yesterday lead by the financial sector and worries over Fannie and Freddie. Commodities bounced back with crude trading to $115.00bll, while gold rebounded back above $815oz. Asian regional stock indexes are surging with Shanghai higher by 7.55% and European indexes are poised to open higher with, the exception of the FTSE, down -2.28%.
The highlight of the European session will be the UK MPC minutes and we will see how close the BoE really is to raising rates. Judging from the price action of the Gbp, the markets are clearly expecting very dovish minutes echoing the dovish Inflation report. We expect the August vote to be identical to July's surprise vote, ie,7-1-1 (Tim Besley voting to raise rates). However, it is a bit astonishing that given the concerns over near term inflation stated in last weeks Inflation Report that in the same report would seem to endorse a rate move lower. There is considerable risk that, in light of the dovish Inflation Report, the market will view another 7-1-1 vote as slightly hawkish.
Daily Forex Pivot Point AUDUSD R 3: 0.8846 R 2: 0.8797 R 1: 0.8757 CURRENT: 0.8703 S 1: 0.8626 S 2: 0.8593 S 3: 0.8503
EURJPY R 3: 163.88 R 2: 163.10 R 1: 162.39 CURRENT: 162.28 S 1: 160.88 S 2: 160.14 S 3: 158.61
USDSGD R 3: 1.4265 R 2: 1.4219 R 1: 1.4201 CURRENT: 1.4108 S 1: 1.4025 S 2: 1.3891 S 3: 1.3819
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A forward-looking index of Australian economic growth declined in June to an annualized rate of 2.0 percent.
The index, published by Westpac Bank and Melbourne University, shrank from a reading of 2.4 percent in May.
The index, which looks at where the economy is headed three to nine months ahead, registered a reading of 256.3 in June, compared to 256.0 in May.
Falling equities prices, tighter liquidity and weak home loan approvals combined with weak U.S. industrial production to reduce the leading index growth estimate.
The coincident index, measuring current economic activity, showed an annualized growth rate of 2.4 percent in June, down from May`s reading of 2.7 percent.
`This is the slowest growth rate of the index since July 2001,` said Westpac Chief Economist Bill Evans. Evans added that signals this week from the Reserve Bank of Australia virtually assure that that interest rate cuts are imminent.
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The U.S. economy is in the midst of a `fierce correction,` Dallas Federal Reserve President Richard Fisher said Tuesday, adding that he thinks that U.S. growth will decelerate to a `snail`s pace, if not completely grind to a halt` in the second half of 2008.
`We are in the midst of a fierce correction from a prolonged period of indiscriminate behavior in the credit markets, a surfeit of home building, a global avalanche of cheap labor and correspondingly cheap imports, and other unsustainable financial and economic activity,` Fisher said at the Progress & Freedom Foundation summit in Aspen, Colorado.
Those forces, combined with a correction in the housing market that has yet to find its bottom, have made for `tempestuous` credit markets, he said. This will lead to slow, possibly stalled economic growth into 2009, Fisher predicted.
`I expect U.S. economic growth will decelerate to a snail`s pace, if not completely grind to a halt, in the second half of this year,` he said. `Indeed, we may see the slowdown extend into 2009 as the excesses that drove the housing markets unwind before the economy can again gear up to cruising speed.`
Fisher, one of the most hawkish voting members of the FOMC, has dissented at every FOMC meeting so far this year in favor of a less accommodative monetary policy. Inflation is one of Fisher`s chief concerns, and the recent consumer and producer prices data has underscored his concerns.
The Labor Department`s recent reports on consumer and producer price inflation in the month of July showed increases in both consumer and producer prices that were double what economists had anticipated.
Although he acknowledged the recent tempering of energy prices and the possible calming effect that can have on inflation, Fisher emphasized that the Fed must stand strong against inflation.
`We cannot afford to gamble away our credibility,` he said of the FOMC. `That is why the FOMC has made it clear in its recent statements that we are keenly monitoring inflationary impulses.`
Keeping a close eye on inflation is key, Fisher said. Comparing the U.S. economy to a python in terms of its ability to swallow and digest a tough dinner like high inflation, Fisher suggested that it is too soon to tell whether inflation will cause increased disruption.
`I urge you to observe closely the noble python,` he said. `He might digest and dispatch the recent inflationary surge, or he might gag on it. It is too early to tell.`
`And until we have a clear sense of what will prevail, monetary policy makers must remain poised to act if slowing growth fails to contain inflationary pressures,` Fisher concluded.
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