The AUD/USD pair fell on Tuesday as the markets in general did, but then found a bid late in the day to form a bit of a hammer. Although it is at the top of the recent range, the candle means the same thing – potential bullishness. One of two things can happen here: Either the candle breaks to the upside, and we see that as a bullish move up to about 1.0750 or so, or we get a break to the downside, making that candle a “hanging man”, a very bearish signal indeed. The trend is up, so knowing that – you know which direction is more likely. However, waiting until one of the ends of the candle gets broken is the wise thing to do.
The USD/CAD pair initially rose during the Tuesday session, but then fell to form a shooting star of sorts just above the 0.98 level. This crucial support level needs to give way for this candle to be a confirmed sell signal, but the trend is in that direction so one has to like the odds. However, we are waiting to see if the pair can close below that level on the 4 hour chart before committing to new shorts. Buying isn’t an option until we break well above parity at this point. Watching oil markets will be crucial as it will more than likely be the catalyst to push this pair. If oil rises, the CAD will strengthen, driving this pair lower.
NZD/USD had a slightly confusing day on Tuesday as traders shunned risk for a large part of the session. However, the pair did manage a bounce in the latter hours to form a hammer. This is the second one in a row from the minor area at 0.83, and this could signal further strength ahead – at least until we see 0.85, which is the next major resistance area. We are buyers on a break of the Monday and Tuesday highs. We don’t sell this pair as the Kiwi has been far too bullish lately.
The EUR/USD pair continues to rise on Monday as the possibility of a bullish flag being formed is still contemplated. The flag look like the final target would be as high as 1.65, based upon the “pole” of the pattern. Also, there is the possibility that we are not in a flag pattern, but rather a downward channel. Either way, this pair will be beholden to the Tuesday meeting between Sarkozy and Merkel. The reaction to that meeting could be the key for the destination for the pair in the long-term. If the EU cannot come to some kind of solution to the debt crisis, this pair will sink like a stone. In the meantime, the top of the flag is roughly 1.45, and if we can close above that level on the daily chart, we will be long this pair for several weeks if not months or years. Tuesday really could be that important. A failure to come to terms will be a simple sell and watch it fall scenario. In the interim, we are sitting still in this pair.
The USD/JPY pair did very little on Monday as traders have learned that the Bank of Japan isn’t very amused by the attempts to push this pair below 77. The last several candles do in fact make several hammers, and this looks very supportive. We have been looking for that thrust upwards in which to join in. Until that happens, we can only watch. The entry point for us is the 77.60 mark – this is to give us a move above not only the 77 level, but the .50 level that often produces reactions in price as well. We won’t sell – the Bank of Japan won’t let us.
The GBP/USD pair found itself rallying on Monday as traders took on more risk around the world. The pair has been bouncing between 1.60 and 1.65 or so for some time now, but it should be noted that the pair wasn’t able to reach the 1.60 on the last move down. This can be a sign of a failed run by the bears, and that the pair could rise once it breaks above the 1.65 level.
The Bank of England puts out the Inflation Letter on Tuesday, and the CPI also comes out. If either of these looks bullish or surprise to the upside, this pair will certainly break above that resistance area. However, the consensus is that they won’t, and if that is the case we might still be consolidating for a while.
The USD/CHF has risen quite rapidly on Monday, as well as over the last few days as the Swiss National Bank looks like it wants to attempt a peg to the Euro in order to stem its rise. The conversation has scared a lot of the weaker players out of the markets, and we have shot straight up to the 0.8000 level. As you can see on the chart, it appears that we have failed to break above that level so far, and that we could get another leg down.
Any confirmation or refusal to peg this currency will have massive effects on the future of the Franc. The action on the Monday candle looks somewhat exhaustive, and as such – we are willing to step in on the short side if we can break the bottom of the Monday range. The pair certainly looks vulnerable suddenly, and this latest spike might just be another selling opportunity after all. We would have to close above 0.8000 on the daily chart to consider going long of this pair.
Threats of a currency peg continued to drive the price of EUR/CHF higher on Monday as traders have been running from the CHF in droves. However, at the end of the session, we have seen that the pair has failed at the 1.15 level, and is forming a shooting star. The trend is down, and as such – we like sell signals. The word is that if a peg is done, it will be to the 1.10 level, and that would mean that the market has to fall from here. We like the candle shape, the location, and the trend being part of this potential move. We are sellers if the bottom of the Monday range gives way to the downside. A break above this candle sends this pair looking for 1.18 and 1.20 respectively.
AUD/USD rose again on Monday as traders took on more risk around the world. The pair has slammed into the 1.05 area, which is an area that once served as support. Because of this, we would assume that it serves as resistance in the near-term. Even with the massive fall last week, the trend is still most definitely up, and we would expect that level to give way eventually. In the meantime, we want to see a pullback in order to go long. The 1.04 could be supportive as well, based upon recent action.
The USD/CAD pair fell fairly hard as oil markets rallied on Monday, pushing demand for the Loonie higher. If should be noted that this is with the trend, and as such – we expected this move. We had told you that the oil markets would hold the key for this pair, and this has proven true. The 0.98 level will be somewhat supportive as all round numbers tend to be, but in reality – this pair going down is natural as it is with the overall trend.
If oil can break above the $90 mark, you can pretty much bet that this pair falls hard in reaction. The 0.9450 level would be inviting as traders know that the situation in this pair is decidedly down. If economic numbers out of the US are good this week, (CPI on Thursday as well as Philly Fed numbers) this could accelerate the down move as traders will certainly buy oil, and then buy the CAD in turn.
NZD/USD had a very quiet day as traders embraced all things risk-related on Monday. This is particularly odd as the Kiwi is considered a massive “risk on” play. The pair has gravitated towards the 0.83 level, even if it is somewhat minor in its importance. The upcoming PPI Input number on Tuesday could move this pair a bit, but in the meantime, we see this as being in a “holding pattern”. If the PPI Input number comes in higher than expected, ( > 1.2%) we could see a surge back to 0.85 in short order. If not, we think this pair wants to meander around the current level.
EUR/USD rose slightly during an uninspired session on Friday. The pair continues to drift within the downward channel, and traders are currently trading as if the market wants to figure out which currency is worse. The current action seems to be “stuck” between the 1.40 and 1.45 areas. Because of this, we are waiting to see a move above 1.45, or a mover below 1.40 in order to buy or sell, depending on the direction.
USD/JPY fell again on Friday as traders attempted to push prices lower, but as with the last several days, found themselves wanting. The BoJ intervened at this level recently, and there are indications that they may be thinking about doing it again. The markets know this, and as such – are not will to push the issue much farther. We see three hammers in a row, there is a good chance that we see a bounce from this area sooner or later.
The GBP/USD rose after first falling on Friday, but fell short of closing above the 1.63 level that previously indentified the bottom of the consolidative action in the market. The market will have to close above 1.63 to be considered worthy of a long, but to be honest we see a lot of sloppiness in the 1.63 to 1.65 range. Because of this, there will be easier and cleaner charts to trade in the near-term.
The USD/CHF pair continued to rise during the Friday session as trader shed the Franc in fears of an eventual peg to the Euro. (This was mentioned as a possibility by some members of the SNB recently.) The truth is that if it were to happen – that would be a while down the road, and sooner or later the market will go back to buying the Franc which served it so well for so long. The pair is currently testing the 0.7750 level, which was minor resistance earlier. If it breaks that area, it will then proceed to 0.8000, and then 0.8300. (Assuming it can continue to rise.) We are still selling this pair, and are waiting for that shooting star or extremely bearish candle to trigger our sell order. Until then, we wait.
The EUR/CHF pair continues to rise as the SNB members suggested that a possible EUR/CHF peg could happen to stem the flow of money into the Franc. The truth is this move is a long way away, and that assumes it actually happens. The pair is decidedly bearish, and we needed this bounce. We are still looking to sell, but as the 1.10 area has been broken, we are looking to see a little more upside and then perhaps some weakness around the 1.15 area. We would sell there on weak candles without hesitation. A break of Friday’s lows gets us selling again as well.
The AUD/USD pair fell, and then rose on Friday as traders took on more risk in the later hours of the session. The recent consolidation area looks like it wants to be supportive of the market, and we feel that we will see the 1.05 level tested fairly soon. Gold is looking like it wants to rise again and that will put in a bid for the Aussie. We buy at a break of the highs on Friday. If it doesn’t break it, we think more consolidation could be in order.
The USD/CAD pair rose again on Friday as the market found the oil contracts to be a bit sluggish. The oil markets are going to control the CAD for the foreseeable future, as it is a major export out of Canada. The markets in oil are starting to look a bit on the weak side, so this could be very bearish for the Loonie. This would bid this pair up, and this could be a trend change that is trying to happen. However, we can only trade what we see, and we do know that the parity level just ahead is very strong resistance, so we are net sellers still, at least until that mark gets closed above on a daily candle. We are looking for weakness about 100 pips above current levels, and then are looking to sell.
The NZD/USD pair fell and then rose on Friday, as the traders stepped in and took on more risk as the day grew older. The pair has been very bullish for quite some time, and it appears that it will continue to be so in to the future. The 0.80 is our line in the sand: If we go lower than the mark, we are not buying anymore. The 0.85 just ahead will probably cause a pullback if we go higher, and that could be your entry point to buy.
The EUR/USD pair is currently banging around in a massive potential flag. Either that, or a downward channel, and at the moment, either could be correct. The pair has been very difficult to trade lately form a long-term perspective, and we don’t think that will change in the next week or two. If we can get a daily close above the 1.45 level – the flag on the chart that is marked with the purple lines would be broken to the upside and valid. If that is the case, we eventually go all the way to 1.65 or so. However, until we get that break, we can only assume we are in a downward channel, but as you can see, this pair has been sloppy over the last few months.