The natural gas markets rose on Thursday, again pushing up against the resistance in the $4.10 area. The area has proven to be very strong, and as such – we are alright with taking a small position on the sell side the close we get to $4.10. The area has been strong, and until it breaks – you can only assume it is still going to be so. If it gets broken to the upside, we are willing to take that small loss and wait. We won’t buy – we simply will look to higher levels from which to sell. A new low gets us selling again as well.
The gold markets rose over $50 yet again on Thursday as traders bought the metal in the $1,800 support zone. The market is bullish overall, but the recent action has been painfully choppy. The weakening conditions in places like the EU and the US, gold continues to have a bid underneath it. The market is a buy only situation, but it should be noted there is a double top that has just formed. If that area gives way, around the $1,920 area – this market goes much, much higher. The pullbacks are to be bought, but the $1,900 area should be known as significant resistance.
The USD/JPY pair fell a bit on Thursday, but managed to bounce off of the 77 level for the second day in a row. It appears that there is someone or something below offering support for this pair, and it looks as if it could be starting to base for a move upwards. If we get above the highs from Tuesday, we will then be long of the pair, holding on for at least 150 pips, markets willing. We don’t sell because of the central bank threatening intervention.
The USD/CHF pair continues to rise in value as the Swiss have made is absolutely certain that they are willing to print as many Francs as it takes to reverse the strength of the currency. The world is nervous, and looking for safe havens. Since the Swiss Franc is no longer able to be one of those, it makes sense that the market is buying the USD, pushing this pair higher. The 200-day moving average has been closed above on the session, and this is a bullish technical signal as well. Because of all of this information, we are buying the USD/CHF pair on pullbacks.
The USD/CAD pair rose on Thursday again, but still remains in the consolidation area that we have been stuck in for a few weeks now. The pair is held hostage by the oil markets, which naturally pullback in this “risk off” session we had on Thursday. The pair is still in a downtrend, and we feel selling is the only choice we have, but only on signs of weakness. If we get weak-behaving candles near the 0.99 level – we are more than willing to sell this pair. We won’t buy until we close above the parity level.
The NZD/USD pair rose, and then fell on Thursday as traders begin to ask even more questions about the global economy. The pair is extremely risk-sensitive, and will fall as more and more fear enters the marketplace. The pair is in a massive consolidation area, but a breaking of the lows on Thursday would have us selling, and aiming to get back down to the 0.81 level. If we get above the highs on Thursday, there is still resistance above until we get to 0.86 or so, keeping us on the sidelines.
The GBP/USD pair rose on Thursday after the Bank of England had no mention of any new quantitative easing, pushing the value of the Pound upward. However, as the day wore on, it started to focus on the global growth story in general. The gloomy outlook pushes demand for the USD, and as such – the pair fell in later hours. The pair has formed a shooting star-shaped candle two days in a row, a very bearish sign. This could be foreshadowing a move lower, perhaps to 1.5850 or so – the July low. If it goes through that area – this pair falls for several handles. We don’t buy this pair, and if we break the lows of the previous two days, it might be worth selling a small position in this market.
The EUR/USD pair fell hard on Thursday as ECB Chairman Trichet did his best to talk down expectations in the EU. The pair is now significantly below the 1.40 mark, and as such looks very, very weak. However, there is still the recent low of 1.3838 which has to be overcome for a long-term sell signal. Truth is though, it is very difficult to buy the Euro at all, so we are selling rallies, or a break down below that level in the 1.3838 area.
EUR/CHF rose again on Thursday, but lagged the USD/CHF pair. The EUR/CHF almost always moves in lockstep with the USD/CHF, and the fact it didn’t shows how weak the Euro really is at the moment. The market is at the 200-day moving average, and is struggling with it. The “peg” of 1.20 announced by the Swiss National Bank is only 150 pips below, and will more than likely hold. However, with all of the issues in Europe, you might be better off to look to other CHF-related pairs at the moment.
The AUD/USD pair fell a bit on Thursday, but stayed above the 1.05 support level. As long as this pair does, it cannot be sold, and should be expected to stay somewhat afloat. The most likely scenario is sideways for the short-term, as there is a gap that was filled from the weekend that pushed prices back down and massive support at 1.05. With those two competing forces within about 125 pips of each other, this pair will more than likely do little. If we get below 1.05 – there is enough support below to keep us from selling.
This morning the Bank of England left interest rates unchanged as expected. It also left out another round of quantitative easing which is potentially bullish for the GBP USD. High inflation is one major concern for the BoE. However, high inflation coupled with a slowing economy makes it difficult to apply stimulus to the economy. Going forward, the BoE is likely to continue to monitor inflation, looking for any kind of a decline. This would allow the central bank to lower its inflation forecast, setting up the possibility of another round of QE by the end of the year.
The prolonged down move in the GBP USD in terms of price and time has put this currency pair at the low end of its two month range, setting up a potential buying opportunity. Although the trend is down, this currency pair appears to have stopped moving lower, leading to the possibility of a short-covering rally.
Counter-trend traders should watch for the possibility of a breakout rally through the downtrending Gann angle at 1.6058 this morning. Not only with the market take out this Gann angle, but it will also penetrate last night’s high at 1.6051. This move is likely to scare short traders into covering and could attract fresh buying. Sustained buying could drive the GBP USD into the retracement zone at 1.6265 to 1.6349.
The EUR/USD found support at the 1.40 area on Wednesday as the German high courts ruled that it was in fact legal for the German government to help bailout the Greek government. However, the ruling also stated that any future bailouts would have to be voted on in Parliament. This effectively assures that there won’t be another one, but that is an argument for the future. The bottom of the range sees a bounce – this suggests we are going higher from this point, but we prefer selling for the long run, and will do so if and when we get closer to 1.45 or so. If we fail to make another run all the way to that level, this could be a signal that the pair is going to break down through the bottom of the range. We prefer selling rallies at this point, but only after a fairly large move.
USD/JPY continues to drift higher, even after falling initially during the Wednesday session. The pair fell from the 77.50 level all the way down to the 77 area. The 77 handle proves to be supportive again, and the market bounced. We don’t sell because of the Bank of Japan’s various intervention policies, but we do buy if we get a signal. For now, we are waiting to break the top of the Thursday candle in order to go long for about 150 pips or so.
The GBP/USD pair rose during the Wednesday session, but failed to close above the 1.6000 level. The resulting candle is a “shooting star-like” candle that appears at the bottom of the recent range. This shows that the bulls tried to rally at the bottom, but haven’t concretely done so. Because of this, we are more likely to look for a rally to short if and when it comes. If not, we would sell on a break lower, but we think the 1.5750 area is the key to going short – if we close below that level, this pair becomes a longer-term sell.
The USD/CHF pair had a very quiet day on Wednesday, which is understandable since the day before had roughly an 800 pip range. The pair hasn’t pulled back yet, but after the recent action in it, we like the idea of buying pullbacks, especially around the 0.83 – 0.85 range. The pair is being supported by a central bank willing to buy unlimited currency, and as such – we are no longer willing to sell this pair. The CHF is no longer a safe haven currency because of this, and as such, this pair will rise on any shocks to the system. Until we get the pullback however, we are simply waiting.
EUR/CHF sat still on Wednesday, which is understandable after a 1,000 pip range on Tuesday. The pair is now pegged to 1.20 effectively, as the Swiss National Bank has decided that the level was where they were willing to defend it at that point. The 1.20, the weekly trend line we broke, and the SNB can all be supportive on a pullback. If the 1.20 area produces a hammer or engulfing bullish candle, we are ready to go long this pair. Until then, we think this pair will be very, very quiet.
The AUD/USD pair rose on Wednesday, and even broke above the gap formed at the beginning of the week. The 1.05 level has held as massive support, and as such – we like buying on dips or even a break above the daily high from Wednesday. The AUD is a pure interest rate play at this point, and traders will be looking for yield wherever they can. We only buy until we get below the parity level, and that is over 600 pips below.
The USD/CAD pair fell on Wednesday, after failing to close above the 0.99 level the day before. The oil markets are starting to come back into play as the storms in the Atlantic could have an adverse effect on oil production out of the Gulf of Mexico. The gap from the weekend has been filled, and now we are simply waiting to see if we can go lower. If we do, this pair becomes a screaming sell. If the CL (Light Sweet Crude) contract gets above $90, this pair is a screaming sell. We don’t buy until this pair gets above the parity level.
The NZD/USD pair rallied during the Wednesday session, although it did not manage to gain enough to clear the top of the shooting star-like candle from Tuesday. The trend is up still, and we aren’t ready to bet against this trend just yet. Because of this, we are looking for a break above not only 0.84, but 0.85 as well to go long. A short isn’t possible until we are below the 0.8000 level.
The EUR/USD pair shot straight up in the early hours of Tuesday in response to the massive 1,000 pip move in the EUR/CHF pair, but quickly faded from that move to an absolute freefall later in the day. The pair is currently sitting right at the 1.40 level, and this is a massive support level. However, the German courts are hearing a case involving whether or not the Greek bailouts are legal in their eyes today. Depending on that ruling, we could see the Euro permanently damaged if the case goes poorly. Because of this, the EUR/USD is a pair we want nothing to do with in the mean time. After the court ruling, the reaction shall tell us which direction to trade in.