EUR/CHF had a slightly bullish day for Monday, but fell towards the end of the trading session as traders started to pare back bets in the Euro. The Euro fell in the last hours of US trading all around, and this pair was no different. Remember, the Swiss National Bank is threatening to defend the floor in this pair at 1.20, so its downside will be limited. Because of this, we want to buy, but only after Europe gets the debt crisis under control. The meeting on Wednesday could have that signal for us – however, we don’t dare do anything in this pair until after that.
The AUD/USD slammed into the 1.05 level on Monday, and pulled back slightly. The area proved to be massively resistive, but the candle is closing towards the very top of the range, which is always a bullish sign. The 1.05 area level is considered massively important, not only because of the technical resistance, but also because of the fact that it is a “large round number”. The pullback was late in the session, so it is hard to put a lot of weight on it. However, looking towards the shorter time frames might be the way to go in order to see if we are going to fall again. The trend is decidedly up over the last couple of weeks though, so shorting is tough. A daily close above the 1.05 level has us buying.
USD/CAD fell on Monday as traders sold the Dollar around the world. The oil markets also managed to break above the $90 mark, and this was massive resistance. The demand for oil could and should push the value of the Canadian dollar up, which of course pushes this pair down. However, the parity level has held for the session, and the level is massive support. Until we close below that on a daily candle, it is going to be very difficult to short this pair. Signs of support and a move upwards from current levels could send this pair go up to 1.03 in short order. In the meantime, we need to see what markets due for the Tuesday and perhaps Wednesday session, and then place our trade accordingly.
NZD/USD rose on Monday as traders bought back into the “risk on” trade. The Kiwi is a commodity currency, so the move makes sense to us. The 0.8000 level has given way, but it appears that the 0.81 level might be the top of that resistance area. The resulting candle looks somewhat like a shooting star, but is a bit too thick to actually considered one. The set up is fairly simple: buying this pair on a break of the Monday highs is considered a decent long opportunity, while the breaking back down below 0.8000 would have us bearish.
Light Sweet Crude
CL exploded to the upside on Monday as traders dumped the Dollar across the board. The market looks like it has broken out, and we should now see an attempt to reach the $100 mark. The breakout is significant, but could be derailed by news out of the EU on Wednesday. Remember, if the markets don’t like the solution for Europe, it will sell assets first, and ask questions later. Because of this, we are bullish, and willing to buy on a break of the Monday highs, but are going to be a little tighter with our stops than usual.
Brent had a positive day on Monday as the aforementioned scene played out in most commodity markets. The Dollar is on the back foot around the globe, and the Brent market gets bought up as a result. The candle on Monday almost broke above the shooting star formed on Friday. If the top of the range on Friday gets broken, this could be a massively bullish sign. We are willing to buy on a break of that shooting star.
The natural gas markets fell again on Monday as traders continued the bearish momentum that the market has seen over the last several months. The $3.75 level still seems to be holding up, but it seems that it is only a matter of time before it gives way. Of course, the winter is coming and it is a traditionally heavy usage time for the resource. However, the supply is so great now; it appears any bounce at this point is simply another invitation to short natural gas. We remain firmly bearish, and aggressively so as long as we stay under $4.
Gold markets rose on Monday as the continuing drama coming out of Europe goes back and forth. As the Situation is so fluid, many traders are starting to buy gold again as a safety trade, in case of some kind of massive blow up coming out of the EU during the week. The markets have been very generous to the EU in its patience, but it certainly needs to come up with something on Wednesday, the “extended” deadline for finding a solution – or things could get ugly. The gold markets benefit from the falling Dollar, and has gotten a boost from that during the Monday session as well. We still like buying dips above $1,600.
EUR/USD rose again on Friday as traders anticipated some grand plan coming out of the EU over the weekend. The fact that it couldn’t break out of its trading range shows just how little faith there actually is in this idea, and it could be setting up for a fall at this point. In fact, the EUR/CHF showed weakness, and suggests that might actually be the case. However, with the meeting over the weekend, we will need to see what the Monday close looks like in order to make another trade. At this point in time, you should probably be flat in this pair.
The USD/JPY pair spiked lower on Friday and even managed to peak below the 76 handle. The area has been massive support, and as such – repelled the surge eventually. However, this was a serious test of the will of the Japanese central bank, which didn’t do much it appears. (It can be said that there are rumors of them stepping in “quietly” at the 76 handle, however this is just speculation.) We still believe in the range, and think this could be a good spot for a scalp. However, the EU meeting over the weekend could produce massive fireworks in the markets at the open on Monday, so smaller positions are urged.
In a surprising show of strength, the GBP/USD pair broke above the resistance area at 1.58 on Friday. The level had been keeping the market down, and as such the market popped after it gave way. However, the 1.60 level is roughly the 50% retrace of the total move, and it should provide massive resistance to the cable pair. We think the buy move has already ran too far, so looking for weakness closer to the 1.60 level is probably the best route for selling. The pair made an impressive move – but there are a lot of headwinds and potential headline risks out there that could push this pair down.
USD/CHF fell again on Friday as investors sold off the Dollar against everything in response to the anticipation of the EU bailout meetings over the weekend. The idea of the meeting producing something major seems to be the focus of the markets. However, the Swiss National Bank is still willing to work against the Franc, and we think this pair only has limited downside because of that. The pair is a “buy only” pair at this point, and with that in mind – we are not willing to join this move. We are looking for a supportive candle in which to buy this pair currently.
The EUR/CHF pair fell on the session for Friday as the market rallied in several other “risk” pairs. This was odd, as the Euro exploded against so many of the other currencies. With this in mind, the EUR/CHF is the one that is being supported by a central bank – so why is it falling? We can’t sell this pair because of the Swiss National Bank and its need to push this pair up, but the fact that the Euro fell shows us that it is possible the Euro strength isn’t real. We might be able to buy this pair for a long-term trade, but only if the EU meetings produce something substantial.
AUD/USD rose during the Friday session as the world awaits the results of the EU meetings over the weekend. The Aussie is a barometer of global risk, and it fared quite well as a result of the market getting excited about possible good news on Sunday. However, the 1.03 – 1.05 levels are just above, and continue to be very resistive. In fact, the pair didn’t break out of its recent consolidation yet, so we would wait. 1.05 has to be closed above on the daily chart for us to buy. On signs of weakness and/or bad news – we are sellers.
USD/CAD fell on Friday and tested the parity support level in the process. The daily close is looking weak, but the level has held up. The market will be highly correlated to the oil markets, and they look ripe for a pullback. Because of this, we suspect a bounce is coming in this pair. The selling of it will be very difficult unless we manage to break below parity, and hold that to a daily close. The market should be observed for the Monday close, and not traded until we see the market’s position at that point.
NZD/USD had a bullish day on Friday as traders continued to get excited about a possible EU rescue package over the weekend. However, the recent consolidation area wasn’t broken, and the real risks are for disappointment from the meeting – which would produce a “risk off” environment, and would be bad for the Kiwi overall. Because of this, we are not comfortable buying this currency unless we see a solid green candle at the close on Monday. Until then, we feel much more comfortable selling signs of weakness.
EUR/USD rose again this past week as traders continue to anticipate the EU coming to some kind of solution in the debt crisis. The pair looks strong at this point, but the 1.40 level should present serious resistance in this pair coming up. The meetings over the weekend could be another catalyst for a big move, but until then it is hard to tell where we go. The path of least resistance is probably down, and a breaking of the bottom of the candle for the week would have it being a “hanging man”, which is very bearish. The breaking of the 1.40 mark must be accompanied by a daily close, and then we would consider buying. Until then, we have to sit still.
The USD/JPY pair spiked lower on Friday and even broke through the 76 level as the Dollar really got punished towards the end of the session. The move was a bit of a surprise, and should catch the attention of the Bank of Japan as well. The BoJ has shown it is working against this kind of move, and one has to wonder how much they will allow the Yen to appreciate. Because of this, we can’t sell this move, and as long as the 76 level holds up – and at the time of writing it is, we would use this as an opportunity to buy. However, this is a short-term trade, and not a long-term one.
In a surprising show of strength, the GBP/USD pair smashed through the 1.58 level on Friday, and even ran up to the 1.5950 level, which is the beginning of a massive resistance level which is centered around the 1.60 area. The pair looks strong at this point, but with the EU meetings over the weekend, the future direction is going to be difficult to pinpoint. The 1.60 level should point the way forward, and to be honest – we are very interested in selling signs of weakness. Buying isn’t going to be possible until we close above 1.60 on the daily timeframe at the very least.
USD/CHF fell this previous week as traders dumped the USD in mass on Friday. The hope that the EU is going to produce some kind of massive bailout package over the weekend is part of what is fueling the massive short-USD positions, and as a result it is pushing the USD down against most other currencies as well. The CHF was no exception. The pullback should be looked at as an opportunity to buy, but perhaps a little closer to the 0.8500 level as it looks like solid support. The weekend is going to produce fireworks more than likely, and as a result – this pair will be much clearer by the time Monday or even Wednesday rolls around, as there is a second EU meeting on Wednesday now.
The EUR/CHF pair fell for the week as the pair continues to trade in a tight range. The market is being artificially propped up by the Swiss National Bank as the SNB is working with a “floor” at 1.2000. The market is therefore a “buy only” market, but there needs to be some kind of resolution to the debt issues in Europe for us to get wildly long in this pair. This pullback could be a buying opportunity, but it shows that the Euro is rising against many currencies, but cant against one that has a floor in it – this could be a sign of underlying weakness in the “Euro rally” we have seen lately.