USD/JPY had another fairly quiet week this previous week as traders simply continue to play ping pong in a very tight range. The Bank of Japan is waiting below near the 75 handle, and the 80 level is waiting above. Until one of these levels gives way, taking a long-term trade will be almost impossible as the market is for scalpers at the moment.
GBP/USD had a bearish week during the previous 5 sessions as the markets continue to punish the UK for its exposure to the European Union. The pair is a risk sensitive pair, and anytime there is massive concern in the markets this pair will often fall. The idea is that a lot of larger funds will buy US Treasuries as the asset is the closest thing to “safe” as people can get involved with.
The UK economy is going through massive austerity, and this will continue to create a drag on growth and the Pound as a result. The 1.55 level has held again, and the support zone down to the 1.53 level looks very much intact as well. The area simply will have to be broken through in order to see continued bearish momentum. The breaking of that level would be massive in its implications. The breaking of that area would also constitute a massive head and shoulders being broken down from, and this lead to a potential bottom at 1.41 or so.
On the upside, there is room to bounce up to the 1.57 without much in the way of massive resistance. However, the 1.57 level does look tough indeed, and we would expect sellers to step back into the market at that level and look to push the pair back down. The area has been massively resistive lately, and without some kind of major change in the European Union or the United Kingdom, it is hard to believe that the area will give way.
With all of this being said the cable pair might be a little hard to trade for the long term for a while, as there simply isn’t much room to move at the moment. However, keeping an eye out for the break below 1.53 or above 1.57 could lead to nice longer-term trades that could continue well into the new year. The pair looks like it is ready to sit fairly still until January when the volume will pick back up in the markets.
EUR/GBP had a very bearish week as the 0.85 support level finally gave way in this market. The pair has been trying to break below that level for quite some time, and as the crisis in the European Union continues to plague the Euro, the Pound is finally finding support in general at the moment. The Euro is simply too toxic to own, so this pair falling makes sense. The 0.80 level will be the next support area to fight this down move, and as a result we are selling rallies until we get below that point. A close on the daily chart above the 0.85 level would change our minds.
USD/CHF had a bullish week, but did give back some of its gains on Thursday and Friday. The pair formed a shooting star- like candle for the week, and the 0.95 level held as resistance. The Swiss National Bank didn’t raise the “floor” in the EUR/CHF pair as expected, so the Franc was bought back up against many currencies in the latter sessions of the week. However, we think the possible fall at this point is more than likely a pullback as the 0.93 level looks very constructive, and the market prefers the Dollar more often than not these days. We are willing to buy the pullbacks in this pair as we think it will eventually go to parity.
EUR/CHF had a very bearish week as traders pushed the market to the lower end of the recent trading range. The pair has a “floor” at the 1.20 level by the Swiss National Bank recently, and this will keep any moves to the downside at bay. The market has been in a range between 1.24 and 1.22, and until the EU gets the financial crisis under control, we think this pair continues to be a scalper’s market as it grinds sideways.
AUD/USD had a bearish week during the week as the markets continue to run from risk in general. The pair is a risk sensitive pair, and anytime there is massive concern in the markets this pair will often fall. The parity level giving way is a sign of just how many traders are concerned about global growth presently.
The Chinese economy is presently slowing down, and as it is Australia’s number one export market, it makes sense that this will hurt the Australian economy over time. The demand for the Aussie dollar will decline, and the pair should fall. However, the 0.95 to parity level looks massively supportive, so the fall won’t exactly be easy for the bears. The support actually goes all the way back down to the 0.93 level, and a break below that would be massive in its implications for a market crash in general. However, a slow grind downward could be the more likely scenario, and we think this is the case.
The upside seems to be limited by the 1.0350 area, and as a result we think this pair will be sideways with a downward bias over the next few months. The “risk off” nature of the markets isn’t very supportive to commodity currencies at the moment, and the Dollar is the currency everyone wants to won. Both of these facts are big reasons not to buy in general. We prefer to sell rallies in this pair as the highs are grinding lower, and the base looks like it is being pressed over and over. The breaking below that massive support block would more than likely signal something akin to that 2088 meltdown, and to be honest – that scenario isn’t exactly out of the question.
While the AUD/USD isn’t always going to be tradable in the near future, it will be a massive barometer on global trade in general. If this pair falls – everything else will as well. The bounces look likely to be opportunities to sell now, and this is exactly what we are doing.
USD/CAD had a bullish week and even broke through the 1.03 level. The market looks strong at this point, as the lows continue to rise over time and the parity level is now massive support. With this in mind, we are willing to buy the dips now. The market has been buying the US dollar over time, and the USD/CAD pair isn’t any different. The pair likes to grind sideways, and this period of time might be more of that, but with an upward bias. As long as there is a possibility of headline risk out there, we aren’t going to be selling the Dollar against commodity currencies like the CAD.
NZD/USD fell for the week, but managed a bounce from the 0.75 level as buyers stepped in to support the market. The Kiwi dollar will be affected by the commodity markets, so trading this pair will have to be done in conjunction with whatever the commodity markets are doing. With this in mind, we are going to watch them as a whole before trading this pair. Technically, the area looks like massive support, but the highs are getting decidedly lower in this pair, suggesting a breakdown through the 0.75 level may be coming. However, the market looks like a “sell the rallies” one, so this is what we will be doing.
Light Sweet Crude
The CL contract fell fairly hard on the week as the “risk off” trade has come back with a vengeance. The Dollar got a boost for most of the week, and the commodities all got thumped for it. The $95 level got broken, and the market suddenly looks very weak. The $90 level looks to be supportive below, and this is where we think the market is trying to reach. The next couple of weeks will be very low volume, so the moves could be exaggerated. In fact, this time of year you can often say that the more exaggerated the move, the more tempting it will be to fade…which is what we will do.
Brent markets fell extremely hard this past week as the $105 level was smashed though. The support below can be found at the $100 and $95 level should be even more supportive. The market looks like it is going to try and reach that $95 level, as the recent fall actually broke below the neckline for a head and shoulders, and the measurement does go down to that mark. We are selling rallies.
Natural gas continues to fall as the last week has seen quite the selloff in this obviously bearish market. The supply far outweighs the demand in this economy, and the technicals are obviously broken down. With this in mind, buying this market isn’t even an option. Selling at this level for a long-term trade might be a bit difficult as it is certainly oversold, but selling the rallies could be the way to go. We like selling any returns to the $3.50 level as well as $4 if we can rally that far. Selling at this level would simply be chasing the trade.
Gold markets had an absolutely brutal week over the last 5 session as the “risk off” trade came back into vogue. The $1,550 level has held so far, and the Friday session showed that the $1,600 to $1,500 level will more than likely produce a bounce, which would make sense as the fall was so massive and over such a short amount of time. The overall look at the chart shows that the highs are getting lower, so this bounce might just be that – a bounce. Either way, we would be willing to buy on the idea that this market should regain some of its losses recently. However, this is a trade, and not an investment as the $1,700 level might be overly resistive this next time around.
The European situation continues to upset the general attitude of the markets, and as long as that is the case, the Dollar will get a bid. The selloff lately in this market can also be thought of as yearend position squaring, and the next couple of weeks will be very light in volume. The light volume could produce fireworks as the lack of liquidity can exaggerate moves. The mood of the market going forward will be determined by the $1,500 level. If the area gives way, there is a real chance that we see a serious move down, with $1,350 being a real possibility at that point. The bounce that we envision looks to be good for about $100 or so, but the headlines in Europe can always throw a monkey wrench into the progression of the markets.
The rise of the Dollar seems to be the biggest thing that is working against the value of gold. It is most certainly not the certainty in the markets. The markets are showing that the situation in Europe will continue to take front stage in the next year, and the headlines will have to be watched. The overall long-term uptrend is still up, and we think that will return to the markets, but we think it could be next year before we see a return to that tone.
Light Sweet Crude
The CL contract found support in the $92.50 level on Friday, an area that is minor support. The market has been sold off hard over the last several sessions and a bounce looks ready to come. However, as the move recently has been so decisive, we are now looking for rallies to sell. Until we get back above the $105 level – this will be our strategy.
The Brent markets found a bit of support again on Friday as the daily bar formed a doji. However, the Thursday candle was a shooting star, and the session on Friday will have triggered sell signals for many traders. The breaking below looks very weak, and we are willing to sell rallies at this point.
Friday saw the second quiet day in the natural gas pits in a row. The recent selloff has been brutal, and the market certainly needs to take a rest. With the holidays quickly approaching, the volume will shrink, and the markets could be prone to sudden spikes. Knowing this, we are very keen to sell those spikes as the show signs of slowing down. Also, we like selling rallies in general.
The Friday session saw gold regain some of its losses for the week, albeit in a very small way. The session actually broke the top of the shooting star on Thursday, and could be the start of a possible bounce as a breaking of that top signifies at least some interest in buying the yellow metal. The long-term trend is still up, but the move recently has been brutal. We are waiting to see another day or two of calm before we buy again. The support level extends all the way down to $1,500 or so, and as a result we could see support here – meaning we won’t buy.
Light Sweet Crude
CL fell again on Thursday as the oil markets continue their slide. The breaking of the $95 level was significant, and the next move appears to be down – possibly to the $90 level. The demand for oil will certainly be lower as the world enters a slowing down economically, and the markets are finally showing this. We like selling a break of the lows form the Thursday session.
Brent markets tried to rally on Thursday, but failed. The resulting candle for the day is a shooting star, and a bearish sign to say the least. With this in mind, we are sellers on rallies, and a break of the lows form the Thursday range would have us selling as well. The $100 level looks to be the next stop in this market.
Natural gas markets fell again on Thursday after first rising. This shows just how weak the markets are and the trend are certainly still intact. The market has been overwhelmingly bearish over the last several months, and looks to continue to be so. The supply is far too great for the demand, so selling is the only thing to do. We sell rallies and a break of the lows from the Thursday session as it formed a shooting star, which of course is bearish.
Gold markets fell flat on the day for Thursday after originally rallying. The market is absolutely weak at this point, and it looks as if the next move will still be lower as the Thursday candle is a shooting star. The $1,500 level looks to be the next support area that the market will test. At that area, if we find support, we would be willing to buy. The selling of gold isn’t encouraged as the trend for the last ten years is up, and we don’t like going against longer-term trend like that.
USD/JPY fell on Thursday as the Dollar got sold off in general. The pair has immense downward pressure on it going back a few years now, and this is why we only sell this pair. In fact, if you look at the 78 level, you can clearly see that the market is struggling to overtake that level for anything more than a brief moment. With this in mind, we are selling currently.
USD/CHF fell hard on Thursday as traders reacted to the lack of anything substantial in the Swiss National Bank statement. The markets were anticipating a raising of the floor in the EUR/CHF pair, and the result would have been a rising in the Franc-related pairs around the world. However, it didn’t get it and the speculators in this position sold off the pair. The 0.95 level is indeed resistive, so this move lined up nicely with the technical analysis as well. However, the Dollar is getting bid up against everything currently, and the upward momentum should continue in this pair. We are willing to buy dips, but would like to see the 0.93 level retested as support first.
USD/CAD fell on Thursday as oil markets regained some of the losses they suffered on Wednesday. The pair fell back down to the 1.03 levels, and area that we hoped to find support. The level has held up fairly well, and a bounce has been seen on the lower time frames. The breaking above the 1.03 signified real strength in the bullish bias in this pair on Tuesday.
The oil markets will more than likely be plagued by the weakening economic outlook for much of the industrialized world. The Canadian dollar will continue to suffer as long as there is serious threat of global recession, and lower demand that comes with it. The Chinese economy, one that has been so strong in its needs for crude oil, is currently slowing down as well – and this could spell out lower oil prices.
The rising Dollar is a trend that we expect in general as all commodities should be viewed with suspicion at the moment. The situation in Europe simply applies too much upward pressure on the safe haven currencies, and the Dollar is chief amongst them. The strength of the pair isn’t going to necessarily have anything to do with expectations of Canada, rather a rush to the safety of US Treasures and other “safe assets” in the United States.
The pair will struggle against the 1.05 resistance area, but overall looks up to the task. The braking of that level will lead to 1.07, and in turn that area could lead to 1.10 before it is all said and done. This pair likes to grind for some time, and then suddenly run hard in one direction or another. Because of this, it is very difficult to say when these moves will happen, but they do look very likely.
The downside looks fairly well protected by both 1.03 and parity, and given a choice – we are more comfortable buying at this point. In fact, we are presently buying dips as long as we are above the 1.03 level, and even as low as parity.