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.
USD/JPY rose rapidly on Tuesday as traders bought the USD across the board. The central bank of Japan certainly is happy about this move, and will not stand in the way of a weakening Yen, something they have been begging for over the last couple of years. The market didn’t make a higher high, but at closing, it seems we are just a few pips from doing so. With this in mind, we only want to go long, but only if we break the highs of the Tuesday session.
GBP/USD fell hard on Tuesday as traders around the globe are buying the USD for its safe haven status. The global markets are certainly nervous at this point, and when this happens, this pair falls. The pair even managed to break below the 1.60 area, but remains in the very wide support area between 1.5750 and 1.60. With this in mind, we are not willing to sell just yet. A close below the 1.5750 sends this pair into bear mode. Any supportive candles in this “zone” could be worth a small position to the long side if we get a bullish engulfing candle, or even a hammer.
Yesterday I spoke about what would have to happen for the USD/CHF to be a buy, and all of those points were accomplished. The Swiss National Bank has decided to announce that they are pegging the Franc at 1.20 to the Euro, and as a result – the Franc lost against all currencies, gaining roughly 8% against most on Tuesday. With this in mind we like buying this pair now as the USD is being bought against many other currencies as well. The pullback needs to be in the 0.83-0.85 range, and any supportive candle could be a signal to go long for quite some time. It is far too early to tell, but a trend change could have just happened.
EUR/CHF skyrocketed on Tuesday as the Swiss National Bank has finally played its “nuclear option” in the currency markets. In a statement, the SNB said that it “can no longer tolerate the EUR/CHF cross at anything below 1.20 and that area in and of itself is still too low.” The SNB also mentioned that they were prepared to buy unlimited amounts of foreign currencies to fight this rise in the value of the Franc. Because of this, the game has changed in this pair and all XXX/CHF pairs in general. It appears that the buying of the Franc for steady profits has just come to an end. We need to see the 1.20 level hold for several days in order to buy.
The AUD/USD pair fell hard on Tuesday, but has slowed in the 1.05 area. The piercing of this level is certainly a negative, but the area hasn’t been completely broken at this point. The resulting candle looks a lot like a shooting star, but at the bottom of a down move. The area below looks like a massive consolidation area, and if we break lower we could see that exact scenario. We feel that this pair could fall, but there will be plenty of support until you get to 1.00 in order to break free from the bullish pressure. The pair is very sensitive to the global markets, so if you see a bounce in the stock markets, you could see a bounce in this pair.
USD/CAD rose, fell, and bounced around during the Tuesday session as traders simply do not know what to do with this pair at the moment. The candle looks similar to a shooting star, but not quite as it is somewhere between that and a doji. The market looks a bit confused, but the 0.99 level continues to give this pair trouble. Parity would certainly be a massive resistance area at this point, and it looks as if the trend may still hold. The signal is fairly easy: A break of the lows on Tuesday gets the market selling, but a buy can’t be initiated until we close above 1.0000 on the daily chart. The trend is down, so we prefer selling if possible.
NZD/USD fell hard during the Tuesday session, after initially rising in value. The pair looks like it is trying to find the 0.81 to 0.80 level for support and the daily candle for Tuesday is forming a shooting star-shaped candle to emphasize that idea. The pair has recently made a lower high, and if we can manage to break below the 0.80 area – look out below. The breaking of the Tuesday low is a reasonable sell signal, but as I mentioned earlier – 0.81 is the start of serious support.