FOREX TRADING

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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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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Weekly Technical Commentary

USD/JPY

Chart Levels:

Support 88.00..87.35..86.00..84.82.
Resistance 89.80..90.80..91.35..92.33.

This week: →
This month: ↘

The sharp rally from a multi-year low at 84.82 has turned into ‘triangle’ consolidation. The US dollar is no longer oversold and most elements of this chart still suggest a short USD/JPY position. Long term while below 92.00 downside pressure is maintained, while the closer we get to 85.00 the more the authorities will be tempted to intervene. In fact the early December high at 90.78 might in fact be a new lower interim high. Decent futures volume over the last two weeks suggests many are cutting out of stale positions ahead of expiry and year-end. These will have to be re-built next year.

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Daily Technical Analysis

EURUSD

The pause in Euro rally triggered by Dubai World debts payment delay so far expected to be temporary as after hit bottom at 1.4827, Euro recovered quickly, closed much higher at 1.4985 on Friday and the trendline support still did a good job prevented further bearish attack thus technically keep the bullish scenario intact, especially if price able to move consistently above 1.5062 today, which is technically potential to be tested after rebound from 1.4827. However, note that the false breakout from 1.5062 area (see my daily chart below) also hide a potential bearish view and price could make another downside attempt testing the trendline support and 1.4827 once again, especially if price break below 1.4920/00 area today. No one knows whether the impact of Dubai World is only a temporary panic reaction last week or will continue to shake world stocks market thus could bring the Dollar higher this week. The bias is bullish in nearest term testing 1.5062. Valid break above that area should trigger further bullish momentum towards 1.5140/50 area

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Daily Technical Analysis

EURUSD

Yesterday I said that EURUSD need a consistent move above 1.5150 resistance area to continue bullish towards 1.5300. The fact was, price never got higher than 1.5150 and bullish momentum was rejected. I was right at this point until price unexpectedly made further bearish momentum, fell below 1.5062, bottomed at 1.4959 and closed at 1.5006. I have to admit and realize that my technical study was completely a mess. After broke above 1.5062 and topped at 1.5143 on Wednesday, I thought a movement towards 1.5300 should not be that hard. Well, my 1.5150 bullish target area was easily hit, but my second bullish target around 1.5300 was not. Technically the bias reverse to bearish, especially in nearest term with 1.4920 support area to be tested. Break below that support level should trigger further bearish momentum towards 1.4850/20 area, but as long as the bullish trendline support hold (see h4 chart below), the bullish scenario in longer term remains intact, especially if price able to break above 1.5062 today, testing 1.5150 area once again. Note that bearish reversal scenario warning is now can not be ignored especially if we have further bearish below 1.4820 with 1.4625 and 1.4450 as technical target. I think I will stand aside for now as situation is very tricky, but probably consider about open long position if price move near trendline support area or 1.4850/20 area today with tight stop loss.

On fundamental point of view, the risk aversion came back into play yesterday. Bloomberg reported that Dubai World proposal to delay debts payment shook investor’s confidence. Stocks in Asia, US and Europe dropped significantly while Yen and Dollar benefited from this situation. Well, I think it’s the time that we should not be too optimistic about global economic recovery. It’s true that we have some significant improvement and have good reasons to be optimistic, but things are just still far from being stable and investor’s panic selling on Dubai World debts payment delay prove that. The Japanese Yen is the most currency appreciated in this situation, lead ‘safe heaven’ currencies strengthen. However, I am concern about possible intervention by Japanese government to weaken the Yen as traders may respond to it thus potentially wane the Yen and Dollar rally.

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Equity Sell-Off Empowers The Dollar Bulls

Overall, the sell-off from the equity markets had a major influence on the pound and on the aussie, but interestingly, it had only limited effects on the euro and swissy. Driven by risk-aversion, the yen broke below the 86.00 area, to reach the lowest value since 1995.

Thanksgiving Day has been historically very quiet in the financial markets over the last four years of trading, but today it proves to be a huge exception. Ahead, the market has some major uncertainties since the U.S. session is closed, but the volatility seen throughout the European session might attract some major players into the futures market.

Dollar Index Technical View: TheLFB Member Charts

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Daily Technical Analysis

EURUSD Outlook

Finally, we have significant technical break on EURUSD. As you can see on my daily chart below, price break above the peak at 1.5062, topped at 1.5143 and closed at 1.5136. If you remember my technical study on November 12, I said about two double top scenarios: valid or failure scenario. When a chart formation fails, I believe the opposite scenario is in play. If the bearish reversal scenario fails, the bullish continuation is in play. So, whether a chart formation fails or valid, I always have a clue. Isn’t that great? I am in buy mode now, targeting 1.5300 area. We have an important resistance around 1.5150 area and need consistent move above that area before aim for 1.5300. Immediate support at 1.5090 followed by 1.5062. As long as price able to stay above 1.5062, the bullish scenario should remains intact. CCI in overbought area and heading down on h4 chart, so watch out for potential minor downside pullback.

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FX Technical Commentary

Euro 1.4960

Initial support at 1.4833 (Nov 23 low) followed by 1.4802 (Nov 20 low). Initial resistance is now located at 1.4999 (Nov 23 high) followed by 1.5048 (Nov 11 high)

Yen 88.50

Initial support is located at 88.36 (Oct 9 low) followed by 88.01 (Oct 7 low). Initial resistance is now at 89.19 (Nov 23 high) followed by 89.75 (Nov 16 high).

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Daily Technical Analysis

EURUSD Outlook

The EURUSD made another rejection to consistently move below 1.4820 key support level on Friday. This fact surely keep the major bullish scenario intact, but the bearish reversal scenario warning showed by double top pattern with peaks around 1.5062 area is also still valid and the bias should remains neutral as market is consolidating now. Overall, this pair has been indecisive in the last two weeks and we need a significant movement above 1.5062 to continue the bullish continuation towards 1.5150 and 1.5300 or consistent move below 1.4820/00 area to confirm further bearish pressure towards 1.4625 and 1.4450 area. Immediate resistance at 1.4965 and the upper line of my bearish channel, which vulnerable to be tested today after rejection below 1.4820. A violation to the bearish channel should be seen as potential threat to the bearish reversal scenario re-testing 1.5062 area.

On fundamental side, we will have many news from Euro zone today (manufacturing and services PMI) and Trichet is going to make another statement which potentially move the market significantly, especially if we have big surprise whether in the numbers or Trichet’s comment. We know the he support a strong Dollar, but the market respond has been mixed so far.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.4842 but bearish pressure was limited as the pair closed higher at 1.4915. The bias is neutral in nearest term. My technical focus remains at the bearish channel, which is still valid indicating bearish correction remains intact with the upper line of the bearish channel as key resistance area. As you can see in my daily chart below, the upper line has been doing a good job to keep the bearish correction intact since the rejection to move above 1.5062 area (peaks). Immediate resistance at 1.4965 area. Break above that area could be a serious threat to the bearish correction scenario re-testing 1.5062 area. Initial support at remains at the key support level around 1.4850/20 area.

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U.S. Midday Currency Market Hit By Risk Aversion

The dollar index strengthened across the board in Thursday trade, as the market traded in a classic risk-aversion phase that mirrored a drop in global equity trade. The major pairs headed lower from the start of the Asian session, and continued to so during the following sessions.

The sell-off on the major currencies against the Usd was driven by equity and commodity market trade, which also posted substantial declines. In the current economic climate of questionable global growth, risk aversion means lower stocks, higher bonds, and stronger Usd as Treasury notes are bought.

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a bullish momentum yesterday, topped at 1.4989 and closed at 1.4959 after rejected to move consistently below 1.4820 key support area and even after Trichet said that he support a strong Dollar. However, on my daily chart below the bearish channel remains valid and the upper line of the bearish channel provide a good resistance. So I think the bearish correction even a bearish reversal scenario (double top) is still intact. Once again, we need violation to the bearish channel to end this bearish correction and valid break above 1.5062 to confirm the bullish scenario towards 1.5150 and 1.5300

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Daily Technical Analysis

EURUSD Outlook

The EURUSD had a significant bearish momentum yesterday, bottomed at 1.4807 but failed to stay below key support area 1.4820, closed higher at 1.4860 and traded around 1.4887 at the time I wrote this comment. As you can see in my daily chart below, it’s a fact that after peaked at double top formation around 1.5062 area the pair keep moving lower in a bearish channel indicating significant downside correction and even potential bearish reversal, especially if we have a consistent move below 1.4820 area with 1.4625 and 1.4450 as technical targets.

Right now, after failed to stay below 1.4820 yesterday, the pair bouncing to the upside with 1.4950 as potential resistance to be tested. Break above that area should trigger further bullish momentum testing the bearish channel. Bearish correction can only be canceled if the bearish channel violated to the upside, but for me the real bullish continuation scenario can only triggered by a movement above 1.5062.

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Daily Technical Analysis

EURUSD Outlook

What a surprise we had yesterday. As you can see in my h4 chart below, after violated the bearish channel, actually this pair had a nice bullish momentum before Bernanke dropped the bomb with his pessimistic comment about economy recovery by saying this words: ‘Today, financial conditions are considerably better than they were then, but significant economic challenges remain. The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible’ Euro fell after that comment, hit the bottom at 1.4879 as risk aversion came back. I didn’t expected this negative tone but another surprise happened as the Euro recovered quickly, peaked at 1.5015 and closed at 1.4967. I thought that Bernanke’s pessimistic tone will support technical bearish reversal scenario, but it didn’t. I was wrong, but for me nothing is confirmed yet for now. To read Bernanke’s full comment, follow this link below:

Regardless of mixed reaction in the market on Bernanke’s words, technically, the fact that this pair still able to stay above 1.4950/60 right now should continue the pressure on Dollar re-testing 1.5062 today. However for me, only movement above 1.5062 could be seen as bullish continuation confirmation targeting 1.5150 and 1.5300. Immediate support at 1.4920 area. Break below that area could trigger further bearish momentum re-testing key support 1.4850/20 area.

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Positive Equities, And The Dollar Holds On

Overall, after a positive Asian equity trading session, in which the dollar index was pushed to a new low, the currency market started retracing throughout the morning European trade. Interestingly, this is happening on a day that equity markets are trading deep in the green, something that does not happen very often. The recent pattern has been that equity markets trade higher, which pulls the dollar lower.

Over the last two weeks of trading the currency market saw a general lack of momentum and volume, which usually appears near the end of an uptrend, signaling that the market needs a short-term retracement of the dollar selling. The currency market is trading in an overbought condition against the dollar.

Dollar Index Technical View: TheLFB Member Charts

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