The USD/CAD pair fell below the all-important 0.98 level on Wednesday, only to bounce back up and above it. The resulting candle looks a lot like a hammer and as such, we think this pair could consolidate in the 0.98 to 0.99 level yet again. The oil markets are vital to this pair, and they are going to have to overtake the $90 level in the CL contract in order to push this pair lower.
However, we should note that the trend is certainly down, and a bounce from here has a long way to go before that changes. Because of this, we like selling on a close below 0.98 or a failure to break above parity.
The NZD/USD pair rose on Wednesday, but managed to fall slightly at the end of the session. The pair is decidedly bullish, and it appears we could be building a bit of a base between 0.80 and 0.83 from which to launch the next bullish move. However, is also should be said that the pair looks like it might take a while to do this.
The NZD/USD has a long history of going nowhere for a long period of time, and then exploding in one direction or another. This is because the market for the Kiwi is relatively small, and as such – the moves become a bit more explosive. We recommend buying on the dips in anticipation of a large move to the upside.
The pair still looks like it wants to break to the upside as it fell on Tuesday, only to rise again to form a hammer. The breaking of the 1.45 level on a daily chart confirms that we are header much higher. Otherwise, a break of the low on Tuesday sends this pair back towards 1.40 or so.
The USD/CHF pair had a bullish day on Tuesday as session saw a retest of the bullishness on Monday. The Swiss National Bank is set to make an announcement on Wednesday as to their intentions to devalue the Franc. This has the markets on edge, and traders are simply not willing to buy the Franc because of this. The truth is that this pair needed a pullback from the massive downtrend, and this move makes a lot of sense. Of course, the announcement on Wednesday will be crucial, so any positions before seeing that and more importantly the reaction – would be foolish as this is likely to rock the markets back and forth.
The Swiss National Bank is expected to announce measures to stem the rise of the Franc against the Euro (and other currencies) on Wednesday, and as such – we think this market will be very volatile and dangerous during the Wednesday session. If the announcement is made, and the pair cannot rally above 1.15 for any significant amount of time – this becomes a screaming sell. If it does rise above that level – the pair is best left alone in our opinion.
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 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.
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.