EUR/GBP had another back and forth session on Friday as traders continue to mull over the situation in Europe. The summit produced a reasonably accepted solution, but not a final one. The lack of fiscal union with the Euro will still be a concern, and the UK is so attached to this area that the market is having a hard time differentiating between these two currencies. With this in mind, we think that the pair should continue to bounce around between the 0.85 and 0.8650 levels.
USD/CHF had another tight range for the Friday session as the market ended up down slightly. The Swiss National Bank has put a floor in the EUR/CHF pair at 1.20, and announced that it is willing to fight strong Franc appreciation going forward, and with this it is going to be difficult to buy it for more than an ultra short-term trade. The US dollar on the other hand is the ultimate “safe haven” currency as traders will often run to the US Treasury markets in times of concern.
The recent global headlines have been poor, and the world is still concerned about the EU in general. The fact that the Euro has been selling off normally pushed the Dollar up in general. With this in mind, and the fact that the SNB is working against the Franc, we like buying this pair.
It must be said that the 0.93 level above is massive resistance. The area above could give way in a time of uncertainty, and if it does – we could see 0.95 in fairly short order. However, the area is currently keeping the bulls at bay, despite an almost continual push to get above it. The strength of this area has been impressive, which leads us to believe that if the breakout ever comes, the move will be strong and swift to the upside. Selling isn’t much of an option, at least for anything more than a short-term trade as the SNB is waiting below. With all of this in mind, we are willing to buy dips and closes on the daily chart above the 0.93 level. The markets have been fairly quiet, but it must be said that every time they fall – they recover. With that in mind we are willing to do a bit of scalping to the upside as well. It has worked lately, and should continue to as the world still want to buy Dollars, and doesn’t seem too interested in fighting a central bank at the moment. The Franc is without a doubt the least wanted currency presently, and should give way soon.
EUR/CHF rose slightly over the course of the day as the markets originally got long of the Franc, but the bounce late in the session saw this pair make a hammer for the session once again. The pair looks to sit still as the markets cannot sell this pair for any length of time as the Swiss National Bank has put a “floor” in this pair of 1.20 recently. The 1.25 level continues to be very resistive as the market simply can’t get above it. Until it does – we aren’t trading this pair for anything more than a scalp.
AUD/USD had originally fallen on Friday, only to bounce again and form a hammer in a very supportive manner just above the obvious parity support level. The recent consolidation has focused on the 1.03 level, which has acted like a magnet for price and it looks like this could continue. We think that the global headwinds could continue, and the upside in this “risk on” pair should be somewhat limited. Because of this, we are willing to sell the rallies as long as we stay under the 1.05 level. The gap from two weekends ago still needs filled, and should be fairly soon.
USD/CAD had another tight day on Friday as the market ended up down slightly. The pair will follow the oil markets over time, and with those markets currently range bound, it makes sense that the Canadian dollar can’t decide where it wants to go. The 0.99 – 1.01 levels are the boundaries of massive support in this pair, and the levels should continue to hold unless the oil markets can break out to the upside, causing demand for the Loonie. The market is still very nervous, and this always pushes demand for the Dollar overall.
The level above at 1.03 is minor resistance, and we think that it can be somewhat easily overcome, but the real test would be at the 1.07 level, as it would signify a massive breakout again. The pair would more than likely do this on bad oil prices more than anything else at this point in time. The lack of volume going forward due to the holiday season could exaggerate moves at times, so be mindful of that. However, the pair itself looks set for more of the same sideways and volatile grind going forward.
The breaking of the 1.07 level has us holding onto the buy side of this pair for some time, but to think that it will happen before 2012 might be asking a bit now. The volumes in several of the markets we follow is starting to dry up, and this is normally a sign that a lot of the big players in the markets are starting to wrap up for the year.
Looking at the near-term, we think selling between 1.05 and 1.07 is the prudent thing to do, and buying just above parity will serve you well for the time being. Of course there is always the chance of the above mentioned break out to either direction and those opportunities would present clearer trend-following trades going forward in what has been an overly choppy marketplace. The oil market will have to be watched, as the $100 level in Light Sweet Crude is the start of massive resistance, and this is the biggest thing working against the CAD at the moment. A break ing down of that market will send this one much, much higher.
The EUR/USD pair has been a focus of the markets for some time now. With the various debt issues in that region, it makes total sense. The headlines have been pushing the markets around lately, and many traders have been chopped up in this pair.
The EU summit came up with a band aid situation, and the UK even has decided not to participate going forward. The real questions loom as to whether or not the ratings agencies will downgrade the European Union countries because of the lack of a common bond and tighter fiscal union than the S&P actually wanted. The outlook for the EUR/USD is somewhat beholden to that issue now at the moment.
The resulting candle for the week is a doji, but closing lower than the open. The week did have at least some positive news coming out of Europe, but the reaction was muted. The lack of enthusiasm almost undoubtedly has to do with the fear of credit downgrades for the EU and its countries. If this comes about, we could see a real move to the downside in reaction. The S&P agency mentioned the fiscal union by name, and threatened to downgrade 15 of the countries in the union, as well as the EFSF bonds that are meant to bail everyone out. With this in the backdrop, there is a real chance that the Euro doesn’t move much, or even moves to the downside.
The 1.30 level continues to be massive support, and there has even been talk of Asian central banks buying at that level. The reality is that the level has been fiercely supportive. The breaking below that area would be massive in its scope, and would send this pair much lower. The resistance at the 1.40 level seems to be a cap in this market as well. In the near-term we think there are still massive headline risks ahead, and we think the longer-term direction is probably down, but choppy.
The USD/JPY pair continues to grind lower as the bears step in every time it rallies. The Bank of Japan is the only reason the market isn’t sitting below the 75 handle at this point. Once the price gets closer to 75, the BoJ intervenes. Because of this, it is hard to form any long-term selling in this pair. Buying isn’t an option until we close over the 80 level finally as it is massive resistance.
The GBP/USD pair rose back above the 1.57 level several times this week, and has since been falling. This makes the pair look very vulnerable as the level simply cannot be overcome by the cable bulls. The pair looks more and more like a complex head and shoulders is forming, and a break below the 1.53 level would confirm this. If we get that – we think 1.43 is very likely in the long run. With this in mind, we prefer selling rallies at this point as buying is proving to be somewhat fruitless at this point.
The EUR/GBP pair has been a sideways market for the last month or so. The truth is that both of these currencies simply aren’t liked by many. The pair looks to be stuck between the 0.85 and 0.8650 levels, and there isn’t much to suggest that we are going to break out of this range in the short-term. This is especially true since the holidays are coming up soon, and the traders will certainly be away from the markets the later we get in the month. With this in mind, we still see this as a day trader’s market for the next several weeks.
The USD/CHF pair has been a very quiet pair over the last several weeks as the markets are respecting the recent push back by the Swiss National Bank and the intervention threats. The USD/CHF has a duel set up really, as the US dollar is the “safe haven” currency everyone runs to in times of trouble. The Swiss Franc used to enjoy this status, but with the Swiss National Bank working against it, traders aren’t comfortable in buying it presently.
As long as there is serious concern over the world’s economies and the EU in general, there will be a bid for the US dollar. So why not buy it against a currency that is being worked against by its own central bank? That is the thinking in this pair it seems. However, the 0.93 level has been very stubborn to give way, and this has kept a lid on this market overall. It should be noted however that the pair does fall – it bounces again.
The downside is protected by the 0.9000 level and even lower at the 0.8500 level. The recent pullback was healthy and looks very constructive. If there is a continuation of global fears, the Dollar should continue to benefit, and this pair should rise eventually. The closing of the pair above the 0.93 level would be very bullish in this pair, and have us long. Shorting this pair isn’t an option for us in this pair as the Swiss National Bank will certainly get involved if the Franc gets some kind of bid from the markets in general. The EUR/CHF pair is the trigger if it falls too much, but the Franc-related pairs should all rise in unison if they get involved. Because of this, there is more upside risk than down.
The daily chart will be out trigger to get involved if we get a close above the 0.93 level. The pair will find the next couple hundred pips tough, but the breaking of it would be a massively good sign and we will see it rise over time.
The EUR/CHF pair has been a sideways market for some time now. The Swiss National Bank initially announced a “floor” in the pair at 1.20, and this level continues to be respected by the markets. The biggest issue with this pair going forward is that nobody really wants to own the Euro as the area is going to go into recession.
The pair can’t fall much either as that floor is still intact. The SNB will certainly intervene if this pair falls too far. The continued uncertainty will continue to keep this pair very quiet over time, and the sideways action will more than likely continue for the near future. Because of this, we don’t see any long-term trades until we at least get a daily close above the 1.25 level.
The AUD/USD pair recently rose back above the parity level, and has since been very volatile. This makes sense as it is so sensitive to headline risk. The markets have been acting erratically lately, and this pair shows that emotion-fueled trading quite well. Choppiness should continue as the markets continue to digest the issues surrounding not only Europe, but potential slowing down in China as well. The weekly candle is a doji, and this shows just how directionless this pair is right now. In order to get long, we will need to see a weekly close above the 1.05 level, and shorting would be under parity. Until then, we are simply watching – but prefer shorting as the panic trading seems to rule over all every couple of days.
The USD/CAD pair has been a very volatile pair over the last several months as the markets continue to weigh the economies around the world and the growth expectations. The oil markets are a big driver of this pair, and the oil markets are almost exclusively driven by economic activity. The pair has found massive support in the 1.01 area, and the support even runs down to the 0.99 level. The pair looks like it has broken out above the parity level recently, and the original fall from the 1.07 level crashed hard into the area. The resulting bounce didn’t quite make it as high, but the candle for the previous week has formed a hammer of sorts, and shows that the pair doesn’t want to give up the fight just yet.
Oil markets look very range bound at the moment, and this is part of the reason we are seeing such volatile yet nowhere moves in this pair. The world slowdown would have a massive effect on the consumption of oil, and this would serious dampen the demand for the Canadian dollar. It is because of this that we need to follow the strength of economies in such places as China. (After all, it is China that the trading world thinks is going to save the rest of us.) If we see serious degradation of global strength, this pair will continue to bounce higher.
For now, the 1.01 to 0.99 level seems to be massively supportive, and we are willing to buy from that area. The 1.07 above looks like it could be the first massive resistance point, so the market will more than likely find itself sitting between the two over the short run. With this in mind, we are buying this pair near the 1.01 level, and selling it when we get to 1.05 in the near-term. If we can get above the 1.07 level, this becomes a long-term buy and hold pair going forward. The pair is known for making large and sudden moves, so this could happen much quicker than many people think.
The NZD/USD pair recently shot straight up, and after falling for much of the previous week managed a bounce in the end. The pair looks well supported at the 0.75 level, and the recent action has been promising. However, the highs are getting lower, and we feel this should continue as the worlds markets are becoming more and more risk adverse over time. The pair is going to be very sensitive to bad news, and it looks like we will probably get more before it is all said and done. We like selling rallies in this pair, especially near the 0.80 level.
Light Sweet Crude
The CL contract has a back and forth week over the last 5 sessions as traders bounced around the $95 to $100 levels. The markets looks like it is trying to find momentum to rise, but the $100 mark has been far too strong for it to break through. The $100 mark has to be broken solidly before we are willing to buy on a longer-term basis. The downside looks fairly limited to $90 as it has been strong support. We look for range bound conditions to continue going forward in this market.
Brent markets fell over the previous week, but saw a bid on Friday as traders are looking to keep this market within its recent range. The market still looks fairly stagnant, and with the holidays coming, there is a real chance that we won’t see a breakout to either direction anytime soon. Because of this, we are in a scalper’s market and will more than likely see sideways markets over the next few weeks.
One of the easiest trades over the last several months has been to short the natural gas markets, and this trend looks as if it will continue. The breaking below the $3.50 mark is a very bearish sign, and it looks as if the next leg down in this market has started. The market should be firmly below the $4 mark for the long run now, and this breaking down leads us to the target price of $3 before it is all said and done. Although there will be bounces, we sell them all as this trend continues to the downside.
The gold markets have fallen a bit lately, but the overall trend still looks bullish. With the end of the year approaching, the lack of volume will become more and more pronounced as the world gets less and less involved in the markets traditionally. The trend line that we have been crawling up since September is still intact, and as long as this is true, we think dips are to be bought. Coinciding with this is the $1,600 – $1,700 range, which we see as massive support. We are buyers in this market as long as that area holds up as well. We prefer to buy the dips going forward.
Light Sweet Crude
The CL market rose after the EU summit came up with another band aid for the markets on Friday. The “risk on” trade continues to be in vogue at the moment, and with that we saw a rise in most commodities. The recent range looks to still be intact, and because of this we think this market will rise, but struggle to get over the $100 mark as that is where the top starts. We like short-term scalps to the upside for the next day or two, and taking our profits quickly.
Brent had an almost identical day on Friday as the markets are all correlated for the “risk on” trade now. The range is still intact, and we think that there is a little bit of upside momentum that will allow for scalps, but the upside is probably limited to the $112.50 mark. Once we get there, we would be willing to take profits.
Natural Gas markets broke down on Friday as the shooting star from Thursday that had us looking for this move. The market continues to be very bearish, and buying isn’t even possible at this point. The rallies have all been selling opportunities, and this latest fight to get back up to the $3.75 level shows just how weak this market is. The $3.50 level should be considered as resistance now, and we are looking to sell the next rally, especially if it fails in that area.
Gold markets sat fairly still during the Friday session as the EU summit came to a close with a mild compromise. The trend is still up, and we have been climbing a trend line for several months now that looks like it is still holding. With these two factors involved, we are buyers and not sellers in this market. On a dip, we are willing to buy as long as we stay above $1,600. Selling simply isn’t an option until we get below that same mark.