FOREX TRADING

Up And Down European Trade

Overall, the dollar strengthened during the first part of the overnight session, but the currency market turned around once the London session opened, when the European cash markets and the S&P futures started rallying to the upside. However, the market momentum was still somehow light, as the Japanese market was closed and ahead, the U.S. and Canadian markets share a Bank holiday.

The euro (Eur/Usd 1.4730) had a range of approximately 60 pips during the overnight session, between the neutral pivot point and the 20-day moving average. Over the last five days of trading, the 20-day moving average proved to be an important price point, which until now, the euro was unable to break at 1.4685.

The pound (Gbp/Usd 1.5770) broke below the 1.5800 support area during the European session, and reached the lowest value since late May. The pound has been in a downtrend for about a month, a time in which it lost almost 1000 pips, even though the other major pairs made new highs for the current year over the same period. The pound’s weakness comes as the BoE tries almost every possible method to fight deflation.

The aussie (Aud/Usd 0.9035) declined 70 pips during the overnight session, but the move was quickly retraced as the S&P futures market surged higher. For now, the aussie is trading near to Sunday’s opening price and above the 0.9000 area, which has held the pair over the last few trading sessions.

The cad (Usd/Cad 1.0370) traded flat during the first part of the session, even though the dollar was strengthening across the board. As S&P futures started reversing, cad fell 70 pips to reach a new low for the current year. Parity, in the C$1.0000 region is the next target for the pair.

The swissy (Usd/Chf 1.0310) moved up and down in a 20 pips range around the 20-day moving average at 1.0310, the main swing point over the last week of trading. On the daily chart, the swissy is trading below the 1.0350 area, the place where it topped over the last six days of trading.

The yen (Usd/Jpy 90.20) gained 70 pips during the overnight session, on top of the 150 pips gained in Friday trade. The current uptrend comes as the BoJ may be tempted to intervene in the market, because the strength the Japanese yen posted recently is becoming a threat to the economy.

European Markets Surge After Philips’ Results

Equity Futures: Dow +47.00. S&P +5.80. NASDAQ +7.75. Japanese Nikkei +110.00. German Dax +4.00.

European Trade: European markets are trading in the green, reaching a new high for the current year of trading in equities. In addition, the S&P futures have followed the positive momentum seen in the cash markets and have broke above the 1070.00 area.

The European markets surged after Philips, one of the largest electronics companies in the world, beat analysts estimations on better consumer sales. Philips, which is listed in the Hollands’ AEX index surged 6.6%, being Europe’s best gainer. The market expected Philips to post a 45 million euros loss, but the company printed a 174 million euro profit in the third quarter.

The gains are led in Europe by Hollands’ AEX and by Germany’s DAX, both up 1.30%. It happens very rarely for the German Dax to outperform the other major European indexes, because most member companies are seen as blue chips, which tend to move in a more contained fashion. The Eastern European companies are up approximately 1.50%, the most over the last few cash sessions.

S&P Futures: The S&P futures are currently trading just below the 1075.00 area, the same place where the market made a swing point high on September 23 09. A break above this level would send the S&P futures to a new high for the current year.

S&P futures did not make a larger corrective retrace in wave B in the past few sessions that had been expected technically. Prices are extremely bullish as the 1075.25 highs from September could be thoroughly tested as resistance. In this case, traders may be looking for a final move up of an expanding diagonal triangle with the first target shown around the 1090 area, followed by a second around the 100% Fibonacci projection zone of the wave A distance.

Sector Moves: Even though the rally was triggered by Philips’ results, which is a member of the personal & household goods sector, the best performing sector in Europe is automobiles & parts, which is up 2.2%. Within the sector, the best performing company is France’s Renault, which jumped close to 5% after rumors surfaced about joint projects with Russia’ AvtoVAZ.

Renault’s news created a strong positive momentum in the European carmakers, with Peugeot, BMW and Volkswagen gaining more than 2%. As a note, the automobiles & parts sector was Europe’s best gainer over the last week of trading.

Other important gains came from the telecommunication and from the technology sectors, while the heavy-weights financial and raw material companies only posted modest gains, of 0.80 and 0.55% respectively.

Crude oil for November delivery was recently trading at $72.60 per barrel, higher by $0.85. Crude oil is trading at the highest level in three weeks, helped by the gains seen in the equity markets and by the declining dollar index. To the upside, the next major resistance area is in the $73.30 area.

Oil is still trading higher, step-by-step as it approaches the $73 resistance area. Traders may see an important turning point to the down-side at this resistance test, where the black c) may be completed with an ending diagonal in the sub-wave v). If this is the case, then the whole flat pattern in a red wave II) position will be completed.

Traders know that once the correction is done the powerful moves are just around the corner, which in our case should be to the down-side, into the red wave III).

The break of $68.00 support will confirm the completed impulse move from the $64.97 low, to current wave c) highs.

Gold for November delivery was recently trading up by $4.40 to $1053.00. Gold moved relatively little until now, but it is expected to pick up additional momentum during the late session. Gold’s daily relative strength index is sitting just above the 70% oversold line.

Written by TheLFB Trade Team