EUR/CHF fell slightly during the session on Monday as the consolidation continues in this pair. The pair simply hasn’t been able to break out of the recent range, and is very unlikely to do so in the near term. The reasons are twofold: The Swiss National Bank has placed a “floor” in this pair at 1.20, and the Euro is simply too weak to get above the all-important 1.25 mark. If the pair were ever to get above the 1.25 level on a daily close, it would mark a significant improvement in Euro sentiment, and we would buy and hold. However, in the mean time we simply only have a range to trade – and we are at the bottom of it. We would buy strength here for a handle or two to the upside.
AUD/USD rose slightly during a fairly quiet Monday session. The pair is approaching the 1.0250 area, and has struggled in this vicinity previously. Because of this, we aren’t willing to buy at this level. The pair is going to be very sensitive to the headlines coming out over the next few days, and the Aussie is particularly sensitive to the data that comes out from China. As the Chinese are slowing down recently, we prefer selling Aussie overall. The pair looks like it wants to go higher at this point in time, but with the resistance just above, we aren’t willing to buy either. We prefer to sell closer to 1.05 as we see it as the top of the recent action, and believe overall that the pair will probably be weaker in 2012.
USD/CAD sat still during the session on Monday as the oil markets also experienced very little in the way of action. The real volume will pick up after this week, so the markets could be a bit quiet going forward. The US dollar has been very resilient recently, a trend we expect to see continue. The parity to 0.99 levels below looks very supportive, and that level would have to be broken to the downside for us to consider selling this pair as there is so much congestion below current levels. The upside looks resistive at the 1.04 level, but the recent action has shown that the bulls come in and support this pair every time it falls. With this in mind, we are thinking that the best move is short-term scalps to the upside in this pair currently.
NZD/USD fell and then rose during a back and forth session on Monday. The pair is currently sitting just below the 0.78 handle, and area we have seen as resistive lately. Whether or not this pair can climb through that level remains to be seen, but it is because of this cluster of selling that we are not willing to buy at this point. A daily close above 0.80 is what we need to see as the entire chart above current levels shows resistance up to that point. A break of the hammer that has been formed for Monday would have us selling though, as the 0.75 would be our first target.
Light Sweet Crude
CL fell on Monday as the markets continued to struggle with the $100 level. The oil markets have seen several attempts at the area, and the $103 level seems to be the uppermost point of resistance now. The breaking above that area is what it will take in order for us to feel safe in buying this contract. In the mean time, we feel the down channel will more than likely hold. This could lead to selling opportunities on a break of the bottom of the Friday hammer.
Brent had an almost completely flat day on Monday as the markets are still trying to pick up volume form the holidays. Not all traders are back yet, and as a result there might be a few slow days ahead in this market. The market has been a grind lately, but with a slightly bearish flavor to it. Because of this, we prefer to sell this market the closer we get to $112 as it has been resistive lately. Until we get a close above the $112.50 level, it will continue to be range bound.
Natural gas fell again during the session on Monday, but managed a slight bounce to form a hammer under the $3 mark. The market has been sold relentlessly over the last several months, and as a result isn’t able to be bought, even though it is starting to look more and more like a bounce could be coming. The bounce that should appear will more than likely only end up being another opportunity to sell this market as the long downtrend continues. The supply continues to outweigh any demands out there, and the $3.25 and $3.50 levels both look resistive and possible selling points on weakness.
Gold markets rose during the Monday session as the hammer from the previous session triggered off buy orders. The gold markets have been oversold recently, and the trading community is expecting another good year in 2012. Because of this, there is a real chance that many traders were stepping into the market on Monday in order to get ahead of the move as other traders come back.
The real test for the bulls is going to be in the $1,650 level, as there is a shooting star from last week that started the fall. The breaking of that candle’s top would be a very positive accomplishment for buyers in this market. Overall, the market has massive support below the area we are at currently, and the area should continue to be a launching point for buyers going forward. The market is in an uptrend over the last several years, and as a result – we feel the buying of gold is the only direction we can go in right now.
We are very constructive at this point in time, and think that the upcoming issues in Europe will make the European Central Bank print Euros, and the Federal Reserve could very well find itself having to expand its balance sheet in the form of quantitative easing. Both of these actions will put a bid in under the gold markets going forward for the better part of this year.
A break of the top of Mondays highs would have us long, and a short isn’t even on the radar at the moment. A breaking below the $1,500 level would certainly have us questioning the ability to sell though, as the giving of that mark would certainly signal something is changing in the attitude towards gold. However, we feel that a breakdown is becoming less and less likely as the larger trading desks come back from vacation this week. The gold story still presents us with plenty of reasons to be bullish, and as long as the $1,500 level holds up, we feel that dips are simply buying opportunities.
Light Sweet Crude
CL had a fairly flat week in the end as the market continues to pressure the upside at $100. The market has been fairly resilient over the last few months, and the $105 level is a big one that the market will continue to struggle with by all accounts. The Iranian government has been saber rattling again, and this only helped to keep the upward pressure on as the traders in the pits contemplated the possibility of the Strait of Hormuz being blocked by Iranian Naval vessels.
The charts are showing the possibility of a bullish flag forming, and a break of the $105 level would also signal a massive “W” pattern being completed. On the bearish side, there is a bearish channel that has been in effect for the last 6 weeks or so, and we have yet to break through the top of it as of the end of the year.
This sets up for a fairly simple trade: Buy this contract if we break above the $105 level as it shows that the oil markets are about to take off again, and based upon the potential flag – we could be looking at a price as high as $135 or so. The downside will be somewhat limited, but easy to track because of the well-defined channel. We are bearish at the moment until the $105 level gets broken – we think this market suddenly becomes a long term buy and hold.
Brent continues to meander around the $100 mark as the traders have been back and forth about the market over the last 9 months or so. The market looks very range bound and we think the $112.50 and $102.50 levels will remain the outer boundaries of this market going forward. The market looks like it will attempt to rise in the short run, but the $112.50 has been very resistive recently. We think this will continue to be the case. The closer we get to that mark, the more we are willing to sell. We aren’t ready to buy at this point as we are in the middle of the range.
Natural Gas markets fell again for the week as the bearish mood continues. Supply is simply far too strong for demand to soak up all of the natural gas out there. The $3 level gave way on Friday, but only barely so. Because of this, it is becoming obvious that the market will continue to struggle with pricing power. The rallies are to be sold when they appear, and the new lows only suggest that a short can be placed there as well. We do however prefer to sell rallies as it allows us to work with the trend and it’s momentum for longer before exploring lower and new prices.
Gold market rose at the end of an otherwise poor week as gold traders stepped in and bought the yellow metal at the $1,550 level. The level is right in the middle of the support zone that we see between $1,500 and $1,600 – and this bodes well for the bulls going into the new trading year. The level has been supportive in the past, and the Thursday hammer at this level suggested that we are starting to see the bottom of the downdraft. The Friday session rose quite vigorously, and this sets up for more strength going forward for the week.
The longer term picture would also suggest that the market could rise as well, given the problems with owning Euros, Pounds, and the possibility of easing coming out of the Federal Reserve. The overall trend is still up as the recent pullback doesn’t come close to changing that. The last eleven years have been positive for the gold markets, and there is no reason to think this is about to change anytime soon.
While going forward the market might not be the same straight shot up that we have seen, the fundamentals continue to look strong, and the market’s latest selloff came in the end of year book squaring that we normally see. The real tell will be in the month of January as traders come back to work. The highs in this market have been getting lower, so the bounce back will more than likely be a bit choppier in the future.
We like buying this market on dips, and with Friday’s action, we are even willing to step in now as the market looks set to rebound. The value of the US dollar will continue to work against gold, but in the long run – both really can rise. In fact, that was the norm for quite some time, despite what most new traders believe. With this in mind, we are buying on dips as long as the market stays above the $1,500 level going forward. Selling isn’t an option even if we break that level, as there are serious support levels below as well.
The USD/JPY pair fell hard for the week as the downward pressure continues. The Bank of Japan continues to lift this pair as the interventions over the recent past has keep a bit of a floor in this pair. However, the area that the BoJ seems to be interested in the 75 level as a possible area to get involved at. The 80 level above is a massive resistance area, so as a long-term trade, we don’t like trading the USD/JPY until we can clear the 80 mark on a daily close.
USD/CHF rose again during the previous week as the Dollar continues to be bid up. The Franc is being worked against by the Swiss National Bank, and the Swiss have the misfortune of having to sell 80% of their exports to Europe. The EU is going into recession, and with the Franc being so overvalued at the moment, this leads to negative economic outlooks for Switzerland. The Dollar is the “safety trade”, and as a result we think this pair will continue to rise.
However, you must be aware that the 0.95 level is a massive resistance area that will take a lot to breakthrough. But when it does – this pair will shoot straight up more than likely. The pair should continue to grind higher going forward, and as a result we are comfortable owning it as long as we are above the 0.93 handle.
USD/CAD fell during the week as the oil markets got a bit of a bid. However, the oil markets are running into massive resistance above, and the next move could very well be down. With this in mind, the hammer that the weekly chart in USD/CAD makes even more sense as the Canadian dollar will continue to be sold as oil falls. The move has been choppy lately, but the trend is starting to favor the upside from here. We would be comfortable buying above the 1.03 level, while watching the oil markets as a guide. Selling isn’t a thought until under the 0.99 level.
NZD/USD rose during the previous week after fending off the bears and an initial selloff. The pair formed a hammer and looks like it could be set to rise, but the highs continue to get lower, so it is hard to make a massively bullish case for this pair. Also, the Dollar is well-loved currently, and as a result this pair could suddenly reverse.
The 0.80 level above looks very resistive, and should keep the pair down at that level. The pair is looking like a choppy market between here and 0.80, and that keeps us away, although it looks like up is the next move. Having said that, we are looking to the 0.80 mark to show us if there will be a selling opportunity from that level.
The GBP/USD pair fell over the course of the week, but still remains above the all-important 1.53 level. The area is the bottom of a 200 pip support area that is the neckline for a massive head and shoulder in this pair. If the market can close below the 1.53 level on the daily charts, we would be massive sellers of cable as the head and shoulders measure down to roughly 1.40 or so if we fall. The hammer for the week shows just how difficult it is going to be to break down though, however – one has to remember that the candle from the week before is a shooting star. Not too much can be read into this though as the liquidity has been low over the last week. The pair continues to struggle to get above the 1.57 level, and this is the clearest indication of just how much bearish pressure there is. Until we get a close above that level, we can’t buy this pair. A daily close below 1.53, and we are short for the long-term.
EUR/USD fell again during the week as the markets continue to worry about further deterioration in the European Union debt markets. The Italians are now front and center for the problems, and the markets seem transfixed on the Italian 10 year bonds. The auction this past week was decent, but not good. The rate of the 10 year note in Italy is now over 7%, a level that most people in the markets see as unsustainable. The bond yields simply will have to come down for there to be any real relief for the Euro going forward.
The 1.30 level has been broken below, and the market currently sits in the middle of a massive support zone down to the 1.29 level. A breaking below the lows of the week would signal a new down leg in this pair, something that is likely to happen sooner or later. With Non-Farm Payroll coming up on January 6th, there is a real chance that a strong US number could inexorably tip the scales in favor of the Dollar. The 1.25 level seems to be assumed as a future price at this point.
Further complicating any real chance of a rally is the fact that there are more interest cuts to come from the ECB in 2012. The Euro has never been below 1%, but 2012 will see that level broken to the downside. The EU is simply in far too much trouble to continue as things are. In fact, there are a lot of analysts saying this could be another “American Decade” coming. This would make sense as there is a massive “reset” going on around the world. With China looking slower as well, the Dollar will get a massive bid over time.
We like selling a break below the low from this past week, especially a daily close below the 1.29 level. We understand that there will be a lot of “noise” from the markets at times, and the trade won’t be a straight shot down. But one has to think it is only a matter of time before the Euro suffers a real setback. The trap door could open suddenly, but the situation now looks systemic, and as a result we will only sell this pair on new lows and rallies that show signs of exhaustion.
The EUR/GBP pair fell again for the week as the Euro continues to get pummeled by traders. The start of the week saw an attempt at a rally, but the 0.84 level held firm as resistance. The pair looks absolutely broken, and the 0.85 level giving way as support is now looking as a harbinger of worse performance to come. The pair is to be sold on rallies and new lows going forward. There is a cluster of support going down to the 0.80 handle, so bounces should be coming. We welcome them as opportunities to sell from higher levels.
The EUR/CHF pair had another negative week over the last five sessions as the situation in Europe fails to instill confidence in traders. The pair looks very heavy, but the 1.20 level just below is the “line in the sand” for the Swiss National Bank as it says an exchange rate below that level is “unacceptable.”
The pair looks like it wants to fall to test that level. However, with the tight trading conditions going forward, we cannot see any real long-term trading opportunities until the pair can close above the 1.25 level – something that isn’t likely to happen for a long time.
AUD/USD rose during the previous week after first facing an initial selloff. The pair formed a hammer for the week and looks like it could be set to rise, but as the highs continue to get lower, it is hard to be as bullish of this pair under normal circumstances. The Dollar is well bid currently, and because of this, we are somewhat weary of going against it.
The 1.05 level above looks very resistive, as does the 1.03 area. One of these should keep the pair down at the level. The pair is looking like a choppy market between here and 1.05, and that keeps us away, although it looks like up is the next move. Having said that, we think consolidation is going to be the order of the day between 1.05 and parity for the next several weeks as the world tries to figure out what is coming from Europe and China.
Light Sweet Crude
The CL contract fell slightly in very thin trading on Friday. The market continues to look buoyant, but the $100 level above keeps fighting back. The $105 level is actually the top of the resistance as we see it, and the economic slowdowns that are coming in various markets should continue to keep prices lower for the time being. We see this market as being in a downward channel presently, and potentially trying to form a bullish flag. The flag is only confirmed if we can break through this resistance. In the mean time, we can only assume the downward pressure continues.
Friday printed a hammer in the Brent markets as the trading volume was very, very thin. The $107.50 level is the midway mark in the recent consolidation area between $102.50 and $112.50, and as a result we are not willing to buy or sell until w get to one of these outer limits. The selling a lot close to the $112.50 level is more our speed.