The USD/CAD spiked during the session on Tuesday as traders bought into the safety trade. At the same time, the oil markets recovered to build up an attempt at the $100 mark, which is very supportive for the CAD in general. As a result, we ended up with a shooting star for the session. The pair is at the top of the very tight range it has been in, and as a result we think this pair falls again, but only for a short fall. The pair simply has become a scalper’s market, being framed by parity and the 1.02 levels.
NZD/USD fell during the session on Tuesday as the “risk off” trade came back. The pair has been grinding lower as of late, and looks like it should continue. A bounce wouldn’t be much of a surprise, but should be thought of as a chance to sell now that the market looks so weak. Because of the risk-sensitive nature of the Kiwi, we don’t want to own it presently. We are waiting for a bounce from which to sell, and see 0.8000 as massively resistive.
EUR/USD fell hard on the Tuesday session as worries about Italian debts continues. The 10 year Italian bond has closed above the 7% level, an area that many people consider “unsustainable”. This should continue to fuel the fears in the market, and the Euro will pay as a result. However, the 1.35 level is just below, so selling is difficult at this point. The daily close below that level would have us selling. Otherwise, we are waiting on a bounce to sell. We do not want to own the Euro at this point.
USD/JPY initially spiked during the Asian session on Tuesday, only to spend the rest of the day falling. The downtrend remains intact as usual, and the selling should continue. However, we are getting to retrace about 50% of the recent intervention and the easy pips have already been had. We look for a slow grind lower at this point, but are finding a new position in this pair to the short side untenable. The buying of it is a loss waiting to happen, at least until we get much, much lower and trigger more intervention.
The GBP/USD pair fell hard on the Tuesday session as traders continue to sell off the Pound and run to the safety of the US dollar. The pair also broke the bottom of two weekly hammers during the session, and this is a very bearish scenario as well. The 1.58 area is offering support at the moment, but this must be looked at as minor support. Because of this, we feel that the selling of bounces could be the smart play in this market. We will not buy this pair now, due to the weekly chart showing weakness.
USD/CHF rose during the Tuesday session as the “risk off” trade continued to push traders towards the US dollar. The pair is supported by the Swiss National Bank as the central bank is working to keep the value of the Franc down. The pair looks like it should have support at the 0.9000 level, and any pullbacks would be interesting buying opportunities as the Dollar is the safety play, and the Franc simply cannot be bought at the moment. A breaking of the recent highs in the 0.93 neighborhood would have us getting more aggressive to the upside.
EUR/CHF continues to grind sideways as the rest of the markets are volatile. The Euro has held up in this pair mainly because of the interference of the Swiss National Bank. If it weren’t involved in the markets, one would have to think the pair would be sitting much lower at this point in time. The pair is going to be the ultimate “buy and hold” pair someday, but the EU has to get its act together before that happens, and that is going to take some serious time. In the mean time, we wait for dips to buy for short-term scalps in this market.
The AUD/USD pair fell on Tuesday, but bounced at the end of the session to form a hammer. The bullish candle looks as if it is reiterating the support at the 1.01 level. The pair has been grinding lower over time, and we think that trend could continue, but there looks to be a bounce in the short-term. Because of this, a buy signal is generated if we break the top of the Tuesday session. The move could signal a run to 1.04 or so, but we think it is just a short-term trade at this point. With the Aussie being so sensitive to headline risk, we are not inclined to own it for too long. A break below parity has us selling.
Light Sweet Crude
The CL contract rose during the session on Tuesday as traders continue to reach for the $100 mark. The market certainly looks like it will find it at this point, but it should also find selling there as well. The entering of longs at this point would simply be chasing a move that is almost finished. We are looking to see the reaction to $100 before forming new analysis at this point, but we feel a pullback is coming because of that level.
Brent markets rose during the session on Tuesday as traders continue to buy into the oil markets. The $110 level continues to support the market, and as a result we think the bias is to the upside at the moment, but looks constrained to stay under $115 as it looks resistive. The consolidation lends itself to scalping the market at the moment, and that is what we are doing.
The natural gas markets continued to fall on Tuesday as the supportive area at $3.50 has been “given”. The market looks extremely weak at this point, but one has to think a bounce should be coming. After all, there will certainly be some profit taking sooner or later. Because of this observation, we are waiting for a bounce to sell, more than likely at the $3.50 or $3.75 level as it should turn into resistance now that we are significantly lower. We cannot in good faith buy this contract as it is simply broken at this point.
Gold markets fell slightly at first during the Tuesday session, only to bounce later as the daily candle printed a hammer. The market continues to be boosted by the issues in Europe, and now there is also concern about the Congressional “Super Committee” in the US not reaching some kind of deal for the budget. The EU could be printing Euros soon, and this should continue to push the price of gold to the upside for the foreseeable future. Because of this, we buy on the dips, with the $1,700 level being our “floor”.
EUR/USD fell on Monday as traders continue to sell off the Euro in general. The EU has massive and well-known debt issues, and the Italian bond auction for the 5 year note went poorly for the session. As a result, the pair sold off, and is now threatening to retest the 1.35 level. The 1.35 area should be very supportive, and if it lets go – we will fall much more. The pair seems to have 9 lives like a cat, but there has to be a cracking point. We are looking for buy signals a little close to 1.35, but until we get them – we are avoiding this pair as it is at the eye of the storm.
The USD/JPY fell during the session on Monday, but managed a bounce late in the session to form a hammer at the 77 handle. Because of this, it looks like it may want to bounce, and a break of the highs from Monday would trigger a buy signal as well. The Bank of Japan is willing to intervene, although probably not at this level. However, the move up here could be a nice trade if we get it. We would not short it at this level as we are getting towards the low area of the consolidation that keeps getting the BoJ to intervene.
The GBP/USD pair fell hard during the Monday session to retest the lows of the recent consolidation that the market has been stuck in. The 1.5875 area seems to be a bit of a floor, so supportive action in the region of 1.59 could be interpreted as a bullish signal, at least for the short-term. The breaking down of this pair below 1.5850 would be extremely bearish at this point, but until then – we can’t sell this pair. We are looking for signals to go long on shorter time frames at the moment.
USD/CHF rose during the Monday session as the world bought the US Dollar in general to avoid risk. The situation in Europe is still far from resolved, and the Franc is being worked against by the Swiss National Bank. The pair can only be bought because of this, but the floor is somewhere near the 0.85 area. The pair is still one we like to buy on dips, and as long as we stay above the 0.85 level, we will continue to deploy that strategy.
The EUR/CHF pair fell slightly during the session on Monday as the Euro got sold off in general. The pair has a floor underneath it as the Swiss National Bank is working against the strength of the Franc. The pair continues to struggle to get above the 1.25 level though. Once it does – we will buy and hold for the long term. Until then, we are sitting still as selling cannot be done until the SNB backs off.
AUD/USD fell on the Monday session as risk assets sold off around the globe. The pair is highly sensitive to this kind of fear, and sold hard as a result. The parity level below looks very supportive, and the 1.01 level has been pretty active for buyers as well. The market is absolutely out of control in general at the moment, and this pair will be very dangerous as a result. The pair can’t be sold until we are under that parity level, so we are looking to see if there are supportive candles in the near-term.
The USD/CAD pair rose on Monday as the commodity markets sold off due to risk issues in the EU. The market continues to consolidate in the parity to 1.03 levels with a particularly strong interest in the 1.02 to 1.01 areas. The pair will continue to struggle to find direction as the two economies are so interconnected. The back and forth action should continue for the foreseeable future, and the oil markets continue to be a massive influence on the value of the CAD. Until we break above the 1.03 level, we cannot buy for anything more than a scalp. Selling cannot be until we close below the 0.99 level.
The NZD/USD pair fell during the session on Monday as traders continue to sell off risk. The Kiwi will be especially sensitive to headline risks, and with so much going on around the world that are making the traders nervous it should have plenty of time to react to headlines. The 0.75 level below is the real line in the sand that has us selling aggressively. The market is drifting lower but is so choppy that this market is probably one to avoid at this point.
The EUR CHF continued to trade in a tight range on the weekly chart while hovering between a pair of retracement levels at 1.9505 and 1.2395. These two prices represent the 50% and 61.8% levels respectively created by the main range of the October 2010 top at 1.3833 and the August 11 bottom at 1.0068. Additional support is at the Gann angle at 1.2308.
Although 1.9505 has been identified as a key 50% level, because of the pegging of the Swiss Franc to the Euro at 1.2000 by the Swiss National Bank, this price and not the 50% level is the true support.
From a swing chart perspective the main trend is up. The swing top at 1.2473 represents a breakout level. Since this currency pair has been compressed for so long, a trade through this price level is likely to trigger an acceleration to the upside.
Since September 14 the EUR CHF has traded in a range of 1.2022 to 1.2473. From a technical perspective that is a long-time to compress a market. With the Swiss National Bank vigorously defending the 1.2000 area, the way of least resistance is up. Traders shouldn’t expect this market to breakout to the upside the conventional way, however, it is going to take a major shift in sentiment by the global investing community to begin aggressively buying Euros and selling Swiss Francs.
With the situation in the Euro Zone continuing to fuel uncertainty, traders may actually be watching the Swiss National Bank more closely for direction. Last week’s CPI report showed a contraction which fueled thoughts of deflation. At the same time SNB Chairman Philipp Hildebrand said the Franc was still strong and that the central bank was ready to take further steps to weaken its currency. This could mean raising the peg rate to 1.30 from 1.20.
The short-term rise over 1.24 could be aggressive traders expecting such a move. Like it did in September, the pegging of the Swiss Franc to the Euro at 1.30 is likely to send shock waves through the Forex markets. Cleary something has to be done to weaken the Franc or the country in all likelihood faces a deflationary scenario. Central banks can deal with inflation since they have had more experience fighting it, but a deflationary cycle is much harder to overcome.
Political pressure is beginning to mount on the SNB to do something soon; however, it appears the central bank may be waiting for more clarity from the Euro Zone finance ministers before making its next move.