Dow Jones Industrial Average October 3, 2012, Technical Analysis

The Dow Jones Industrial Average fell during the session on Tuesday after a significant gain on Monday. The market looks ready to tread between the 13,000 and 13,600 levels, and this would make sense as a very important nonfarm payroll number comes out on Friday. Essentially, the market looks like it is ready to consolidate until we get that information.

With this in mind, it appears that we will see very little action in the marketplace until 8:30 AM Eastern standard Time on Friday. Once that announcement comes out however, we could see a significant move in one direction or another. We do think that a knee-jerk selloff reaction should be bought into though as a week jobs number would of course only intensify and continue Federal Reserve easing.

 

Dow Jones Industrial Average October 3, 2012, Technical Analysis
Dow Jones Industrial Average October 3, 2012, Technical Analysis

US Dollar Index Forecast October 3, 2012, Technical Analysis

The US Dollar Index fell initially during the session on Tuesday, but bounced off of the 79.50 level in order to form a hammer. Currently, looks like we are attempting to breakout and above the 80 level, but this area has been so resistive that it seems we will struggle until at least Friday when the nonfarm payroll number comes out.

Looking forward, we think that if we managed to break down below the 79.50 area, we should see a significant selloff. With the Federal Reserve printing currency the way it is, this is certainly the most logical direction, and as such we will not hesitate to sell this contract and over fist once we get below that 79.50 area. As for buying, we aren’t necessarily interested at this point in time.

 

US Dollar Index Forecast October 3, 2012, Technical Analysis
US Dollar Index Forecast October 3, 2012, Technical Analysis

Silver Forecast October 3, 2012, Technical Analysis

The silver market fell slightly during the session on Tuesday as the $35 level continues to hold as resistance. This area represents a significant barrier for the buyers to get over, and as such it may take some time for the market to break out. However, the fact that this level has been given way doesn’t suggest to us that the market is certainly going to turn around and start selling off.

Granted, it is very possible that we do get some type of pullback, but this will more than likely be a buying opportunity. After all, the silver market broke down decisively over the $30 level just a couple weeks ago, and it looks like we are going to continue much higher once it’s all said and done.

Looking at the chart, the Wednesday hammer from last week suggests to us that the $34 level will be rather supportive and as a result we think this market will more than likely consolidate between $34 and $35 in the short-term. With the Federal Reserve printing money as fast is a can, it does make sense that the precious metals markets continue to rise over time, and as a result we think that silver certainly has a bright future.

If the economy suddenly gets stronger, silver also has a part to play in that as well. As it is an industrial metal, and a lot of ways silver is the more interesting of the precious metals as it not only works against inflationary forces, but it also helps itself along once we have strong demand in the industrial sector. Unlike gold which is primarily used as jewelry, silver is used in literally hundreds of applications.

If we can get a daily close above the $35 level, we suggest that this market will more than likely run up to the $40 level. Ultimately, we think silver goes much higher than that and advocate buying silver in this physical form if at all possible as it takes out all of the volatility. However, if you cannot do it in that form, we suggest the SLV ETF as a great way to play a longer-term core position, while adding to it from time to time on pullbacks that shows signs of support in the silver futures market.

 

Silver Forecast October 3, 2012, Technical Analysis
Silver Forecast October 3, 2012, Technical Analysis

Crude Oil Prices October 3, 2012, Technical Analysis

The light sweet crude market fell for the session on Tuesday as the market continues to consolidate just above the $90 level. This area is massive support, so we suspect that dips going forward will more than likely provide buying opportunities close to that price.

Right now, it looks like this market is stuck between the $90 and the $100 levels, and as such we think that buying while were real low like this is the way to go. We don’t necessarily look for some type of big explosive move to the upside, rather a slow grind higher as the markets had been oversold. As for selling is concerned, we are not interested until we get well below the $85 level.

 

Crude Oil Prices October 3, 2012, Technical Analysis
Crude Oil Prices October 3, 2012, Technical Analysis

Natural Gas Forecast October 3, 2012, Technical Analysis

The natural gas markets fell during much of the session on Tuesday, but bounced off of the $3.40 level in order to clear the $3.50 resistance level. The resulting candle looks a lot like a hammer, and as such if we continue higher and break the top of the resistance for the Tuesday session, we think this market will grind much higher. Ultimately, we feel like this market will continue much higher, but the truth is there will be plenty of opportunities to buy on the pullbacks, which is essentially what we plan on doing.

 

Natural Gas Forecast October 3, 2012, Technical Analysis
Natural Gas Forecast October 3, 2012, Technical Analysis

Gold Prices October 3, 2012, Technical Analysis

The gold markets fell slightly during the session on Tuesday, as the shooting star from Monday continues to put a little bit of a damper on the market. However, once the market gets its rest, this commodity should continue much higher.

The Federal Reserve continues to print US dollars, and as a result we believe that the price of gold will continue much higher. However, it must be said that the $1800 level is an area significant resistance, and will have to be overcome in order for the longer-term trend to remain to the bullish side. Because of this, we are certainly going to buy any daily close above that level, and of course would be interested in buying pullbacks as well since this market is in such a bullish uptrend.

We believe that there is support all the way down to the $1740 level, and as such we think that buying pullbacks will be the way to go forward. The GLD ETF is a possibility for a longer-term core position, while adding in the CFD and futures markets could be a way to boost your returns. As for selling gold, there simply is no reason to.

 

Gold Prices October 3, 2012, Technical Analysis
Gold Prices October 3, 2012, Technical Analysis

USD/JPY Forecast October 3, 2012, Technical Analysis

The USD/JPY pair rose during the session on Tuesday as the 78 handle gave way. This suggests to us that we may see a move up to the 79 handle, but the length of the candle wasn’t exactly expressing massive bullishness. In fact, we feel that more than likely this pair will grind its way back towards the top of this current consolidation area rather than move with any gusto.

The pair is essentially locked in a struggle between two central banks that are trying to print their way out of trouble. Because of this, we feel that the range bound attitude in this market will continue, and as result we are buying this pair closer to the 77.50 level, and selling it closer to the 79 handle.

 

USD/JPY Forecast October 3, 2012, Technical Analysis
USD/JPY Forecast October 3, 2012, Technical Analysis

USD/CAD Forecast October 3, 2012 Technical Analysis

The USD/CAD currency pair rose during the session on Tuesday as the 0.98 handle again acted supportive. We still believe that this pair will tread water between the 0.98 and 0.9850 levels, and as such we are hesitant to get involved.

As the two economies are intertwined, the nonfarm payroll numbers on Friday will have a dramatic affect on price action in this market. Because of this, we are very hesitant to get involved in this pair until we make a massive move higher, which would be closing above the 0.9950 level, or a massive move lower which would be a daily close below the 0.98 handle.

More than likely, we think that this pair will continue to bounce around in this 50 PIP zone. With this in mind, we are simply waiting out the market until after the jobs number and we will follow accordingly.

 

USD/CAD Forecast October 3, 2012 Technical Analysis
USD/CAD Forecast October 3, 2012 Technical Analysis

NZD/USD Forecast October 3, 2012, Technical Analysis

The NZD/USD pair initially rose during the session on Tuesday, but gave back all of the gains once we got above the 0.83 resistance level. This market looks like it’s ready to pullback some, but I see quite a bit of support at the 0.82 handle, and this suggests to us that we should see a bit of a grind sideways at least until the nonfarm payroll number comes out on Friday.

This market should be highly correlated to the commodities market, and if the jobs number turns out to be fairly week, there is a good chance of this market will take off as it will be understood the Federal Reserve will have to continue to print money. Either way, the New Zealand dollar should benefit as the commodity markets rise. In the short-term however, this looks like a consolidated market that will grind and a fairly tight range.

 

NZD/USD Forecast October 3, 2012, Technical Analysis
NZD/USD Forecast October 3, 2012, Technical Analysis

GBP/USD Forecast October 3, 2012, Technical Analysis

The GBP/USD rose during the session on Tuesday, but gave back all of those gains in order to form a shooting star. This is the second shooting star in a row, and this of course suggests to us that there will be a selloff in the near-term. This selloff would actually be welcomed by us as it would be an opportunity to buy this pair at lower prices.

The Federal Reserve continues to expand its quantitative easing policies, and as such the US dollar should be punished over the long term. The British central bank on the other hand is fairly comfortable with this position from a monetary policy stance and as such should see the British pound be one of the favored currencies out there.

Of course, there will come times when the safety trade will force money back into the US dollar, but the truth is that overall traders will prefer to own the higher yielding British pound all things being equal. Because of this, we expect this longer-term bull trend to continue, and as such we are actually looking at all pullbacks at this point in time as opportunities to buy this market.

With the nonfarm payroll number coming out this week, the markets could be fairly quiet until 8:30 AM Eastern standard time on Friday. This pair should enjoy bullishness in the end regardless of what the announcement brings. If the jobs number is fairly robust, this would signal that the US economy is getting better and as a result the “risk on” trade would come into play after the initial knee-jerk reaction. Alternately, you could see a poor jobs number, and this of course means that the Federal Reserve will continue to ease its monetary policy and drive the value of the US dollar lower. Either way, the British pound should when in the end.

We are buying dips, and believe that the 1.60 level should offer significant support. We also think the 1.58 level will offer significant support as well, as it was the site of the massive breakout that got this rally going earlier this summer.

 

GBP/USD Forecast October 3, 2012, Technical Analysis
GBP/USD Forecast October 3, 2012, Technical Analysis

EUR/USD Forecast October 3, 2012 Technical Analysis

The EUR/USD pair rose during the session on Tuesday, but gave back much of the gains in order to form a shooting star. We remain firmly under the 1.30 level, and this should signal that a real fight is coming up in this pair.

The real question in this market is whether or not the market participants are focusing on Europe, or the United States. This seems to go back and forth over time, and as such every time we get involved in this market we have to be aware the fact that the market seems to go back and forth as to which side of the Atlantic it once the focus on. As a general rule, whatever side of the Atlantic they are paying attention to is the one that does much poorer.

We have a trend line on this chart that suggests that we could possibly sell on a break down below it, but we would need to see a solid daily close south of the 1.2750 level. As far as buying is concerned, we would buy supportive action closer to the trend line.

 

EUR/USD Forecast October 3, 2012 Technical Analysis
EUR/USD Forecast October 3, 2012 Technical Analysis

EUR/JPY Forecast October 3, 2012, Technical Analysis

EUR/JPY rose during the session on Tuesday as the market tested the 101 handle. The 100 handle still continues offer support, and we think that will remain the case. Because of this, we like buying short-term chart pullbacks that show signs of support. We think eventually this market runs all the way to the 105 handle, and with all of the sudden bullishness in the Euro, this isn’t really that big of a surprise that the market looks a strong. With the Bank of Japan working against the value the Japanese yen, and the world being suddenly happy with the state of things in Europe, this market looks like it only has one direction to go.

 

EUR/JPY Forecast October 3, 2012, Technical Analysis
EUR/JPY Forecast October 3, 2012, Technical Analysis

EUR/GBP Forecast October 3, 2012, Technical Analysis

The EUR/GBP pair rose during the session on Tuesday as the 0.80 resistance level was broken above. However, the candle does look overly bullish, and as such we aren’t necessarily impressed. We think that this market will continue to bounce around between current levels and the 0.79 handle, and as such we aren’t ready to make a trade yet.

The British pound in general is relatively strong, and as such we don’t like being short of it. On the other side of the equation, the Euro seems to be strong as well. Because of this dynamic we are essentially avoiding this pair in the short-term as both currencies do so well. Once the market start focusing on the problems in Europe again however, we will be more than likely very short of this pair as the trend is decidedly downward.

 

EUR/GBP Forecast October 3, 2012, Technical Analysis
EUR/GBP Forecast October 3, 2012, Technical Analysis

AUD/USD Forecast October 3, 2012, Technical Analysis

The AUD/USD pair fell significantly during the trading session on Tuesday as the Reserve Bank of Australia cut rates in the middle of the night. While the general thought was that the RBA would have to cut sooner or later, it seems to have caught several the participants in the market off guard, and as such they found themselves selling rapidly.

The 1.03 level gave way as support, and now we’re going to fall much lower in trying to find the parity level. At this point time, 1.03 should end up being resistance, and as such we will sell weakness in this general vicinity. However, the Federal Reserve is expanding its quantitative easing policy as well, and as such this shouldn’t be much of a meltdown, rather a slow grind lower.

The candle for the session on Tuesday is long and closing towards the very bottom, so this of course means that there is more than likely going to be some type of continuation lower. Because of this, we would also sell a break of the lows from the Tuesday session as it would suggest that the market will at least attempt the 1.0150 support level directly below. However, looking at the longer-term charts we believe that the parity level is a much more likely target over the long run.

One of the crosscurrents of this move will of course be the gold market. While this is going on, the gold markets seem to be fairly strong and look very likely to break out to the upside. In a sense, this may be a bit of a choppy move lower, because of the various competing factors around the world. One of the biggest hindrances without a doubt though is going to be the Chinese economy in the fact that it is slowing down. Remember, the Australian economy is highly tied to the Chinese economic situation.

We like selling rallies on the short-term charts, but think this market will more than likely be very volatile in the short-term. Because of this, longer-term charts trading this could be difficult to do, and as such we will take little bite-size pieces out of the market on the way down.

 

AUD/USD Forecast October 3, 2012, Technical Analysis
AUD/USD Forecast October 3, 2012, Technical Analysis

EUR/USD Mid-Session Analysis for October 2, 2012

The EUR/USD is trading better at the mid-session but trading has been range bound on low volume. Traders are waiting for Spain to make a formal request for financial aid from the European Central Bank. The announcement appears to be imminent but traders appear to be shy about taking a position ahead of the news to avoid disappointment.

Daily EUR/USD Chart
Daily EUR/USD Chart

Technically there was little follow-through to the upside following Monday’s closing price reversal bottom. The daily chart indicates that the main trend is down and that a move through 1.2959 will turn the main trend up.

The first resistance price is a downtrending Gann angle at 1.2972. This is followed by a retracement zone created by the 1.3172 to 1.2803 range. This zone is at 1.2987 to 1.3031. This is the first objective of the reversal bottom, however, if bullish news hits the market then look for the Euro to accelerate through this zone.

On the downside, solid support comes in at 1.2824, 1.2803 and 1.2741. 

Silver Fundamental Analysis October 3, 2012, Forecast

Silver, like other commodities, equity markets and currencies will be influenced the most by the movement in the U.S. Dollar on Wednesday. The key to understanding where Silver may move will be determined by watching the fundamentals that affect the dollar.

The U.S. Dollar will be most influenced on Wednesday by two events. The first is the ADP Non-Farm Employment Change. This report will give traders an indication as to what to expect from Friday’s U.S. Non-Farm Payrolls report. A bullish report would drive down the dollar while driving up Silver. A bearish report will have a negative effect on silver since the Greenback would likely appreciate.

Silver could also rise if Spain makes a formal request for aid from the European Central Bank. This would be bullish for the Euro and other higher-yielding currencies. The dollar would weaken on the news, making commodities priced in dollars cheaper, driving up demand. 

NZD/USD Fundamental Analysis October 3, 2012, Forecasts

The single biggest influence on the NZD/USD is likely to be demand for higher risk assets. This decision will be controlled by whether Spain makes a formal request to the European Central Bank for financial aid or the outcome of the ADP Non-Farm Employment Change report.

On Wednesday ADP releases its assessment of the U.S. jobs picture.  This report will give investors a heads up on what to expect from Friday’s U.S. Non-Farm Payrolls report. If the number is bullish then demand for higher risk will rise, pressuring the U.S. Dollar. This will give the New Zealand Dollar a boost. If the report shows weakness then look for the NZD/CAD to weaken.

Another factor that may drive up the New Zealand Dollar will be demand for higher risk assets fueled by a formal request from Spain to the European Central Bank for financial aid. Traders are waiting for this to take place and it could trigger a sharp rise in global equity markets and commodities.  Since interest rates in New Zealand are higher than rates in the U.S., investors may buy the currency pair in an effort to capture the better yield. 

USD/CAD Fundamental Analysis October 3, 2012, Forecasts

On Wednesday the focus will be on the ADP Non-Farm Employment Change. This report will give investors a heads up on what to expect from Friday’s U.S. Non-Farm Payrolls report. If the number is bullish then demand for higher risk will rise, pressuring the U.S. Dollar. This will give the Canadian Dollar a boost. If the report shows weakness then look for the USD/CAD to strengthen.

Another factor that may drive up the Canadian Dollar is demand for higher risk assets that could come about if Spain makes a formal request to the European Central Bank for financial aid. Traders are waiting for this to take place and it could trigger a sharp rise in global equity markets and commodities – namely gold and crude oil. Since the prices of these two commodities exert a major influence on the Canadian economy, its currency could benefit from price appreciation. 

AUD/USD Fundamental Analysis October 3, 2012, Forecast

On Wednesday, the AUD/USD could see some follow-through selling pressure following Tuesday’s interest rate cut.  After months of debate, the Reserve Bank of Australia finally cut rates because of uncertainty over global growth, China, Europe and the U.S. This action drove down the Australian Dollar versus the U.S. Dollar.

Losses may be limited on Wednesday if Spain makes a formal request for financial aid from the European Central Bank. This decision could drive up demand for higher risk assets. Although interest rates were cut in Australia, its 3.25% is still higher than U.S. rates, making it a higher-yielding asset. Bargain hunters may try to take advantage of the lower prices and buy the Aussie Dollar at relatively cheap levels.

If Spain doesn’t make the request then demand should be weak for the Australian Dollar, driving it lower against the U.S. Dollar. 

Natural Gas Fundamental Analysis October 3, 2012 Forecast

Analysis and Recommendations:

Natural Gas continues to hold on to its gains, trading at 3.483. Natural gas futures were higher on for the 6th straight day, with Northeast and Midwest forecasts calling for cool weather for later this week and next week driving the front contract to a new high for the year. Despite prospects for some early heating load, many traders and analysts remained skeptical of the upside with storage and production still at or near record highs. Concerns also are growing that as gas prices push well above $3 per mmBtu some utilities, which have been burning cheaper gas to generate power, could switch back to coal.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data October 2, 2012 actual v. forecast

Date

 

Currency

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Oct. 02

 

KRW

 

 

South Korean CPI (YoY) 

2.0%

 

2.0% 

 

1.2% 

 

 

 

 

AUD

 

 

Interest Rate Decision 

3.25%

 

3.50% 

 

3.50% 

 

 

 

 

GBP

 

 

Nationwide HPI (MoM) 

-0.4%

 

-0.3% 

 

1.1% 

   

 

 

EUR

 

 

Spanish Unemployment

79.60K

 

 

 

38.20K 

 

 

 

WEEKLY

 

Upcoming Economic Events that affect the CHF, EUR, GBP and USD

Date

Time

Currency

Event

Forecast

Previous

Oct. 03 

10:00

EUR

Retail Sales (MoM) 

-0.2% 

-0.2% 

Oct. 04

12:00

GBP

Interest Rate Decision 

0.50% 

0.50% 

 

12:00

GBP

BOE QE Total 

375B 

375B 

 

12:45

EUR

Interest Rate Decision 

0.75% 

0.75% 

Oct. 05

11:00

EUR

German Factory Orders (MoM) 

-0.7% 

0.5% 

Government Bond Auction

Date Time Country 

Oct 03 09:10 Sweden 

Oct 03 10:00 Norway 

Oct 04 08:30 Spain 

Oct 04 08:50 France 

Oct 04 15:00 US 

Oct 05 15:30 Italy