USD/CAD had a very bearish week over the last 5 sessions, but did bounce a bit towards the end of the Friday session. It should be noted that the bounce was from the 1.01 level – the start of the support in the parity neighborhood. Because of this, we will need to see a strong break below the parity level in order to sell this pair. The bounce from here could have us buying though, as the USD is the “safe haven” trade at the moment, and there are a lot of headline risks out there. We are just as content with sitting on our hands though, as the two currencies and economies are so intertwined at times that it can be a very choppy pair.
NZD/USD had an extremely impressive week as the pair shot straight up. The market is currently sitting in between two major levels, but is currently in bullish mode. However, the highs keep getting lower, and the 0.8000 level isn’t that far above. Because of this, we are willing to step back and take a look at the action if we get up to that level. If we see any weakness, we are sellers. Sometimes we are paid to wait, and this could be one of those times.
GBP/USD rose during the previous week, but gave back over half of the gains by the end of Friday. The candle looks like a shooting star at the bottom of the recent fall. The 1.55 level is the start of the support level the pair is sitting on and goes all the way down to the 1.53 level. The breaking of the 1.53 level is an extremely bearish sign. If we see that kind of move, we will be heavily short of this pair. We are not willing to buy the pair at this point as the highs keep getting lower – indicating that the trend is eroding.
EUR/USD had a bullish week, but gave up a significant chunk of those earnings on Friday. The resulting candle looks like a shooting star at the end of the recent plunge in prices, and signals that we might struggle to maintain higher prices. The breaking of the bottom of the week’s range would be a very bearish signal, and would attract more sellers at this point. The buying of this pair will be almost impossible as the headline risks are numerous out of the EU right now. With the Germany – France meeting on Monday and the EU summit on Friday, there should be plenty of disappointment for all involved. We like selling rallies still as long as we are under the 1.36 handle.
The EUR/GBP pair fell for the start of the week, only to have the market bounce again over the last several sessions. The pair formed a hammer at the end of the week, and this was preceded by a shooting star. This shows how conflicted traders are in this market presently. The pair is simply a battle between two very ugly currencies, and should continue to be choppy at best going forward. Because of this, we are not trading this pair for longer-term trades at the moment.
EUR/CHF continued to go sideways during the previous week as traders avoid buying the Franc, but simply do not want to own the Euro. The pair currently has a “floor” of 1.20 as dictated by the Swiss National Bank, and cannot rise above the 1.25 mark as the EU has so many problems currently. Someday, this pair will break above the 1.25 level, and it will become a buy-and-hold pair. However, we don’t see this happening in the near term, and as such have a hard time placing anything even remotely long-term based as far as a trade in this pair.
AUD/USD had a strongly bullish week as the pair ended up well over the 1.02 level. The pair did give back some of the gains at the end of the trading week, but managed to retain 80% or so of the gains. The risk environment is still high, and as a result – the headlines can come into the markets and slam this pair straight down – or even shoot it straight through the roof. With this in mind, we like buying this pair on pullbacks and a breaking of the high for the week, but are going to be very quick to move our stop losses to break even as the risk in trading this pair is very high at the moment.
Light Sweet Crude
CL had a positive day for the Friday session as traders continue to buy commodities in general. The market looks like it wants to attempt a breakout above the recent highs of $103 and if it does – this could be the beginning of the next massive leg up in the market. However, we expect the area to actually be more resistance than the market is ready to go up against at the moment. We are buyers, but will need to see a pullback first.
Brent markets rose on Friday to make an attempt at regaining some of the losses on Thursday. The market currently looks like it is stuck between $105 and $112.50, and shows no real signs of breaking out. With this in mind, we are willing to buy supportive candles near the $105 level, and sell bearish ones near #112.50 until proven incorrect.
natural gas markets fell on Friday as traders continue to push against the support in the $3.50 area. The market has been weak for quite some time, and it appears that it will continue to be if you believe that the action of selling rallies is indicative of how the broader trading community feels about natural gas at the moment. The selling of rallies has been the easiest and most reliable strategy that we have seen in this market, and we are going to continue to do so until it can close well over the $4. We do not buy at all.
Gold markets gained a bit on Friday as traders continue to push the envelope of the “risk on” trade. The recent move has been strong, and the candle did fizzle a bit towards the end of the session. With this in mind, it looks likely that we are about to see a pullback in this market. As far as we are concerned, this is good news. It will allow us to buy at cheaper prices, and we are willing to buy supportive candle below as long as we are over the $1,650 level.
The USD/JPY pair got a boost on Friday as traders continue to buy the Dollar against the Yen at the moment. However, there is a ton of selling in this pair overall and the 0.8000 level is still massively resistive. With this in mind, we prefer selling at higher levels as this pair will continue to be a “sell the rallies” type of pair. The trade going forward will be in that vein, and we aren’t willing to buy at this time. Any sign of weakness gets us short again.
USD/CHF rose during the Friday session as the breaking of the highs form Thursday signaled more buying. The pair has shown to attract support in the area of 0.90 over the last several sessions. The highs are what we need to see to consider this a long-term buy and hold type of trade, but the pair seems very intent of doing just that. Because of this – we like buying on dips. We will not sell it at this point in time.
The USD/CAD pair had initially fallen in the wee hours of Friday before bouncing after the Non-Farm Payroll announcement. The markets produced a hammer for the session, and it currently sits on the 1.01 level – the start of the massive parity support area. The pair looks ready to bounce, and we would be willing to buy on a break of the highs form Friday. The selling of this pair will be difficult until after the 0.99 level is broken to the downside.
NZD/USD had a rough day on Friday as the risk appetite in the trading community fell later in the session. The pair has had an extended run, and a fall from here wouldn’t be a surprise at this point. The shooting star on Friday was preceded by a hammer on Thursday, so it does show confusion at this point. We actually prefer selling this pair, and would do so if we could get below the hammer on Thursday or on signs of weakness closer to the 0.8000 level.
Friday saw a hard sell off in the cable as traders sold the risk trade in the currency markets. The breaking of the bottom of the doji form Thursday gives us a sell signal, although we are sitting just above support. The 1.53 is the start of a 200 pip support zone, and we think that the market will test the bottom again. For short-term traders, the breaking of the bottom of the range from Friday has us selling, but keeping tight stops.
EUR/USD rose initially on Friday as optimism gripped the markets once again. However, the 1.35 level has proven that it will attract sellers as the pair approaches it, and the candle was red at the end of the session. The outside reversal candle is an ominous sign, and the EU has a couple of meetings this coming week that could spook this market. The breaking of the bottom of the Friday range would have us selling again. The pair isn’t one we buy under any circumstances as the headline risk in the EU are simply too strong at this point.
The EUR/GBP pair rose during the session on Friday, but gave up most of the gains by the end of the session. The resulting candle looks like a shooting star, and we see this as a short-term opportunity that could produce another fall down to 0.85 in the meantime. The breaking of the bottom of the Friday range is a bearish enough sign to have us short this market. We aren’t interested in buying the Euro at all currently.
EUR/CHF had a fairly quiet day on Friday as the range was squeezed down to roughly 50 pips again. The pair is stuck between the Swiss National Bank’s imposed “floor” at 1.20, and the 1.25 level which seems to be a brick wall of resistance. Of course, in order to expect the Euro to climb above that area, they would have to have the debt crisis fixed – something that isn’t happening anytime soon it seems. With all of this in mind, we are avoiding trades in this pair at the moment.
The AUD/USD pair struggled on Friday as the market sold off in general. The Thursday session produced a hammer, and the Friday session formed a shooting star – effectively stating that the pair is confused and could grind sideways over the next few sessions. The pair is very sensitive to headlines, and as a result – great care should be taken when trading this market. We would be willing to buy pullbacks, especially ones that find support at parity.
The USD/JPY pair fluctuated last week but it was able to end with gains for the second straight week. The Japanese yen lost momentum against most of its major counterparts due to the optimism that dominated the market.
The EU finance ministers announced the expansion means of the EFSF in order to prevent the debt crisis from spreading to other countries, the move that was coupled with many questions if it will achieve its purpose or not.
On the other hand, global equities rallied last week to cover some of the previous losses, as market sentiment helped investors to increase demand for risky assets on the back of safe haven investment, such as the Japanese yen.
In a coordinated central banks intervention, six major central banks led by the Federal Reserve lowered the borrowing dollar swap rate by 50 basis points for banks, in order to support banks and provide more liquidity into the financial system.
The Central banks intervention eased some concerns regarding the gloomy outlook for the market and the global economy.
The USD/JPY pair’s outlook remains a big puzzle for investors, as any intervention from the Bank of Japan will take the pair higher, while risk aversion could return to FX market as strong as before, which will increase demand for the yen as a safe haven and push the pair to the downside.
Major highlights for this week that will affect the USD/JPY pair’s trading:
Monday December 05:
On Monday at 15:00 GMT the U.S. economy will release the ISM Non-Manufacturing for November, where it’s expected to come at 53.5 from the previous reading of 52.9.
On the other hand, Factory Orders for October will be released at the same time and expected to remain flat following 0.3% rise the previous month.
Tuesday December 06:
Both economies will not release any fundamentals on Tuesday, where the pair’s movements will depend on the market sentiment.
Wednesday December 07:
On Wednesday at 05:00 GMT, Japan will issue the preliminary reading for Leading Index for October, where it’s expected to come at 91.5 inline with the previous reading.
The preliminary reading for the Coincident Index for October is expected to rise to 90.2 from 89.
The U.S. economy will release the Consumer Credit for October at 20:00 GMT, where it’s expected to come at $7.00 billion compare to the previous reading of $7.386 billion.
Thursday December 08:
On Thursday at 23:50 GMT (Wednesday), Japan will issue the Current Account Total for October and expected to shrink to a surplus of 1452.2 billion from a surplus of 1584.8 billion yen.
The Adjusted Current Account Total for October is expected to show a surplus of 941.0 billion yen from the prior reading of 1186.6 billion yen, while the Trade Balance is expected to show a surplus of 343.3 billion yen from the previous surplus of 373.2 billion.
At 23:50 GMT the Japanese Machine Orders for October will be released, where it’s expected to come at –7.1% from the prior -8.2%, while the annual Machine Orders is expected to come at 10.6% from the prior 9.8%.
Japan will issue the Eco Watchers Survey Current for November which had a prior reading of 45.9 and expected to come at 46.5, while the Eco Watchers Survey Outlook had a prior reading of 45.9.
At 13:30 GMT the U.S. economy will issue its weekly initial jobless claims numbers, where the number of people filing for first-time claims for the state unemployment insurance increased 402 thousand last week.
The Wholesale Inventories for October will be published at 15:00 GMT, where it’s expected to come at 0.3% compare to the previous reading of –0.1%.
Friday December 09:
On Friday at 23:50 GMT (Thursday), Japan will release the final reading for the third quarter Gross Domestic Product where the previous reading showed that the Japanese economy grew by 1.5%.
The U.S. economy will release the Trade Balance for October, where it’s expected to show a deficit of $44.0 billion widening from the previous deficit of $43.1 billion.
The University of Michigan Confidence for December will be released at 14:55 GMT and expected to slow to 63.0 from 64.1.