FOREX TRADING

EUR/USD closed higher on Wednesday as it consolidates above the 10-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If it renews the decline off December’s high, the 38% retracement level of the 2008-2009-rally crossing is the next downside target.

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USD Mixed, JPY Weakens, Commodity Currencies Rally

• USD: Mixed, ADP employment falls more than expected, non-manufacturing ISM confirms expansion
• JPY: Lower, pressured by political and fiscal uncertainty as Japan’s finance minister resigns, carry trade
• EUR: Higher, ECB’s Stark says EU may not bail Greece out of its deficit problems, services PMI and PPI rise
• GBP: Higher, consumer confidence unexpectedly drops, shop prices rise at fastest rate in 13 months
• CAD and AUD: AUD & CAD higher, Australia reports strong building approvals and vehicle sales

Overview

USD traded mixed Wednesday gaining versus the JPY and European currencies and weakening versus the commodity currencies. JPY experienced significant volatility and traded lower in reaction to report that Japan’s Finance Minister Fujii has resigned because of health concerns. His resignation generates uncertainty about Japan’s fiscal outlook. JPY has recently weakened pressured by concern about a possible downgrade of Japan’s sovereign debt rating if Japan does not reduce its deficit. EUR traded lower in reaction to a statement from the ECB’s Stark that the EU may not bail Greece out of its deficit problems. EU downside was limited by report of improving EU service PMI and an uptick in EU inflation. GBP was pressured by report of an unexpected decline in UK consumer confidence which posted its sharpest monthly drop for the year. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, slipped above 1.4450, topped at 1.4483 but further bullish momentum was rejected as price whipsawed to the downside, bottomed at 1.4346 and closed at 1.4363. On h4 chart below we can see that this was a case of a false breakout which usually trigger bearish pressure testing 1.4250 area. We need the price to close below that area to confirm the bearish scenario testing 1.4127 – 1.4000 this week. Immediate resistance at 1.4400 – 1.4450 area.

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EUR/USD closed lower due to profit taking on Tuesday as it consolidated some of Monday’s rally but remains above the 10-day moving average crossing. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI remain neutral to bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If it renews the decline off December’s high, the 38% retracement level of the 2008-2009-rally crossing is the next downside target.

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USD Rebounds, Factory Orders Rose by 1.1%

• USD: Mixed, Fed’s Duke says recovery to be moderate, interest rates to remain low for an extended period
• JPY: Higher, large-scale exporter repatriation, Finance Minister Fujii to resign due to health concerns
• EUR: Lower, CPI inflation accelerates, German employment outlook improves
• GBP: Lower, concern about UK debt outlook and diminished demand for UK gilts
• CAD and AUD: AUD & CAD higher, Australia’s new home sales rise, platinum at highest level since August

Overview

USD opened lower Tuesday pressured by improving risk appetite as commodity markets and equities continue to rally at the start of the New Year and in reaction to dovish comments from Federal Reserve Governor Duke. Duke said that she expects the US economic recovery to be moderate and that interest rates will remain at low levels for an extended period. JPY led the way supported by exporter repatriation and a report that SMFG plans to raise a large amount of capital by issuing new shares. The SMFG news sparked short covering in the JPY. EUR opened higher supported by report of accelerating EU CPI, a modest drop in German jobless rate and gains in cross trade to the GBP. GBP continues to underperform pressured by concern about the UK deficit and potential reduced demand for UK gilts. EUR turned lower after the release of US factory orders. Commodity currencies traded higher with the AUD supported by report of rising Australian new home sales and firmer equity and commodity markets. Commodity currency gains were limited by a Reuter’s report which states that Chinese banks have been told to control the pace of lending. If Chinese banks significantly reduce lending it could slow the Chinese recovery and reduce optimism about economic recovery in Asia. Today’s US economic data was mixed with factory orders posting a strong gain and pending home sales declined more than expected.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD still trapped in range area of 1.4450 – 1.4250 yesterday. I think the best strategy remains to short around 1.4450 or to long around 1.4250 with tight stop loss. Bullish scenario will be confirmed by a close above 1.4450 today targeting 1.4600 – 1.4800 this week while bearish confirmation will be confirmed by a close below 1.4250 targeting 1.4127 – 1.4000 area this week.

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EUR/USD posted a key reversal up on Monday and closed above the 10-day moving average crossing signalling that a short-term low has been posted. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain neutral to bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If it renews the decline off December’s high, the 38% retracement level of the 2008-2009-rally crossing is the next downside target.

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USD on the Defensive, Stocks and Commodities Surge

• USD: Lower, pressured by improving risk appetite and a surge in commodity prices, ISM beats expectation
• JPY: Higher, tracking broad USD weakness versus the majors
• EUR: Higher, manufacturing PMI rose to 21 month high, investor confidence at best level since June 2008
• GBP: Higher, UK manufacturing PMI and mortgage approvals beat expectations, debt worries limit gains
• CHF: Higher, EUR/CHF near multi-month low, Swiss manufacturing PMI remains above 50
• CAD and AUD: AUD & CAD higher, China may use FX reserves to buy commodities, PMI at 20 month high

Overview

USD traded lower to start the year pressured by firmer equity market trade and a surge in commodity prices. Strong PMI data from China and Europe contributed to equity market gains and demand for commodities. China’s manufacturing PMI rose to its highest level since April 2004. The improvement in China’s PMI data suggests that China’s economy may grow by 10% in early 2010. There are reports that China may use FX reserves to buy oil and commodities. Crude traded above $80 a barrel and metals prices surged. The surge in commodity prices sparked demand for growth led currencies like the CAD and AUD. GBP underperformed pressured by selling in cross trade as UK Chancellor Darling warns that cutting the deficit too quickly could hurt the UK economy. In addition, Pimco says it will cut holdings of UK bonds because of increased borrowing. USD started the year higher in Asian trade supported by speculation that improving US economic data will lead to an earlier Fed rate hike and in reaction to a statement from Fed Chairman Bernanke that all options are open for interest rates. There was limited reaction to a UBS report which says the USD may firm in 2010 as US investors cut foreign holdings with US investors are less willing to increase their foreign exposures. US economic data was mixed with construction spending declining more than expected and manufacturing ISM rising more than expected. USD remained on the defensive post release of the ISM report.

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EUR/USD closed lower on Wednesday as it consolidated some of the rebound off last week’s low. A short covering rally tempered early session losses and the high-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are turning bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If its renews this month’s decline, the 38% retracement level of the 2008-2009-rally crossing is the next downside target.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD has been consolidating in range area of 1.4450 – 1.4250 in the last two weeks. I am expecting a break on either side to see clearer direction. The bearish scenario was interrupted since the violation of the bearish channel (red channel) but the bullish momentum also still limited so far. For me, nothing is confirmed. While conservative traders may stand aside in this situation, aggressive traders still can use range trading strategy, which is to short around 1.4450 or to long around 1.4250 with only tight stop loss. Break above 1.4450 should confirm the bullish scenario at least testing 1.4600 – 1.4800 area this week while break below 1.4250 should trigger further bearish momentum re-testing 1.4170 – 1.4127 area before aim for 1.4000 area.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.4272 but closed higher at 1.4338. The pair is still consolidating in range area. I think we are in no trading zone now as direction is not clear in nearest term. Another way to trade in this kind of market is to short around 1.4420/50 or long around 1.4250 with a tight stop loss. We need a break from the range area to see clearer direction.  Break above 1.4420/50 area should be seen as bearish failure and trigger further bullish momentum towards 1.4600 even 1.4800 area. Break below 1.4250 should trigger further bearish momentum targeting 1.4170 – 1.4130 before testing 1.4000 area.

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USD Higher on Surge in Chicago PMI

• USD: Higher, stock rally stalls, optimism about US recovery fuels debate over timing of Fed tightening
• JPY: Lower, fiscal worries and widening yield gap pressure JPY, fear JAL will file for bankruptcy
• EUR: Lower, EU M3 unexpectedly declined in November, Madrid downgrade by S&P
• GBP: Higher, concern about UK debt, sharp rebound in cross to EUR and JPY
• CAD and AUD: AUD & CAD lower, tracking the decline in the price of gold and equities

Overview

USD traded higher Wednesday supported by fiscal worries in Japan and the UK and optimism about the US recovery. S&P warns that Japan’s sovereign debt rating may be cut if Japan does not take action to reduce its debt. The Telegraph reports that UK debt is worse than Italy’s. Weaker equity market trade and a Moody’s downgrade of Abu Dhabi Commercial Bank rating sparked safe haven demand for the USD. JPY was also pressured by report and Japan Airlines may be on the verge of filing for bankruptcy. EUR was pressured by report of an unexpected decline in EU M3. The decline in M3 generates concern about economic recovery in the EU. GBP experienced a sharp rebound in cross trade to the EUR in reaction to report that S&P has downgraded too regions in Spain. The downgrade raises the risk of a downgrade of Spain’s sovereign debt rating. Commodity currencies were pressured by weaker equity market trade and decline to one week low the price of gold. USD is supported by optimism about the US recovery and speculation that improving outlook for the economy will cause the Fed to begin to withdraw stimulus. US economic data was positive with Chicago manufacturing PMI rising more than expected. The Chicago PMI rise fuels optimism about the recovery in the US manufacturing sector. The direction of equity markets and sovereign debt risks are the main drivers for this week’s FX trade. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, topped at 1.4457 but further bullish momentum was rejected as price whipsawed to the downside, bottomed at 1.4331 and closed at 1.4353. On h4 chart below we can see that was a case of a false breakout from 1.4420 – 1.4250 range area which usually trigger significant bearish momentum, at least testing 1.4250 area. Break below that area should trigger further bearish scenario towards 1.4170 – 1.4130 area. Immediate resistance at 1.4420 – 1.4450 area.

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Majors Form Important Swing Points

The dollar index was sold during the overnight session, but as U.S. trade approached, the major pairs started losing ground gained earlier in the day. This move was widely expected because the uptrend of the last few days came on very light trading volumes, and more importantly, against the near and medium term trend reads. Looking ahead, the dollar index is expected to continue its uptrend, breaking free from its correlation with S&P futures and to some extent, with the commodity market. For the major pairs, the next important support area is to test lows set in pre-Christmas trading.

Dollar Index Technical View: TheLFB Member Charts

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Daily Technical Analysis

EURUSD Outlook

The EURUSD didn’t make significant movement yesterday, moved in only small range of 60 pips. On h4 chart below we can see that after the bearish scenario was interrupted by violation to the bearish channel, price seems to consolidating in a range area with 1.4420 area as a key resistance level and 1.4250 as key support level at this phase. The bias remains neutral and we need a valid break from the range area to see clearer direction. Break above 1.4420 should trigger further bullish momentum towards 1.4585 while break below 1.4250 should trigger further bearish momentum testing 1.4170 – 1.4127. We will have US consumer confidence data today which expected to be the market mover which can take us out from this ranging market and give clearer direction. A better than expected number should be good for the Dollar while a worse than expected number should weaken the Dollar.

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