USD/CAD Technical Analysis for the Week of September 5, 2011

The USD/CAD pair formed a hammer on the weekly chart, showing massive support in the sub-0.98 area. However, the massive shooting star leading to the parity level also bodes for confusing trading in the near term. The pair could see consolidation between the 0.98 and parity levels. The economies are intertwined so much that choppy and indecisive trading isn’t exactly out of the ordinary for this pair. We look for a close above parity on the weekly to go long for the longer-term, and a close below the 0.98 level in order to short this pair.

NZD/USD Technical Analysis for the Week of September 5, 2011

The NZD/USD pair rose during the previous week, but struggled to get above the 0.85 for any significant amount of time. The resulting weekly candle is a shooting star, and this pair looks like it is heading lower at the moment. The pair isn’t bearish however, but rather could be a sign that we are about to enter the consolidation area again that is bordered by the 0.85 and 0.80 areas. The pair is decidedly bullish, so instead of selling, we would prefer to see some kind of buy signal a little lower in order to go long of this pair.

USD JPY – September Outlook

The fear of an intervention by the Bank of Japan held the USD JPY in a narrow range for much of August helping to contribute to the miniscule loss of less than 1% for the month. Although a new low for the year was reached on August 19 when the market took out the March 2011 low at 76.37. This pair quickly turned around after reaching 75.94 as nervous traders quickly abandoned attempts to break this market lower on the thought that the central bank was poised to apply some pressure like they did earlier in the month.

Earlier in the month, the BoJ embarked on an aggressive intervention campaign, causing a 2% drop in the Yen against the U.S. Dollar. The decline in the Yen was its biggest in almost a year. Like the intervention attempted in March following the earthquake and tsunami, BoJ officials are hoping its third intervention of the year puts a bottom in the market allowing the Japanese economy to solidify its recovery from the March disaster.

With traders continuing to flock to low-risk, safe haven currencies amid signs of a slowing economy, the jury is still out as to whether the BoJ applied enough firepower to reach its objective. Traders seem to think the central bank still has the weapons to combat high volatility in the currency and rapid appreciation. The trading action throughout the month seems to indicate that traders are allowing this latest round of intervention to take hold.

Although the early August intervention low at 76.29 was taken out later in the month when the market reached 75.94, the quick turnaround to the upside seems to be indicating a growing respect for the Bank of Japan’s threat to intervene as many times as possible to prevent rapid currency appreciation for no other reason other than speculative purposes.

The appointment of a new Prime Minister with experience in intervention could also be sending a signal to speculators to back off the Japanese Yen and allow the currency to top out. With the economy still struggling to recover from the natural disasters earlier in the year, the BoJ needs to stop the Yen from appreciating because a high priced Yen hurts exports. The size of the intervention in August is a strong indication that the central bank is committed to weakening its currency.

As the global financial markets began to calm throughout August, coupled with the intervention, the USD JPY began to stabilize. Some chart watchers believe the sideways movement in the currency pair is creating a support base or a launching pad for the next rally. This is only likely to occur if demand for higher risk assets returns. If this happens then traders are likely to begin borrowing Yen to purchase these higher yielding assets. This could trigger a strong rally in the Dollar/Yen.

Technically, the USD JPY is trading inside a monthly range identified as 85.52 to 75.94. The retracement zone of this range is 80.73 to 81.86. This area along with a downtrending Gann angle at 80.52 are the next potential upside target. Although the market is likely to sell off following the first tests of these levels, a breakout through them will be a strong sign that the Yen has reached an important top.

In September traders should continue to fear an intervention, meaning that caution should be exercised when shorting the USD JPY near the low for the year at 75.94. Unless there is another global sell-off of higher risk assets, traders should avoid speculating heavily when the currency pair is nearing a new low.

On the upside, speculation that the U.S. Fed may initiate another quantitative easing program is helping to fuel a rally in the equity markets. This is helping the Dollar appreciate against the Yen. This action is likely to continue in September until at least the next Fed two day meeting on the 20th   and 21st. At that time, the Fed may reveal its new plan to stimulate theU.S. economy. If it means more free money, then look for equities to advance and the U.S. Dollar to depreciate against the Yen.

GBP/USD Technical Analysis September 2, 2011

The GBP/USD pair fell on Thursday, and even managed to break below the 1.62 mark as traders sold off many risk-related assets around the world. The Pound has been a favorite of sellers lately, but now is getting into more serious support. We did see a significant bounce at the end of the session, but the pair is decidedly weak. With the choppiness in this pair lately, with think that selling rallies is now the way to go in this pair.

EUR/USD Technical Analysis September 2, 2011

The EUR/USD pair fell hard on Thursday, as traders are focusing on the various issues in the European debt markets. The Non-Farm Payroll report comes out at 8:30 a.m. New York time and this pair will certainly be effected by it. The two currencies are both reviled as both economies are weak at best. The pair is tough, and it is choppy to trade. Because of this, we think the pair will be almost impossible to trade on Friday. However, the close could give up much more information. In the mean time, we see much cleaner set ups in other pairs such as the AUD/USD and NZD/USD for today.

USD/JPY Technical Analysis September 2, 2011

The USD/JPY pair rose quite a bit on Thursday, but only to fall again in later trading. The 77 level is now turning into significant resistance at this point, and should keep a bit of a cap on the market in the coming days. The bears are more in control, but the Bank of Japan is waiting to intervene in the market if prices get too low. Something has to give – but we haven’t seen it yet. Sitting on our hands is the way to go in this pair for the time being.

USD/CHF Technical Analysis September 2, 2011

The USD/CHF pair fell again on Thursday as traders continue to buy the Swiss Franc against most other currencies. The pair tested a weekly trend line and failed to the upside a couple days ago, and as such – has confirmed the downward trend again. The area in the 0.79 – 0.80 levels is massive support, and if that gives way- we will go much lower. The 0.75 level is more than likely the next stop if this happens. If the area holds, we need to see 0.83 level broken to the upside in order to buy this pair.

USD/CAD Technical Analysis September 2, 2011

The USD/CAD pair fell again on Thursday, although did not manage to break through the bottom of the hammer from Wednesday. This shows that there is still some support in the 0.97 area, and it will have to be overtaken in order to fall more. The trend is down, so we are more comfortable shorting this pair than buying it. The daily close below 0.97 is a great sell signal in our opinion. The pair cannot be bought until we close above parity.

NZD/USD Technical Analysis September 2, 2011

The NZD/USD formed a hammer on Thursday, after forming a shooting star on Wednesday. The 0.85 level is shaping up to be a significant battle area, and could determine the short-term future for this pair. The breaking above the high on Wednesday could prove this pair to be strong enough to rise more. A breaking of the lows on Thursday would be very bearish. The Non-Farm Payroll report will more than likely throw this pair around in the New York morning, and as such – we think waiting until the closing of the daily candle might be the best way to find your signal in this pair.

EUR/CHF Technical Analysis September 2, 2011

The EUR/CHF pair fell on Thursday, and it looks as if the 1.13 level will have to be broken in order to continue the fall. The pair is decidedly bearish, and the 1.10 area looks like a target to the downside for this pair. If we cannot break 1.13, then we will bounce. The 1.2000 is the ultimate resistance in this pair, and we want to see it overtaken in order to go long. If we break through 1.13, we will get aggressively short of this pair.

AUD/USD Technical Analysis September 2, 2011

The AUD/USD pair rose on Thursday, and continues to impress in its ability to rise in the face of a “risk-off” environment. The Aussie is now becoming a bit of a safe haven play, albeit moderately so, but the Aussie is being bought by traders looking for strong and vibrant economies around the world. The 1.08 level is now the area to break above if we want to see continued upward pressure. The Non-Farm Payroll report will cause fireworks, and this pair could move rapidly as a result. All trades should wait until after 9 a.m. New York time, as this pair will more than likely be moving quite a bit. If we can get above 1.08 – we should go higher.

NZD USD – September Outlook

After posting a new all-time high at .8842, the NZD USD sold off sharply as investors shed risky assets. Fortunately this sell-off was event driven and not related to a shift in the economy, and the Kiwi stopped at a major 50% level near .7978. From this retracement level, the currency pair rallied back to close at .8541. This close was about 2.84% lower than July’s close.

Despite the hard sell-off in August, the main trend remained up on the monthly chart. Studying this chart, one can see that the market clearly has support at the 50 percent to 61.8 percent retracement zone of the .7114 to .8842 range. This zone is at .7978 to .7774. The market will have to break through this retracement area to signal the start of a sizable correction.

In addition, uptrending Gann angle support from the March 2011 bottom at .7114 is providing solid support. This month the angle moves up to .8074. A move through this angle will serve as a warning that the market is weakening.

Fundamentally theNew Zealand economy appears to be sound. Last month the NZ economy posted a strong trade balance surplus of 129 million, trouncing the estimate of a 124 million deficit by a long-shot. This was the first July trade surplus since 1991. Although it showed a surplus, the figure was significantly lower than the June surplus. In addition, retail sales increased, beating expectations. With the economy on sound ground, expectations are for this trend to continue into September.

The interest rate differential also favors the New Zealand Dollar over the U.S. Dollar. With the Reserve Bank of New Zealand holding interest rates at 2.5% while the U.S. Fed remains soft, money should continue to flow into thisPacific Rim nation.

In late July, the RBNZ expressed concerns about the debt problems in Europe and the U.S., stating that it expected fragility in the global financial markets. Now that the U.S.debt ceiling issue has been resolved, traders are likely to focus on other side of the equation, the New Zealand economy.

At this time the central bank is concerned about the very high value of its currency putting a drag on the economy. If this condition persists, the RBNZ is likely to refrain from any interest rates hikes in the short-term. As the Kiwi gains strength, traders should be aware that the central bank may take action to prevent excessive volatility. Rumors of this taking place may dampen gains and could even make traders nervous enough to trigger a sell-off.

 

GBP USD – September Outlook

Up until the last week of August, the GBP USD was in a position to post a gain for the month. This was before the economic outlook turned gloomy. At the forefront was a dismal consumer confidence figure. This news fueled selling pressure as traders began to abandon their long positions.

Like most economies the consumer is needed to provide growth. As consumer confidence falls, so does consumer spending. This report was bearish because it was a strong sign that the economy was in a position to falter, leading to speculation that the economy would fall into a recession.

About mid-month, the GBP USD surged to the upside, reaching its monthly high at 1.6618 after it was reported that inflation grew faster than estimated. Traders bought the Sterling in anticipation of a possible interest rate hike by the Bank of England. When inflation rises to unacceptable levels, often the central bank will raise interest rates to draw money from the economy.

This inflation-driven rally came to a screeching halt when it became clear that the weakness in the economy would mean the BoE would be in no position to begin hiking interest rates.

Additional bearish factors that helped pressure the British Pound were increased jobless claims and a weak outlook for the economy based on the BoE minutes. The latest release of the minutes from the August meeting showed that all nine members of the central bank’s Monetary Policy Committee agreed to hold the benchmark lending rate at a record low of 0.5 percent.

Unlike the U.S. Federal Reserve which claims to have more tools available to prevent another recession, the Bank of England seems to have its hands tied because of the high inflation rate. It is very difficult to propose additional quantitative easing when inflation is running high. Based on current economic conditions, don’t expect the BoE to begin raising rates soon. The key as to which way the GBP USD will move in September will be determined by the strength or weakness of the economy.

Technically, the GBP USD made a minor closing price reversal top. This is potentially bearish signal. How bearish the market gets will be determined by whether there is enough selling pressure to break through bottoms at 1.6111 and 1.5780. A pair of uptrending Gann angles at 1.6789 and 1.5509 suggests the British Pound may have an expanded range in September with a slight bias to the downside.

EUR USD – September Outlook

The EUR USD finished August virtually unchanged from July at 1.4369. The range for the month was .0494 which was relatively tight. In addition the Euro posted an inside move which typically indicates indecision and impending volatility.

The inside trading range was most likely the result of uncertainty regarding the sovereign debt situation in many Euro Zone countries namely –Spain,Italy and Greece. The list could go on to include Ireland and Portugal, but last month the market seemed to focus on the big three.

The problems in the Euro Zone that are primarily weighing on the Euro center around creating a super fund to bailout the struggling nations, and the possibility of a double-dip recession. Throughout the month the debate raged on over how to bolster the European Financial Stability Facility fund. The debate was clearly a battle between the haves and the have nots. Understandably the richer nations are hesitant about throwing more money into a fund to bailout the poorer nations unless the latter continues to apply strict austerity measures to gain control of their finances.

This discussion is expected to continue until a final solution is reached. At times it was discussed in the news whether the Euro Zone was on the brink of a break up. When this alternative was proved to be too expensive, the thought of a Euro Bond was also mentioned. Unlike the U.S. Treasury, the European Central Bank may have a difficult time getting approval for such a proposal because of the many cultural, political and economic differences between the member nations.

The Italian debt market was also at the forefront last month. The cost of insuring Italian debt soared at times along with borrowing rates. When the situation reached a dangerous level, the ECB stepped in to buy Italian bonds. This helped put in the bottom in the Euro for the month until late August when traders began to focus on the economy.

The last week of August proved to be a tumultuous week for the Euro. What started out to be a near-term breakout above 1.4500 because of increased demand for higher yielding assets, turned ugly when ECB President Jean-Claude Trichet hinted that the central bank was considering ending its tight monetary policy. Whether he meant that interest rates hikes would come to an end or there would be a rate cut was unclear, but by the end of the month, it became clear that he must have had a peek at the economic numbers.

Facing both the possibility of a double-dip recession and the lingering sovereign debt crisis, the EUR USD begins September under pressure. Technically, the monthly chart indicates the market is in an uptrend. The charts show the main range is 1.2873 to 1.4940. The 50 percent to 61.8 percent retracement zone of this range at 1.3907 to 1.3663 may be the next downside objective.

At the start of the new month, the EUR USD was holding above an uptrending Gann angle at 1.4276. From the chart you can see that this angle started from the June 2010 bottom at 1.1876 and was tested successfully in January 2011 at 1.2873. This angle will clearly control the direction of the market in September. A break under 1.4276 will likely mean further downside pressure while holding this level may mean the market will take another shot at 1.4500.

 

 

USD CAD – September Outlook

The USD CAD bottomed at .9406 in July. When risk hit the markets because of the European sovereign debt crisis, theU.S.debt ceiling debate and theU.S.debt rating cut, investors dumped higher risk assets and flocked to the safety of the U.S. Dollar. This helped put in the bottom and contributed to the eventual breakout over the June swing top at .9912.

Usually a breakout over a swing top triggers a change in trend to up, but in this case it appears the breakout was event driven and not caused by a bullish shift in investor sentiment. Now that the U.S. Federal Reserve is once again suggesting stimulus to help boost theU.S.economy, traders have once again returned to risky assets, driving the USD CAD lower.

If the financial markets can remain calm and allow volatility to return to normal, then look for downside pressure to return to the USD CAD. With the Fed committed to keeping interest rates low until mid-2013 and it leaning toward additional stimulus in the form of quantitative easing, the U.S. Dollar is expected to remain under pressure.

Based on the monthly chart, this currency pair is likely to return to the bearish outlook it has experienced since early 2009. As long as theU.S.economy remains at risk and the Fed is willing to provide low interest rates and stimulus, look for the Canadian Dollar to remain the stronger of the two currencies.

Technically, 1.0009 or basically par is likely to remain resistance. The bottom at .9406 appears to be solid support also. This means the currency pair is likely to straddle the mid-point of this range at .9708 until the U.S. Dollar gets clear direction from the Fed.


 

AUD USD – September Outlook

After posting a new all-time high in July, the AUD USD proceeded to sell-off sharply during August. Although the main uptrend remains intact, the size of the break brought attention to the fact that despite the strong uptrend, this currency pair can sell off quickly should global economic conditions warrant a risk off scenario.

Besides a flight to the safety to the U.S. Dollar, the Aussie remains vulnerable to a softer interest rate policy by the Reserve Bank ofAustralia. The main reasons for the sell-off in the Australian Dollar during August were the continuing debt crisis in Europe, the debt ceiling debate in theU.S.and theU.S.debt rating cut by the S&P Corp.

Setting aside all of those factors, the fact remains that Australian interest rates are higher thanU.S.rates. Since money seeks the highest yield, funds should continue to flow intoAustralia, driving up the AUD USD. Throughout the latter half of August, traders were holding the Aussie steady on the thought that the RBA may lower interest rates at its next meeting in September. On Friday August 26, RBA governor Glenn Stevens assured the market that interest rates would not be cut. This helped boost the Aussie.

Also on August 26, U.S. Fed Chairman Ben Bernanke hinted at additional stimulus while assuring investors that theU.S.economy would recover from its sluggishness. This helped trigger increased demand for risk, driving up the Aussie into the end of the month.

Expectations are for the AUD USD to continue to work its way higher in September as long as the RBA leaves rates unchanged or hints at further increases. In addition, as long as demand for higher yielding assets persists, the Australian Dollar should benefit. Because of the size of the sell-off in August, investors are likely to be a little more cautious as the market approaches the 1.0800 to 1.1000 area.

Technically, the AUD USD is in an uptrend on the monthly chart. Last month’s sharp break through an uptrending Gann angle did nothing but take out stops. The market has now regained this Gann angle, placing the Aussie inside of Channel Up. The upper level of the channel is 1.1608 and the lower level is 1.0627.

It is highly unlikely that the Aussie will reach the upper level of the channel, however, it is likely to straddle the lower level several times. This will make 1.0627 an important pivot that will control the direction of the market throughout the month. Holding above it will create a bullish tone while breaking below it is likely to conger up memories of the sharp break in August.

In August the AUD USD closed at 1.0706. This put the Aussie down .0286 or -2.67%.

EUR/USD Technical Analysis September 1, 2011

EUR/USD fell again on Wednesday as fears over European debt issues reared their head again. The market is fragile at this point, but to be honest – the choppiness has taken a lot of the clear cut support and resistance areas out of the picture. The 1.4350 area just below the close is an area that we have seen a lot of back-and-forth lately. The pair is a matter of trading two ugly currencies, and as such – this pair will be very choppy for a while. Until we get above the 1.4550 area – going long is difficult, and selling is getting harder and harder as the lows are getting higher. Because of this – we fell that the Friday Non-Farm Payroll number is going to be vital in determining the future direction. In the mean time, we expect very little in the way of clarity.

USD/JPY Technical Analysis September 1, 2011

The USD/JPY pair fell on Wednesday, yet managed a nice bounce in the latter hours of the session. The candle for the day printed as a hammer, and just above the 76 level. The market is supported by the Bank of Japan, so a fall from here would more than likely get the central bank involved. Because of that fact, we don’t sell this pair. We are looking for a reason to buy – but we need to see the 78 handle come into play in order to do that. In the mean time, this could be a good pair to scalp.

GBP/USD Technical Analysis September 1, 2011

The GBP/USD pair fell hard on Wednesday as traders sold the Pound. The pair is approaching the 1.62 level, and will face support in this area. The market must close below the 1.62 level in order to push more selling into the market as it has been in consolidation for quite some time. The market looks weak, but until we get below that level – we are still just over support. The bullish case is hard to make in this pair as the highs are getting lower over time – a basic part of any down trend.

USD/CHF Technical Analysis September 1, 2011

USD/CHF fell hard on Wednesday, after bumping up against a weekly trend line for a few days. The pair fell straight to 0.8000, and area that was once massive resistance. The bounce from there is good for about 60 pips at the time of writing, which is fairly strong for this typically slow-moving pair. The breaking of the trend line and the 0.83000 level is going to be vital for this pair to continue the bullish move in the future. In order to sell – we need to see 0.8000 broken through significantly.