Two weeks ago, the Greenback was the top performer, followed by the Japanese yen. Then, the Japanese yen we the highlight of last week. This week, the rotation comes to the commodity currencies such as the Loonie and the Aussie. Let’s take a look.

EUR/USD Awaiting Breakout from Consolidation

I was correct to update last week that the bullish attempt on Friday was not to be considered a bullish signal. Instead the market did indeed retest the 1.3450 area, but bounced off of it this week.

Weekly and Daily: The EUR/USD is still in congestion. Looking at the daily, we see that it has been consolidating with a slight downward tilt since the start of February. The 1.3450 area provided support, while each rally attempt falls shorter and shorter (congestion).

Looking at the weekly, we see that the last 4 weeks have been without direction. However, we can see in price and momentum, that the market is very bearish and without any bullish signs, looks to continue to 1.30 area. (78.6% retracement).

On the other hand, the current support is strong and has held up. So wait for a break below 1.3450 to confirm outlook to 1.30 area.

For a bullish outlook, which should only be for short-term and monitored carefully, a confirmation requires a break above 1.38 and estbalishing support above this area as well. Then, the target maybe the 1.43 area.

4H: Looking at the 4H time-frame for clues, you can see that the momentum has channeled up, and is currently testing support. the market is also testing tghe 61.8% retracement area of the previous upswing.

If the market stays above 1.35, there may be another bullish swing projection on the upside. This may bring the market near 1.38 area. Remember, this is still in the context of congestion, which is in a larger context of decline.

If the market gets to that point (1.38/1.3850), monitor for topping action, but also beware of a possible break above.

GBP/USD: Next Stop on the Bear Train: 1.45

Daily: The market reached the target of 1.49, set in last week’s update.

This week, the market pauses above 1.4850 and has only retraced 38.2%. The market is in congestion, and a strong break below the 1.50 level (see in 4H chart) may spell further decline towards 1.44/1.45.

4H: The 4H chart shows that the momentum is bullish, but the price action has not been very strong. A break above the current declining near-term trendline, might be followed by a rally to the 1.53 area. This however is even strong resistance, and the 1.45 target would still be viable if the market tops off here.

USD/JPY Eyes 87.00

Daily: The USD/JPY pair is reversing the previous week’s decline, and the projection to 87.00 is looking less likely.

4H: The 4H time-frame shows that this current rally has strong price action. However, there is resistance at the 90.60 area (78.6% retracement). If the market tops off there, it may still be able to bring the pair to 87.00 level. The choppiness of the market of late, adds to the probability of this. (Usually a swing to 61.8% retracement instead of 38.2% lessens the probability of a full swing projection).

USD/CAD: Approaching Support

Daily: The Canadian dollar, a commodity currency had a very strong week against the greenback. Last week’s anticipated rally was invalidated by the open of this week’s trading.

The market instead started to plunge the pair towards the previous lows near 1.02. Judging from the momentum in the daily, further decline is possible, and a break of the current support is looking probable as well.

Where will this current swing find support?

Weekly: Looking at this chart, we see that the market did attempt a rally, as the stochastic shot up mid-Feb. However, this more bullish momentum was not a reflection of price which made a lower high. This is a “Bearish Reversal” (not to be confused with bearish divergence).

A projection and possible support is near the 1.010/1.015 area.

EUR/GBP Congestion Pattern

4H: Looking first at the 4H time- frame, we see that the market is declining, but after a very strong push. The 0.9150 area held, and the market is already passing the 23.6% retracement. There may be some support at 0.8940. If this area holds, the probability of bullish breakout above 0.9150 improves.

Weekly and Daily: We also see in the daily chart that the 0.91 area was 61.8% retracement and is holding. A decline that breaks below 0.8940 sees support at 0.8850.

After 0.8850, looking at the weekly, we see the flat support at 0.87, and a rising support that may meet price action near 0.8750.

This is a large congestion pattern, so be patient and wait for a clear breakout, and wait for the breakout to be confirmed with either a throwback (after bullish breakout of 0.9150), or a pullback (bearish breakout below 0.87).

A bullish target is the 0.96 area, and a bearish target is the 0.84 area first, then if that breaks, the 0.80 area is the next target.

AUD/USD On to 0.92

1H: The AUD/USD is done with a quick throwback, which only retraced about 38.2%.

The quick, instead of 50-61.8% retracement adds to the likelihood of reaching 0.92, and also adds to the probability of a break above the declining resistance that can be see in the Daily chart.

The break of the near-term declining trendline in the 1H time-frame was the trigger which closed where we anticipated (near 0.91).

I noted that the rally from here would yield a reward to risk ratio of about 2:1.

GBP/JPY: Couter-trend Rally

4H: Looking GBP/JPY pair is showing strength as the 132.00 support held. The 4H time-frame shows that the 138/139 area is significant resistance, so look for some topping action there.

Weekly and Daily: We see that this week paused near the swing projection, and the 161.8% retracement level. We see that if the current rally persists, it will meet resistance at the previous support, which is near 1.38. This may also test a declining channel resistance.

The weekly shows momentum that suggests bearish continuation. So be cautious about the current rally, as it may just be a pullback from the previous breakout below the 1.40 support established throughout second half of 2009.

If the market tops off, a bearish target is the 130.30 area (78.6% retracement).

Capital Market Services, L.L.C.
www.cmsfx.com

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. CMS will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analyses.

Foreign currency trading is not conducted on an exchange. CMS is acting as a counterparty to its clients’ transactions and as a result, CMS’ interests may be in conflict with its clients. Since CMS acts as the buyer or seller in the transaction one should carefully evaluate any trade recommendation provided by CMS or any of its solicitors. Foreign currency trading involves a substantial risk of loss and may not be suitable for all investors.

All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.

Daily Technical Analysis

EURUSD Outlook

As I had expected, the EURUSD had a bearish momentum after break below 1.4450, bottomed at 1.4338 and closed at 1.4379 on Friday. The bias is neutral in nearest term but I prefer a bearish scenario at this phase targeting 1.4250 area as bullish scenario failed. Immediate resistance at 1.4400 – 1.4450 area. Only break above 1.4450 area should be seen as bearish failure and lead us into no trading zone as direction would become unclear.

GBPUSD Outlook

My technical strategy to short near the trendline resistance worked perfectly on Friday as price had a bearish momentum, bottomed at 1.6213 and closed at 1.6257. Although the current bias is more to the downside, I think the bearish scenario is not confirmed yet, not until we have a convincing movement below 1.6250 area, targeting 1.6040 area. The trendline resistance area remains a good place for a short position with tight stop loss above it. Immediate resistance at 1.6330. Break above that area should trigger further bullish momentum and keep the bullish scenario intact.

USDJPY Outlook

The USDJPY had a moderate bearish momentum on Friday, bottomed at 90.59 and closed at 90.82. This fact should keep the bearish scenario targeting 90.15 remains intact and the bias remains to the downside. Immediate resistance at 91.30. Break above that area should lead us into no trading zone in nearest term but as long as price stay below 91.85 I still prefer a bearish scenario at this phase. Break below 90.15 area should continue the bearish scenario towards 88.00 area.

USDCHF Outlook

The USDCHF had a significant bullish momentum on Friday. On h4 chart below we can see that price break above 1.0213 and now struggling around 1.0280 and the upper line of the bearish channel. This fact should be seen as a serious threat to the bearish scenario especially if we have a consistent move above 1.0280 and violation to the bearish channel, targeting 1.0400 – 1.0500 area. Immediate support at 1.0213 area. Break below that area should keep the bearish scenario intact.

EURJPY Outlook

As I had expected, the EURJPY had a bearish momentum on Friday, bottomed at 130.29 and closed at 130.59. This fact should keep my bearish scenario intact but we need a clear break below 130.00 area to continue further bearish scenario targeting 129.00. Immediate resistance at 131.30. Break above that area should be a potential threat to my bearish outlook and could trigger further bullish momentum.

GBPJPY Outlook

The GBPJPY had a bearish momentum on Friday. On daily chart below we can see that price is now struggling around the lower line of the triangle indicating a critical phase. So far price still able to stay below the triangle so I prefer a bearish scenario at this phase targeting 146.70 area. Immediate resistance at 148.20 area. Break above that area should lead us into no trading zone as direction would become unclear

AUDUSD Outlook

My technical strategy to short around 0.9325 area as a top/peak was proved to be a good strategy as we had a significant bearish momentum on Friday. On h4 chart below we can see that the bullish channel has been violated to the downside indicating bullish failure and potential bearish scenario targeting 0.9110. Immediate resistance at 0.9240 area. Break above that area should lead us into no trading zone as direction would become unclear.

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

Daily Technical Analysis

EURUSD Outlook

The EURUSD still trapped in range area of 1.4450 – 1.4600 yesterday. However, earlier today in Asian session price break from that range area, slipped below 1.4450 suggesting a potential bearish scenario towards 1.4250 as bullish scenario is now in serious threat. The bias is bearish in nearest term. Another movement above 1.4450 should lead us into no trading zone as direction would become unclear for me.

GBPUSD Outlook

The GBPUSD had a moderate bullish momentum yesterday, topped at 1.6346 and closed at 1.6333. Earlier today in Asian market price attempted to push higher, testing the trendline resistance (aqua) but, as you can see on my daily chart below, the trendline resistance still did a good job preventing further bullish pressure. I think the trendline resistance area is a good place to have a short position with tight stop loss above it, targeting 1.6190 area. A break above the trendline resistance should trigger further bullish scenario targeting 1.6700 area

USDJPY Outlook

The USDJPY attempted to push higher yesterday, slipped above key resistance 91.85, topped at 92.03 but whipsawed to the downside, bottomed at 90.84 and closed at 91.17. This fact should keep the bearish scenario targeting 90.15 area remains intact. Immediate resistance at 91.50. Break above that area should lead us into no trading zone as direction would become unclear.

USDCHF Outlook

The USDCHF still trapped in range area of 1.0143 – 1.0213 yesterday. This fact should keep is in no trading zone and need a clear break from the range area to see clearer direction. Break below 1.0143 should trigger further bearish momentum targeting 0.9917 while break above 1.0213 should be seen as potential threat to the bearish scenario testing 1.0280 area. Break above 1.0280 should be seen as bearish failure testing 1.0500 area.

EURJPY Outlook

The EURJPY attempted to push higher yesterday, topped at 133.62 but whipsawed to the downside, bottomed at 131.71 and closed at 132.22. This fact should keep my bearish scenario intact testing 131.30 area. Break below 131.30 should trigger further bearish momentum targeting 130.00. Immediate resistance at 132.50.

GBPJPY Outlook

The GBPJPY made indecisive movement yesterday. On daily chart below we can see that price actually still consolidating in a triangle formation. I think we are in no trading zone for now and I prefer to wait for further development. We need a break from the triangle to see clearer direction. CCI is heading down on daily chart suggesting potential downside pressure testing the lower line of the triangle. Break below the triangle should be see as bearish confirmation targeting 145.98 area. Immediate resistance at 149.50 – 150.00 area

AUDUSD Outlook

The AUDUSD continued its bullish momentum yesterday. However, as you can see on h4 chart below, price seems to have a good resistance around 0.9325 area, which is a potential top at this phase, a good place to short targeting 0.9170 with a tight stop loss above 0.9325 area. Break above 0.9325 area should trigger a significant bullish momentum targeting 0.9404 area.

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

Daily Technical Analysis

EURUSD Outlook

The EURUSD made another indecisive movement yesterday, trapped in a range area of 1.4450 – 1.4600 as you can see on my h4 below, indicating consolidation but the scenario is more to the upside unless we have a break below 1.4450. The bias is neutral in nearest term. We will have some important news from the Euro zone and US today. While ECB likely to keep rate at 1%, traders focus will be more on the ECB press conference. An optimistic tone should support the Euro further while a negative tone may diminish Euro rally. US retail sales data is expected to be weak. Unless we have a significant positive surprise on retail sales numbers, the Dollar should remains under pressure. Break above 1.4600 should continue the bullish scenario targeting 1.4800 area.

GBPUSD Outlook

As I had expected, the GBPUSD continued its bullish momentum yesterday, topped at 1.6302 and closed at 1.6278. The bias should remains bullish testing the major trendline resistance (aqua), which is a potential strong resistance are at this phase. Break above the trendline resistance should trigger further bullish momentum towards 1.6430 in nearest term and 1.6700 in longer term. Immediate support at 1.6250. Break below that level should diminish the bullish momentum and lead us into no trading zone with potential further bearish momentum testing 1.6040 – 1.6113 support area.

USDJPY Outlook

The USDJPY was corrected higher yesterday. My bearish scenario is in serious threat, but it’s too early for a bullish scenario. The bias is neutral in nearest term but as long as price stay below 91.85 area the bearish scenario targeting 90.15 area should remains intact. Break above 91.85 should be seen as bearish failure. Immediate support at 91.00 area. Break below that area should trigger further bearish momentum and keep the bearish scenario intact.

USDCHF Outlook

The USDCHF made indecisive movement yesterday. On h4 chart below we can see that price still trapped in range area of 1.0143 – 1.0213. The bias remains neutral in nearest term but I still prefer a bearish scenario at this phase. Clear break below 1.0143/30 area should trigger further bearish momentum targeting 0.9917 area. On the other hand, break above 1.0213 area should diminish the bearish scenario testing 1.0280 area.

EURJPY Outlook

The EURJPY was corrected higher yesterday. On h4 chart below we can see that after break below the trendline support (red) price retreated higher near the trendline, which is often happen technically. The bias is neutral in nearest term but if price move back above the trendline, the bearish scenario is in serious threat, testing 133.77 resistance area. Break above that area should trigger further bullish scenario at least testing 134.36 area. Immediate support at 132.00 area. Break below that area should keep the bearish scenario intact.

GBPJPY Outlook

The GBPJPY had a bullish momentum yesterday. On daily chart below we can see that price rejected to move below the trendline support (blue) indicating the bullish scenario remains intact targeting 150.69 area. Immediate support at 148.50 area. Break below that area should lead us into no trading zone as direction would become unclear for me

AUDUSD Outlook

The AUDUSD had a bullish momentum yesterday. On h4 chart below ( I have made some adjustment to the bullish channel) we can see that price still move inside the bullish channel indicating the bullish scenario remains intact. However we seem to have a good resistance around 0.9325 area. We need a valid break above that area to continue the bullish scenario targeting 0.9404. Immediate support at 0.9200 area. Break below that area should be seen as serious threat to the bullish outlook.

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

USD Rebounds on Dovish ECB Rumor, Weaker Commodities

• USD: Mixed, China’s reserve rate hike seen as minimal threat to global growth
• JPY: Lower, BOJ may succumb to government pressure to ease monetary policy further in 2010
• EUR: Higher, Greek finance minister says Greece will not need a bailout from the EU or IMF
• GBP: Higher, BOE Sentance says interest rates may have to rise this year, industrial production rises
• CAD and AUD: AUD & CAD higher, rebound in risk appetite as concern about China tightening fades

Overview

USD traded lower Wednesday pressured diminished fear that Tuesday’s tightening in China will derail the global recovery. Equity markets stabilized in the US and Europe which contributed to a slight improvement in risk appetite and a rewind of carry trades. The pace of the withdrawal of liquidity in China will be key to the outlook for growth and risk appetite. So far Chinese tightening has been limited. An official at China’s central bank said that monetary policy remains reasonably loose. His comments helped to dampen fears that China’s tightening will derail the global recovery. GBP was supported by BOE rate hike speculation. The BOE’s Sentance said that the central bank may have to increase interest rates this year. EUR was supported by Asian central bank demand and a pledge from Greek officials that they will take action on the deficit. Greece’s finance minister said that Greece will not need an IMF or EU bailout. Commodity currencies rebounded supported by stable equity market trade. JPY traded lower pressured by diminished risk aversion and BOJ ease speculation. JPY was supported Tuesday by safe haven demand and unwind of carry trades. Wednesday finds a modest rebound in carry trades as the impact of China’s tightening fades. There was limited reaction to a statement from the Fed’s Plosser that he sees the economy emerging from recession and the Fed may begin to tighten even with jobless rate high. Plosser said that he does not see inflation pressures presently but that keeping interest rates too low too long could lead to a burst of inflation or sow the seeds for the next crisis. Plosser is a policy hawk and his views may not be representative of the majority of the FOMC. USD rebounded midsession as commodity prices declined and reaction to a rumor that the ECB may signal a dovish policy bias at tomorrow’s meeting.

Today’s US data:

The Treasury budget and Fed beige book will be released after this report is posted.

Upcoming US data:

On January 14th December import prices will be released expected at 0.1% compared to 1.7% last month. Also on January 14th initial jobless claims for week ending 01/09, December retail sales and November business inventories will be released. Jobless claims are expected at 430k compared to 434k last week. December retail sales are expected to rise by 0.2% compared to 1.3% last month, ex. autos retail sales are expected to rise by 0.3%. November business inventories are expected at 0.1% compared to 0.2% last month. On January 15th December CPI, December industrial production, capacity utilization January Empire State Manufacturing and January Michigan consumer sentiment will be released. CPI is expected at 0.2% compared to 0.4% last month. Industrial production is expected at 0.4% compared to 0.8% last month and capacity use is expected at 71.6 compared to 71.3 last month. Empire manufacturing index expected at 9.45 compared to 2.55 last month and Michigan sentiment is expected at 73 compared to 72.5 last month.

JPY

JPY drifted lower Wednesday pressured by a modest rebound in risk sentiment as the impact of China’s tightening fades and by BOJ ease speculation. China’s reserve rate hike Tuesday is a minor step to curb lending and is unlikely to have much impact on rising inflationary pressures or global growth. It remains unclear if China plans to take more aggressive tightening action. If China steps up its tightening actions fresh safe haven demand for JPY could emerge along with more unwind of carry trades. JPY was also pressured by speculation that the BOJ may ease monetary policy during 2010. There is a report on Reuters that the BOJ is prepared to respond to its pressure from Japan’s new Finance Minister Kan to ease monetary policy. According to the report, Japan’s Kan has been a vocal critic of the BOJ for not supporting the economy and having a too rosy outlook for Japans recovery. The report says the BOJ will have to take action to boost growth if the economy continues to weaken. In December the BOJ announced that it was increasing its funding operation. The BOJ may consider increasing its purchase of government debt or the size of its funding operation as additional monetary easing measures to try to boost Japan’s economy and combat deflationary pressures. JPY remains vulnerable to speculation that the BOJ may expand quantitative ease during Q1 2010 and to the risk of a possible downgrade of Japan’s sovereign debt rating.

On January 14th CGPI for December will be released expected at 0.1% compared to 0.2% last month along with November machinery orders. The machinery orders are expected to rise by 8.5% compared to -4.5% last month.

Key technical levels to watch in USD/JPY include support at 90.40 with resistance at 92.43 the January 12th high.

EUR

EUR traded higher despite report of weaker than expected German GDP and a Moody’s warning about deteriorating sovereign debt outlook in the EU. German 2009 GDP was revised to -5% from an original estimate of -4.8%. Although this report is history it suggests that the German economy is recovering from a deeper economic hole which may mean that the recovery will be weaker. In addition, the German budget deficit rose to 3.2% of GDP. Moody says that 2010 will be a challenging year for EU sovereign debt. EUR was supported by Asian central bank demand and diminished fear that China’s tightening will derail the global recovery. EUR was also supported by a statement from the finance minister of Greece that Greece is on track to resolve its deficit problems and will not need a bailout from the EU. Earlier in the month the EUR was pressured by a downgrade of Greece’s debt rating and concern of possible Greek debt default. Focus turns to Thursday’s ECB policy meeting. The ECB is expected to hold monetary policy unchanged and signal a steady policy bias. The ECB is also expected to reaffirm that the central bank expects price pressures to remain contained and that the outlook for the EU recovery remains uneven. EUR remains vulnerable to concern about EU growth prospects and sovereign debt risks.

On January 14th German December CPI will be released expected unchanged at -0.1%. ECB policy meeting will be held on January 14th and no rate change is expected. On January 15th EU December CPI November trade balance will be released.

The technical outlook for the EUR is positive as the EUR holds above 1.4500. Expect EUR support at 1.4402 the January 11th low with resistance at 1.4666 the December 15th high.

GBP

GBP traded higher supported BOE rate hike speculation and better than expected UK industrial production. The BOE’s Sentance said that the BOE should consider halting its asset purchase plan and needs to assess the outlook for inflation risks. According to Sentance the UK economy is nearing a point where stimulus is enough and rates may have to be raised this year. UK November industrial production rose by 0.4%, a 0.3% rise was expected. Manufacturing output however was flat. Recent UK economic data suggests that the UK economy is emerging from recession and inflation pressures rising. Monday the UK reported a sharp improvement in its trade balance as exports surged. In addition the BRC retail sales also came in stronger than expected. The latest CPI report from the UK shows that inflation is running at 1.9%. The BOE’s inflation target is 2%. Sentence said that the BOE must assess the risk for inflation. GBP is also benefiting from UK election polls and increased optimism the UK budget outlook. The latest UK election polls show that the Tory party could gain a 60 seat majority in the UK Parliament. The UK will hold a general election sometime between March and June 3rd. One of the major election issues will be the expanding UK budget deficit. The Tory party has indicated that they plan to take greater action then the current UK government to reduce the UK budget deficit. GBP remains vulnerable to concern about UK debt outlook and election uncertainty.

The technical outlook for GBP is positive as GBP rallies above 1.6100. Expect near-term support at 1.6115 the January 12th low with resistance at 1.6412 the December 16th high.

CAD

CAD traded higher supported by speculation that China’s decision to hike its reserve requirement will have limited impact on global growth outlook. The 50bps reserve rate hike is seen as a minor tightening and is unlikely to have any great impact on China’s growth or inflation. The main question is whether the reserve rate hike is a prelude to more aggressive tightening in the future. CAD price direction is closely correlated to the outlook for global growth and commodities. China’s economic outlook is key to the global economic outlook and demand for commodities. Over the weekend China reported a sharp increase in export sales and lending. Chinese officials are trying to take action to prevent the Chinese economy from overheating and turning into a bubble. The pace of China’s withdrawal of liquidity will remain a major focus for the growth lead currencies like the CAD. Commodity price were mixed Wednesday with crude oil lower and metals higher. CAD gains were limited by weaker crude prices. No major economic reports were released in today’s trade. Tuesday Canada reported that its trade balance swung to deficit last month. Monday Canada reported a sharp increase in December housing starts. Recent Canadian economic data suggest that the Canadian economy is recovering. CAD price direction remains closely tied to the outlook for commodities and equities. Trade will be watching closely whether China takes additional steps to reduce liquidity. Today’s CAD rebound was impressive in light of the fact that crude oil prices traded lower and Canada’s trade balance was disappointing.

The technical outlook for CAD is positive as USD/CAD trades below 1.0400. Look for near-term support at 1.0175 the July 2008 low with resistance at 1.0420 the January 5th high.

AUD

AUD traded higher supported by the fading impact of Tuesday’s reserve rate hike in China as investors view the rate hike as having limited impact on China or the global recovery. As noted above, it remains to be seen if the reserve rate hike from China is the prelude to more aggressive tightening. Absent more aggressive moves from China to withdraw liquidity the action should have limited impact on China’s domestic economy or global demand for commodities. Tuesday AUD traded lower in reaction to weaker commodities weaker equities and selling across trade to the JPY sparked by a spike in risk aversion in reaction to news of the surprise reserve rate hike in China. Wednesday’s price action is the reverse of Tuesday’s with the AUD recovering and prostrate to the JPY as equity markets stabilize and Chinese officials make reassuring statements that overall monetary policy will remain loose.

AUD is experiencing choppy trade but remains well supported on breaks by RBA rate hike speculation. Australian economic data has been mixed. Monday’s Australia reported strong ANZ jobs ads for December. Tuesday November housing finance was reported to have dropped by 5.6%. Last week Australia reported strong retail and vehicle sales. improvement in its trade deficit and rising building approvals. These reports suggest that the Australian domestic economy has weathered recent RBA rate hikes and puts a February RBA rate hike back on the radar screen. Strong Australian economic data encourages speculation that the RBA may hike rates in February. Focus turns to Thursday’s release of Australian employment data.

On January 14th December unemployment will be released the unemployment rate is expected to fall by 0.1% to 5.6% from 5.7% with employment growth at 20k s compared to 31.2k is last month.

The technical outlook for the AUD is positive as the AUD holds above 9200. Expect AUD support at 9170 with resistance at 9378 the November 17th high.

By Michael J. Malpede

Easy Forex

Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst.

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

The market showed a tendency to move higher against the U.S. dollar during the Asian and the European sessions, but so far, the major pairs have failed to break out of the range of the prior few days of trading. One exception was the pound, which advanced 90 pips overnight, but even so, this is below the pair’s ATR for this time of the day. Unless something happens during the U.S. session, the trading range is expected to remain subdued. The macroeconomic calendar is relatively light this Wednesday ahead of the Fed Beige Book, which does not necessarily help the currency market ahead of historically slow dollar index movement in Wall Street trade.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 78.45 Looking for: Low of a Short, wave IV)

Momentum: The dollar index went into Long mode in early December and held that trend up until January’s Non-farm Payroll release. The read turned short this week, and a weekly chart close below 76.50 will be a signal that sellers have the upper hand.

Elliott Wave: The dollar index traded lower recently, towards the 77.00 region, offering the chance to monitor a complex corrective pattern, shown in our blue wave IV) position.

A corrective pattern seems to be a double zig-zag structure with a wave c of a wave (Y) that is in process, that may find its lows somewhere the around 76.70 or 76.50 region, before an up-trend can continue. Once a double zig-zag in wave IV) is complete, we will look for a move into the 78.00 zone and then look above the 78.50 wave III) top.

From an Elliott wave perspective, bullish expectations remains valid so long as the market trades above the critical 75.58 support zone, which is the top area of a blue wave I).

The euro (Eur/Usd 1.4505) tested the 1.4450 support area twice during the overnight session, at the same place were the market based in Tuesday trade. For now, the euro has bounced off this intra-day support, but it might test it again later in the day if oil and equity markets move lower. To the upside, the next important resistance area is in the 1.4600 zone.

The pound (Gbp/Usd 1.6235) is approaching the 1.6250 swing area, after gaining more than 90 pips during the Asian and the European sessions. A break above the 1.6250 area is important, but may be difficult to break because this area has acted as an important swing point in the recent past. In addition, within the next 100 pips, the pound will meet two important moving averages, the 50 and the 100 daily SMA’s.

Pound Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed. Price Points: 1.5831, and 1.5300 – 1.5350. Looking for: Top of a Long, black wave B) reversal

Momentum: The cable trend went Short on 3rd December, and has meandered sideways since then. The pair can be just as easily bought as sold.

Elliott Wave: The pair is bullish this week, as expected from previous wave posts, and looks to be trading in the last leg, wave c, of a zig-zag pattern that we are looking for in a larger black wave B).

The target of a Long wave c is around the 1.6300-1.3500 resistance zone, where a zig-zag correction may complete a larger black, corrective wave B). After that completes, a down-trend towards the 1.5900 and 1.5800 zones should happen.

Any break of the blue wave b low (around 1.5890) or a break of 1.5831 support of a black wave A) will suggest that a Long, black wave B) reversal is already completed.

The aussie (Aud/Usd 0.9250) gained a few pips overnight, but overall, lagged behind the other major pairs. This is linked to the mixed session observed overnight in the commodity market; the same one that dragged the pair 90 pips lower during the prior day of trading. Ahead, the aussie will probably trade in correlated fashion with the commodity market.

The cad (Usd/Cad 1.0360) bounced from the 1.0400 area, where the pair hit a resistance trend-line that has held the market since Dec 17 09. If the dollar index continues losing ground over the upcoming sessions, this could help the cad to move down to the 1.0250 area once again, where it formed an intra-day swing point low earlier this week.

The swissy (Usd/Chf 1.0190) tested the 50-day moving average during the first part of the day, but as expected has failed to push above this price point. Against the Euro, the Swiss franc gained a few pips for the first time in a very long period.

The yen (Usd/Jpy 91.35) is currently posting gains for the first time in three days, in a time in which it shed 180 pips. If the yen continues to move higher, especially above the 20-day moving average and above the 91.30 area, then the Usd/Jpy outlook will shift to long.

Equities Move On Basic Materials And Tech

Equity Futures: Dow +8.00. S&P +1.80. NASDAQ +2.00. Japanese Nikkei -5.00. German DAX +3.00.

European Trade: Equity markets traded in mixed fashion throughout the overnight hours. The Asian markets closed lower, but European shares managed to turn into the green after the opening bell. At the same time, S&P futures posted some small gains, on light trading volumes.

European markets started the Wednesday session in the red, but shares turned positive helped by the basic materials and technology sectors. In intra-day trade, the U.K. FTSE fell 0.15%, Germany’s DAX gained 0.30%, while Finland’s OMX index gained 0.90%, being among the top gainers in the region. In emerging European trade, shares stayed above the breakeven line, but the recorded market volumes were quite low.

Basic material companies advance aided by the gains seen in the metals market, and by a report issued by Morgan Stanley, which showed that this sector will benefit from the recovery of global industrial production. Since the beginning of the cash session the basic materials sector added approximately 1%, being the top performer.

Technology shares gained after Goldman Sachs upgraded Infineon. The semiconductor manufacturer Infineon gained 3.90% in intra-day trade, leading the pack of gainers in the German DAX index. However, the positive momentum observed in the technology shares might not be extended through the upcoming U.S. session, since Google announced that it might quit its offices in China. In pre-market trading, Google shares were down 1.5%

In the commodity market, metals advanced a few basis points, but energy commodities, such as crude oil, gasoline or heating oil fell ahead of the U.S. Crude Oil Inventories report from the U.S., where a surplus of 1.4M barrels is expected to be reported. Usually, this report creates some volatility in the commodity market. Agriculture products traded mixed overnight.

S&P Technical View: TheLFB Member Charts

4 Hour Chart Flows: Long Price Points: 1127 Looking for: Near-term bearish view

Momentum: The S&P futures market confirmed a Long momentum read on Nov 11th and built a solid near-term support base around 1095. The 1125 area will be a major support zone. The moves to test and hold support are impressive, and are backed with global equity markets that are also holding support.

Elliott Wave: S&P futures were bearish over the past few sessions, after reaching the 1147 highs. The market traded lower, down to the 1127 region, which indicates that prices could easily move much lower than that.

Some changes to the wave count have been made, as market could have already finished a five wave bullish structure from a triangle low (1088). The new wave count now signals for a move towards the 1112 support region in the near-term after a blue wave ii)/b) completed, so long as the 1147 top stays in place.

Upcoming Economic Moves:
10:30 EST Usd OIl Inven. Exp 1.4M, Prev 1.3M
14:00 EST Usd Fed Beige Book
14:00 EST Usd Budget. Exp -87.9B, Prev -120.3B

Crude oil was recently trading at $79.80 per barrel, lower by $0.90

Gold was recently trading up by $2.40 to $1131.80.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.

The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.

The dollar index swing up and down around the breakeven line throughout the overnight session. The trading volumes were strong during the European hours, but the market moved chaotically in very close ranges. This is in reaction to the fundamental part of the market being very mixed mixed: on one side, U.S. yields are rising, which is dollar bearish, but on the other, the U.S. economy appears to be emerging faster than the Euro-area from recession, which is dollar bullish. Looking ahead, the dollar bulls and bears will continue to fight during the first part of the U.S. session, with the U.S. and Canadian trade balance numbers at 08:30 EST probably setting the direction of trading.

Dollar Index Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 78.45 Looking for: A Short, wave IV) reversal

Momentum: The dollar index went into Long mode in early December and held that trend up until January’s Non-farm Payroll release. The read turned short this week, and a weekly chart close below 76.50 will be a signal that sellers are dominating.

Elliott Wave: The dollar index has traded lower since the end of the past week, towards the 77.00 region. As such, we are looking for a complex corrective paten, shown in a blue wave IV) position.

A corrective pattern seems to be a double zig-zag structure with a wave c of a wave (Y) in process that may find its lows somewhere the around 76.70 or 76.50 region, before an up-trend can continue.

From an Elliott wave perspective, bullish expectations remains valid so long as the market trades above the critical 75.58 support zone, which is the top area of a blue wave I) that may be forming.

The euro (Eur/Usd 1.4485) traded in volatile fashion during the European and the Asian sessions, in a range of only 55 pips. On the daily chart, the euro is trying to break above the 1.4500 area, where it hit the 23.6% retracement of the uptrend that started in March 09 and lasted until December 09. A break above this level will be interpreted as bullish

Euro Technical View: TheLFB Member Charts

4 Hour Chart Flows: Mixed Price Points: 1.4570, and 1.4670 Looking for: A Long, wave IV reversal

Momentum: The euro trend went Short on 3rd December, and has meandered lower since then. It does look as though a long test of resistance is overdue.

Elliott Wave: Eur/Usd has shown some small weakness recently after moving from the 1.4550 Monday top, to the 1.4450 suport zone, which was probably just a correction of the current up-trend shown in our red wave IV.

Overall, we are looking for a more complex correction in our wave IV reversal with a double zig-zag pattern, separated by a wave (x). Currently, the market is trading in the wave C) leg of wave (Y), which may show us an extended structure towards the 1.4570 and 1.4670 zones.

The pound (Gbp/Usd 1.6135) and the Japanese yen are the only currencies that strengthened against the dollar overnight. The pound was probably helped by the 200-day moving average, located in the 1.6100 area, which housed an important number of institutional orders. The Gbp/Usd advanced approximately 60 pips since the Tuesday’s session open, but the pound recently hit a resistance trend-line that held the market for a month. A break higher would lead into the 1.6300 zone.

TheLFB Trade Plan of the Day is one of the six that are available to members on the major pairs each day, plus four Jpy based cross pairs, as well as S&P futures, oil, gold, and the dollar index.

The aussie (Aud/Usd 0.9225) was the weakest pair during the overnight session, and especially throughout the European trading hours, when it dropped 60 pips in just a few minutes. This move was somehow expected, since the aussie appears to be in an overbought state on the daily chart. Today’s sell-off is only the second decline over the last 13-day of trading. However, as soon as it finds support, the aussie will very likely continue resume its uptrend; this does not yet look like a swing change.

The cad (Usd/Cad 1.0345) had been moving higher since the prior U.S. session, when poor macroeconomic data coming from the Canadian economy hit the newswires, and the Prime Minister spoke of the impact of C$ strength on the overall economy. In the near-tem, the cad could re-test the 1.0420 area, which has been an important swing point over the last few months of trading. A bounce lower from the 1.0420 area would signal that the cad is ready to resume its downtrend.

The swissy (Usd/Chf 1.0180) moved very little overnight, unaffected by the price action seen in the other major pairs. On the daily chart, the swissy is trading just below the 50-day moving average, which will probably provide some resistance if buyers will show up again.

The yen (Usd/Jpy 91.70) is heading lower for a third consecutive day, the longest declining streak in a month. Over this period, the yen has lost 180 pips, after it bounced off the 200-day moving average, in the 93.50 area. To the downside, the next important support area is in the 91.30 zone, which is near the 20-day moving average.

European Shares Drop After Alcoa’s Results

Equity Futures: Dow -32.00. S&P -3.80. NASDAQ -5.50. Japanese Nikkei +29.00. German DAX -6.00.

European Trade: European shares posted some small declines around the opening bell, but overall, the selling was contained. The U.S. futures markets followed a similar pattern throughout the overnight session, losing points in a test of 1135 support.

The selling started after Alcoa, the first major company that reported its Q4 results, disappointed investors. Alcoa’s profit was $0.01 per share, but analysts had expected a $0.06 read. Looking ahead, the market will look for further guidance on the earnings season momentum. As such, investors will focus extensively upon the next few major companies waiting to report.

In European trade, Germany’s DAX has lost 0.45%, France’s CAC 40 fell 0.40%, but the selling was more pronounced among the Nordic markets, like Norway’s OBX, which lost 1.10%. Earlier in the day, Asian markets closed the trading session mixed, with the Nikkei closing up 0.75%, but the S&P/ASX index fell approximately 1.00%.

S&P Technical View: TheLFB Member Charts

4 Hour Chart Flows: Long Price Points: 1127 Looking for: A Long, wave iii)

Momentum: The S&P futures market confirmed a Long momentum read on Nov 11th and built a solid near-term support base around 1095. The 1125 area will be a major resistance point to battle this week. The moves to test and hold support are impressive, and are backed with global equity markets that are also looking bullish.

Elliott Wave: S&P futures have been bullish since the NFP release, when Usd was sold off. We are looking for a new wave count, with an impulse structure towards the 1150-1170 resistance area.

Currently, the blue wave iii) is in progress, and may hit the highs somewhere around the 1150 zone, before a lower wave iv) and higher wave v) can get underway. The S&P will remains bullish so long as the market trades above the 1127, wave i) top, where the blue wave iv) must not touch if this wave count is correct.

Sector Moves: Alcoa was among the companies that moved the most overnight. Alcoa plunged 6% in pre-market trading, following the weaker than expected Q4 results. This created broad weakness among the basic materials sector, with BASF, Vedanta, Fresnillo and Petrofac falling between 2.50% and 4%.

Companies from the travel & leisure sector also were among the top decliners in European trade after the Japanese airline JAL plunged 45%, affected by a possible bankruptcy. Air France-KLM lost 2.4%, Lufthansa fell 2.3% and the British Airways declined 1.60%.

The beer maker Heineken, which previously announced that it will buy the Femsa’ beer unit, was upgraded to “buy” from “hold” by RBS. Heineken shares jumped 1% in intra-day trade.

Upcoming Economic Moves:
08:30 EST Cad Trade Bal. 0.8B, Prev. -0.4B
08:30 EST Usd Trade Bal. -34.9B, Prev.-32.9B

Crude oil was recently trading at $81.90 per barrel, lower by $0.60

Gold was recently trading down by $2.10 to $1149.30.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.

The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.

Daily Technical Analysis

EURUSD Outlook

The EURUSD made indecisive movement yesterday. The bullish momentum after breakout from the previous range of 1.4250 – 1.4450 seems limited so far and looks like price is trying to make another choppy market. However, as long as price stay above 1.4450 area, the bullish scenario targeting 1.4600 should remains intact. Break below 1.4450 should be seen as potential bullish failure re-testing 1.4250 area once again.

GBPUSD Outlook

The GBPUSD had a bullish momentum yesterday. On daily chart below we can see that price has convincingly move above the bearish channel indicating potential bullish targeting 1.6250 area. Immediate support at 1.6113 area. Break below that area should lead us into no trading zone but only a movement below 1.6040 area could be seen as bullish failure and trigger further bearish scenario back towards 1.5900 – 1.5832 area

USDJPY Outlook

As I had expected, the USDJPY had a bearish momentum yesterday, bottomed at 90.73 and closed at 90.97. The bias remains bearish targeting 90.15 area. Immediate resistance at 91.50 – 91.85 area. Break above that area should lead us into no trading zone as direction would become unclear for me

USDCHF Outlook

The USDCHF didn’t make significant movement yesterday. On h4 chart below we can see that price trapped in a small range area of 1.0213 – 1.0143 area. As long as the bearish channel valid, I still prefer a bearish scenario at this phase and expecting a break below 1.0143/30 area to continue the bearish momentum targeting 0.9917 area. Until that happen, I think I will stand aside for now. A break above 1.0213 area should trigger further upside correction towards 1.0280 area.

EURJPY Outlook

The EURJPY had a significant bearish momentum yesterday, break below the trendline support area after made a false breakout, as you can see on my h4 chart below. This fact should be seen as bullish failure and potentially trigger further bearish pressure testing 131.30 area. Break below that area should trigger further bearish momentum targeting 130.00 area. Immediate resistance at 132.30 area. Break above that area should lead us into no trading zone in nearest term but I still prefer a bearish scenario at this phase

GBPJPY Outlook

The GBPJPY had a bearish momentum, bottomed at 146.65 and closed at 147.06. On daily chart below we can see that we are in critical technical phase as price is now struggling around the trendline support area. Consistent move below that trendline support should be seen as bullish failure and trigger further bearish momentum targeting 145.20 area. Immediate resistance at 147.70 area. Break above that area should keep the bullish scenario intact.

AUDUSD Outlook

The AUDUSD had a bearish momentum yesterday, bottomed at 0.9169 and closed at 0.9198. I think we are in critical technical phase now. On h4 chart below we can see that price slipped below the bullish channel indicating serious threat to the bullish scenario but price still move around 0.9228 – 0.9190 support area. We need consistent move below that area to confirm the bearish scenario towards 0.9100 – 0.9000 area. Immediate resistance at 0.9250. Break above that area should keep the bullish scenario targeting 0.9404 intact.

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results