The gold markets rose again as the “risk on” trade came back into vogue on Monday. The hints of a possible solution to the EU and the need for a “super bond” got the markets rallying in Asian trading. The gold market is being served well by not only the uncertainty, but also the fact that the EU is looking more and more like it will start to print money next year. The recent support area offered a lift to the market, and it looks like $1,700 will offer a floor for the immediate future. The market looks like it will consolidate between $1,700 and $1,800. With this in mind, we bought today, and are aiming for $1,800.
The USD/JPY pair rose during the “risk on” rally Monday, but gave up some of their best gains towards the end of the session. The pair has come under pressure anytime it has risen, and we think that theme should continue going forward. In fact, it would take a rally to above the 80 handle for us to consider buying this severely beaten down currency pair. With this in mind, we are fading rallies and not buying at all.
The USD/CHF fell as traders sold off the Dollar around the world. The “risk on” trade is decidedly Dollar negative, and as a result, the pair fell. However, the pair didn’t manage any significant move down, and the daily candle is a bit of a hammer at resistance. (Not the best looking one, but certainly the same shape.) The 0.92 area offered support, and we feel that this pair should continue to rise over the longer term. The pair is a great example of a “buy the dips” market presently, as the Swiss National Bank is working against an appreciating Franc, and the Dollar is the last safe haven currency left.
The USD/CAD pair fell fairly hard during the Monday session as the oil markets took off. The “risk off” trade also added to the selloff in the Dollar, and as a result this pair had to fall. The 1.03 level held as support though, and the oil markets did sell off significantly in the afternoon New York time. The pair still looks bullish at this point, and the 50 pip bounce in the late part of the day certainly does nothing to dissuade that opinion. We are still buyers of dips at this point.
NZD/USD rose during the session on Monday as the “risk on” trade came back into focus. The Kiwi is highly correlated with riskier assets, so this wasn’t a big surprise. The breaking of the 0.75 handle was a big step forward, but the rest of the riskier currency pairs look a bit on the weak side. With this in mind, we are going to pass on a NZD/USD long position at this point. The selling off of the pair in the later part of the session could be a sign that the opening gap may get filled in the short term.
GBP/USD initially rose during the Monday session as hope sprung eternal in the markets. The rumors of EU fixes came back to the forefront, and the expectations came into play as the world sold off the Dollar. The pair smashed through the 1.55 resistance level, and looked very bullish at first. However, as the session wore on, the markets started to sell off the Pound, and the daily candle is a shooting star, and closing in the vicinity of the 1.55 level again. This is a very bearish turn of events, and we are willing to sell again if we can break through the bottom of the Monday range. We are not buying cable at this point.
The EUR/USD pair rose initially during the Monday session as the rumor mill started out in full force over the weekend. Stories of supposed IMF bailouts of Italy and other such rumors pushed the value of the Euro higher. However, the end of the session saw that the Euro had pulled back massively. The ending daily candle printed as a shooting star, and it looks like the pair is weakening yet again. The pair still looks destined to reach 1.31, and we are selling rallies at this point in time. We simply will not buy the Euro under any circumstances at the moment.
EUR/GBP fell during the Monday session after going both positive and negative during the session. Both of these currencies are presently being thrown around by the events unfolding in the EU, and as a result this pair should remain choppy. The candle for the session looks very much like a doji, and shows just how directionless the pair is at the moment. This really is a contest between two unwanted currencies, so until we get close to a support zone in the form of 0.85 or resistance zone in the form of 0.8650 – we are flat in this market.
EUR/CHF fell during the session on Monday as the Euro rose against almost all other currencies. The pair is supported by the Swiss National Bank, and as it couldn’t rise – shows just how weak the Euro is in general. The rise in the other pairs was pared back by the end of the session, and this pair looks like it is signaling a further decline in the overall value of the Euro. With the SNB having a “floor” at 1.20, we aren’t in this pair at the moment, but do use it as a barometer of underlying Euro strength or weakness.
The AUD/USD pair surged during the Monday session as rumors flew around the marketplace of bailouts and promises of IMF money for Italy. Even after the IMF denied this rumor, there were other hopes of various fixes. The markets then ran up to just under parity, and it was at that point that the sellers came back into the market. The selling was fairly strong, and it appears that we are going to struggle to get above that parity level. The market seems to have retained its bearish tone at this point, and as such we are selling rallies in the AUD/USD.
The CL contract fell during the week as traders continue to worry about a weak US GDP and the problems in the EU. In fact, the main reasons for oil rising has much more to do with problems in the Middle East rather than any actual demand. The $95 level still continues to hold as support, and as long as it does – we can only buy this pair now. The $103 level above should continue to be resistive. In order to sell this market, we need to see $90 violated to the down side. The oil markets will be pushed and pulled between economic reality and Iranian fears, so trading in this market should be for short-term trading only at this point.
Oil Forecast for the Week of Nov. 28th, 2011, Technical Analysis
Brent markets fell this past week, but are finding the $105 area very supportive. However, if that area were to give way, this could signal much lower levels for this market. The basic driver of buying seems to be worries out of the Middle East and not fundamental buying. The demand curve could continue to weaken as the US GDP was disappointing and the EU is certainly going into recession. The demand simply won’t be there. However, until we break below – we can’t sell. A bounce could be bought for a short-term scalp.
The Natural Gas markets had a bullish week over the last 5 sessions as the $3.50 level produced the suspected bounce in this market that we thought could happen. However, the trend is decidedly bearish, and as a result we are looking for higher prices from which to sell. The $3.75 and $4 levels could be possible areas for this, and we will be watching those areas very intently for signs of weakness. The selling had gotten a little overextended recently, so this bounce is actually going to be welcome news for sellers as they reload on their positions. We sell rallies, and do not buy this market at all.
Natural Gas Forecast for the Week of Nov. 28th, 2011, Technical Analysis
gold markets had a bearish week over the last 5 sessions as traders continue to sell off winning trades to pay for losing ones. The margin calls have been frequent in the markets, and the winners have to be liquidated in order to pay for those. The market is decidedly bullish overall, but it looks like this market has to rest at these lower levels before picking up steam again. The Euro is highly distrusted, and as a result the Dollar is gaining rapidly which can have an effect on this market at times as well. However, with all of this mistrust, it is only a matter of time before the buyers step back in. There is massive support down to the $1,600 level in our eyes, and as a result we think buying this market is still the way to go, especially on dips.
gold Forecast for the Week of Nov. 28th, 2011, Technical Analysis
The USD/JPY pair had a very positive week for the last 5 sessions, but one has to keep in mind the extreme amount of bearishness in this pair to begin with. The longer-term weekly charts clearly show that the 0.80 level is a massive resistance area, and we feel that this area should continue to serve as being too strong to be overcome anytime soon. The rise of the USD in this pair probably has more to do with the run to the Dollar in general as the EU crisis gets worse. The Yen will also be considered a safe haven as well, so to think this pair rises above 0.80 is probably wishful thinking at this point. A weekly close above that level would have us second guessing this idea though. In the mean time, we will probably see opportunities to sell this pair on rallies.
USD/JPY Forecast for the Week of Nov. 28, 2011, Technical Analysis
USD/CHF rose during the week as traders continue to run towards the Dollar in general. The Swiss National Bank is also working against the Franc, so it makes sense that this pair rose, and should continue to as well. The 0.95 level above should be resistive, but there is absolutely nothing fundamentally or technically to suggest that the area should continue to hold as resistance. We like buying the dips in this “buy only” pair now, and will continue to do so. If 0.95 is overcome, the parity level is next, and with Friday’s action – we may have even seen a trend change for the immediate future.
USD/CHF Forecast for the Week of Nov. 28th, 2011, Technical Analysis
The USD/CAD pair shot straight up during the week as traders continue to buy the US dollar hand over fist. The risk profile of the markets is being reduced as the world worries about recession and debt markets. The Dollar and its safe haven status will more than likely continue to push this pair higher, but we are getting lofty at this point. The pair should prove to be a “buy on the dips” pair going forward, and the 1.07 level will be a real test. The breaking of that level to the upside sends this pair to at least 1.10, and quite possibly higher. We don’t sell this pair at the moment – there are far too many reasons to own Dollars now.
USD/CAD Forecast for the Week of Nov. 28th, 2011, Technical Analysis
NZD/USD had a rough week over the last 5 sessions as the 0.75 level gave way. This crucial area is the start of the absolute bottom of support in this market, and a violation of it could rush in a bit of a meltdown in the Kiwi dollar. The pair is highly sensitive to economic headlines and negative sentiment, so the pressure should continue to be there as the world continues to worry about recession and debt issues in the EU. We like selling rallies, and would become aggressively short of this pair if we can break the 0.70 as well. We think the move to 0.70 is coming, and view the recent breaking of 0.75 as a very bad omen.
NZD/USD Forecast for the Week of Nov. 28th, 2011, Technical Analysis
The GBP/USD pair had a horrible showing this past week as the world continues to run towards the US Dollar. The pair is currently sitting in the middle of the “line in the sand” of 1.55 – 1.53. The area is absolutely vital if bulls want any chance to regain the upper hand. As a result, we like selling a break below the 1.53 level for a long-term trade that could perhaps run as low as 1.42 before it is done. The pair is very risk-sensitive, so headline shocks out of the EU will continue to guide the direction. We don’t buy this pair as we aren’t fond of catching falling knives.
EUR/USD fell hard during the week as the debt crisis is starting to infect Germany as well. The Germans had a failed debt auction this week, and the markets got spooked as a result. The pair is decidedly broken at this point, and the all-important 1.35 level finally gave way to the bears. The breaking of 1.31 will be watching for now, and could open the door to 1.30 and 1.25, respectively. The pair could and probably will bounce at one point or another, and this could be looked at as a selling opportunity as the EU looks unable to come to grips with the problems facing it in the debt markets. We sell rallies, and will not buy this pair anymore.
EUR/USD Forecast for the Week of Nov. 28th, 2011, Technical Analysis
The EUR/GBP pair initially rose during the week, but was sold off in the second half as bond auctions went very poorly throughout the EU. The markets are starting to abandon the EU in general and the Euro as a result. However, the UK is highly connected to the EU and the results of that area. The UK exports over 30% of its goods to the EU, and as a result – poor economic news in the EU is poor economic news for the UK as well. The Pound is being sold off as a result now, and this pair is certainly a fight between two unwanted currencies. That will make this pair choppy, but the bias is more than likely to the downside. The two preceding weeks formed supportive hammers before this week’s shooting star. This pair appears to be winding up for a move, but the direction won’t be clear until we either get above the 0.8650 level, or below the 0.85 level. Until then, we are sitting tight in this pair.
EUR/GBP Forecast for the Week of Nov. 28th, 2011, Technical Analysis