USDCHF – Still a Chance of Marginal New Lows Before Reversing
EUR/USD fell during the session on Monday as the markets were in “risk off” mode again. The pair did find support at the recent 1.31 resistance level however, and this is a bullish sign now that the daily candle looks a bit like a hammer. The 1.30 level should continue to be supportive, and as a result we aren’t willing to sell until that level is broken on a daily close. The buying of this pair can be done until about 1.35 as the move looks set to continue from the last couple of weeks.
The USD/JPY pair fell during the Monday session, and even went so far as to fall below the 76.50 level that has been so obviously supportive over the last several months. The area isn’t an “official” line in the sand like we have in the EUR/CHF, but it is obvious that someone with a lot of money (read: Bank of Japan or large Japanese exporters) has an interest in keeping the market above that level.
The breech of this level is a fairly significant event, and one has to think that the Bank of Japan will become vocal again fairly soon about the current exchange rate. However, it should be noted that they are normally a bit slow to actually intervene, normally taking about a week or two to actually do it after making statements.
It was just about 50 pips below the closing price form Monday where the Bank of Japan last intervened. The Move was fairly sharp, but lost a lot of its steam in short order. Essentially, this market has been fighting with the 76.50 level in sight since then, although there has been a bit of consolidation as well.
We would simply not sell at this point. This market could become very explosive all of the sudden, and as a result we are avoiding the sell side. However, buying is going to be difficult as well, as the BoJ hasn’t made any remarks lately to make us think that the move is imminent. The financial leaders in Japan are going to have to start jawboning this pair for us to get overly excited about buying. Of course, a simple supportive candle like a hammer at this low levels would also be an interesting signal to buy.
Once we hear the Japanese start to complain about the Yen’s value, we are on the sidelines. However, once there are headlines out of Tokyo complaining about it – we are ready to buy on signs of support such as hammers on the lower time frames, and of course large green daily candles.
GBP/USD fell on Monday, but managed a bounce late in trading to form a hammer. The 1.57 level is looking supportive at this point, and it appears that the market may want to make a run at the 1.58 level now. The area has been resistive, and it should continue to be. However, if we get a daily close above that level – it would be a massively bullish sign.
On the flip side of that trade, a breaking below the low of the hammer form Monday is a bearish signal as it shows it to be a “hanging man”. The breaking below this level would signal the market’s willingness to come back and retest the 1.55 level for support. The pair has been very bullish lately, and the move has been fairly parabolic. Because of this, we would be aggressive on the confirmed hanging man to the sell side. As far as buying – we need to see a daily close above 1.58 to consider it.
The EUR/GBP pair fell on Monday as it failed to crack the 0.84 level. The pair ran into the 0.8350 support level and stopped. Because of this, the pair looks very tight at this point, and a move could be coming in the short term. The trade in this pair is always choppy as the two economies are so intertwined, and this next few days won’t be much different more than likely. However, we have a fairly straightforward trade in our opinion: A daily close above the 0.84 level is bullish up to the 0.85 resistance level, and a close below the bottom of the Monday session has the market falling more and following the recent downtrend.
USD/CHF rose during the session on Monday as the markets bounced in the Dollar’s favor. The 0.91 level acted as support, and as a result we saw traders step in at that area. The area looks supportive all the way down to 0.90 or so, and we like buying as long as we can stay above that level, and show any signs of strength or support. We aren’t interested in selling as the EUR/CHF pair, a potential trigger for intervention by the Swiss National Bank, is hovering dangerously close to the lows that the central bank has put in. Intervention will have an effect on all XXX/CHF pairs, as this one will be no different. With this in mind, although this isn’t our favorite pair at the moment, we would only buy.
The EUR/CHF pair fell during the session on Monday as traders sold most risk assets. However, this pair has a “floor” in it imposed by the Swiss National Bank at the 1.20 level, and this pair is getting a bit too close to that area. The daily candle formed a hammer as it bounced, and this could perhaps be a decent signal to go long. Certainly the central bank is behind the buyers, and the threat of intervention is always out there. With this in mind, we would consider buying on pullback on the smaller time frames knowing that the pair tends to grind – not skyrocket. However, if it fall s enough – the intervention could make you a lot of money when it happens.
AUD/USD fell during the session on Monday as the markets were initially weak in Asia and Europe. The Aussie is always receptive to the “risk appetite” globally, and as a result will often fall in these situations. However, the stock markets picked back up once it was just the Americans involved, and this helped to boost the demand for the Aussie dollar.
The recent breakout of the 1.04 level still means quite a bit to us. The triangle that was formed below measured a move all the way to 1.12, and with the Federal Reserve choosing to extend the low interest rates until the end of 2014 there is a real chance that commodities will continue to strengthen as the Dollar weakens. The Australians will continue to enjoy strong demand for their currency as long as the trends in interest rates continue. Adding to this is the fact that the pair also has a positive swap.
The 1.05 level acted as support during the session, and the hammer shaped candle suggests that buyers stepped in to push the pair higher late in the session. The 1.07 level act as resistance, and we could see the pair struggle to climb above it, but this should only be a bit of a minor hiccup on the way to higher levels.
Because of this, we are only buying this pair, and as long as gold looks healthy, we are even more interested in the Aussie. The bottom of this hammer being broken would be a sign of real weakness, but the 1.04 level is the more important level. As long as this market can stay above it, the pair will be hard to sell. In fact, we think that perhaps taking a “core” position that you can trade around on the way up might be the way to go.
We are buying pullbacks that show supportive price action until we break below the 1.04 level. We also are buying a daily close above the 1.07 level as we think this pair should be healthy most of 2012.
USD/CAD rose at first during the Monday session, but was quickly beat back down by the sellers as the trend continued to the downside. The parity level is still acting as support, but the recent action in this pair makes us very leery of buying. The oil markets will continue to push this pair around, and until there is some kind of resolution in that market – this one will be held hostage by it. Since we see a ton of support all the way down to 0.9750 once we get below parity, we simply aren’t willing to sell at this point. With the shooting star formed on Monday, we aren’t willing to buy either – unless of course the daily close is above the top of the shooting star, which is a massive bullish sign. In the meantime, we are flat of this pair.
NZD/USD fell during the Monday session as it attempted to break a resistance level at the 0.8250 level. The area now looks like a double top, and a break of this would then become a massively bullish sign. The commodity markets should continue to get a bid due to the extended low rates being announced by the Federal Reserve last week, and as a result – the Kiwi should get a bid. The braking above 0.8250 would be a great buy signal. Of course, we could see a bit of a pullback, and as long as 0.80 holds as support – we are willing to buy dips.
The Light Sweet Crude markets fell a bit on Monday in a fairly quiet session. The market is now finding itself more likely to be on the low side of $100 rather than the upside from there. The range has been extremely tight lately, and it appears that the $98 level is holding the market up at this point. If we get a close below that on the daily, we would sell as the market appears weak overall. The buying of this contract isn’t considered until we get a close above the $105 handle.
Natural gas markets fell on Monday as the market continues to try to price in extreme amounts of oversupply in this commodity. The winter continues to be mild in the northeastern United States, and warmer weather is on its way. Adding to this is the massive amounts of natural gas that has been found over the last twelve months, and you have a bit of a perfect storm when it comes to the falling market.
The markets did get a bit of a positive signal from a couple of gas drillers saying they are going to stop for the time being until prices can rise, but the mathematics are going to work against the bulls over time. With the winter well over half done, the market will struggle to deploy all of the excess overhang in inventory. With this in mind, the down trend should continue.
The $2.50 level looks to be supportive at this point, and this makes sense as it is a “round number” of sorts. The $2.85 has seen sellers come back into the market, and it has yet to see a serious challenge to the $3 mark. This fairly tight range we have seen over the last couple of sessions sets up a fairly straightforward trade for us.
On the break of the top of this range, one could try to aim for $3, but it is at that range that we believe the real battle will be. Because of this, buying a breakout to the upside, while technically correct, might be a bit risky at this point. However, a break of the $2.50 and daily close down there would signal that the bears are back in control – and we would be very happy to sell at that point in time as the trend has been so strong over the last year or so.
While we have two separate signals that could be triggered, quite frankly we prefer to sell as the trend will take control again sooner or later, and it has been a great one-way trade for some time now.
Gold markets fell during the Monday session but managed a bounce in the later hours. The market has recently broken out of a strong downtrend line, and the candle that formed on Monday looks to be a hammer above that former resistance. The market has been healthy for quite some time, and we suspect that it will continue to be. The $1,750 level will be resistive, but it looks like we are going to make a serious attempt at it now. A break above $1,750 is a good buy signal. There simply are no sell signals.
EUR/USD continued to rise during the Friday session as the shooting star from Thursday got violated. The 1.32 level has been breached, and the market looks very healthy at this point in time. However, we have seen this movie before, so one would have to think it would take just one bad headline out of Europe to completely change this.
Oddly enough, Fitch downgraded several EU countries in the afternoon and the EUR/USD stayed strong. It originally sold off, but the kneejerk reaction was reversed in less than 30 minutes, showing just how Dollar negative the environment really is in the current environment. However, one of the biggest positives at the moment is the rumor that the Greek debt talks are about to produce a solution. (I swear this comes up every few days – but never seems to produce results.)
The 1.32 area will be one to watch as it is serious resistance on the longer-term charts as well. The level could being the top of a consolidation range down to the 1.25 level, as the weekly charts suggest this is possible as well. Of course, the market will have to show some kind of weakness at this area to make us more certain of a sell, but in the long run, we believe this pair falls.
We are looking at the EU going into recession, and the GDP numbers out of the US were weak as well, giving rise to Treasuries in the long run too. This pair will continue to fall, but it has been a nice bounce so far, and jumping into it at this point is reckless. The pair needs to show us a shooting star or bearish engulfing candle in the vicinity to get us selling, but the spot we are in is the perfect place to see it happen.
We are waiting, but will sell the first bearish signal that we find. Buying at this point could net some profits, but the situation in Europe is too volatile to get involved with. If you really want to sell the Dollar, the commodity currencies are a much better bet at this point.
USD/JPY fell during the Friday session as the Dollar continues to weaken against most other currencies. The area just below starts the support level that the Bank of Japan has been defending, so this area could produce interventions. Because of this, we certainly cannot sell at this point. However, until we get a supportive candle, we can’t buy wither. Because of these factors, we are going to stay out of this pair for the time being.
GBP/USD rose during the Friday session as the Dollar continues to weaken. The area above is the start of significant resistance though, and it is at this point that we will find out just how strong the Pound is going to be. The 1.57 to 1.58 level has been massive resistance over the last several months, and the move upwards from the lows in the 1.53 area has been absolutely parabolic. Because of this, it is doubtful that we will see a straight shot up from here through the top of the resistance area. We are looking to sell resistive and weak candles between here and 1.58, if we get them. If we get a close above that level – we would be forced to buy at that point.
EUR/GBP continued to rise during the Friday session as the shooting star from Thursday got violated. The 0.84 level has been very resistive in the recent past, and as a result it held back the bulls at the end of the day. However, we have seen this happen before, and it will only take a bad story out of Europe to send this pair down.
Fitch downgraded several EU countries in the afternoon and the Euro stayed strong. One of the biggest positives at the moment is the rumor that the Greek debt talks are about to produce a solution. This has been suggested several times in the recent past, but never actually accomplishes anything.
The 0.84 area will be the area to watch as it is serious resistance on the longer-term charts as well. The level should continue to pressure the market, but it must be said the Euro is banging against the level over and over – a sign of strength. However, above the 0.84 level is the even more important 0.85 level and that one will be even harder to overcome.
The Europeans are going into recession, and the British are highly exposed to that fact. The Brits send over 40% of their exports to the EU, and as their biggest customer is slowing down, the UK will as well. This pair will continue to be choppy, but the issues in the EU seem to be bigger than in the UK at the moment. This will continue to give this pair a downward bias overall.
Because of the downward bias, we are looking for selling opportunities. Weak candles will be our signal at the 0.84 level and especially at the 0.85 level if we do in fact manage to break higher to that level. The trend is down, and owning Euros is something that will be very difficult to do in the near term, no matter what the rumors are. The first daily shooting star or large red candle we see, we would not hesitate to sell in this pair.
USD/CHF fell on Friday as traders continued to sell the Dollar in general. The pair has seen a brutal selloff lately, and the breaking below of the hammer from Thursday is indeed a very bearish sign. The 0.91 level looks a bit supportive below, but at the current moment, we are not keen to step in and buy. The candle from Friday ended at the absolute bottom, and often that means continued selling. However, with the Swiss National Bank trying to weaken the Franc, we are not interested in selling at this moment either. We are very flat of this market currently.
EUR/CHF fell during the Friday session after first rising in value during the session. The pair is currently being supported by the Swiss National Bank as the central bank said just a few months ago that the 1.20 level was the “minimum acceptable level” that the pair could trade at. The market seems to be hell bent on testing the resolve of the Swiss, and it seems that a lot of traders are about to get a nasty surprise when the SNB intervenes at a sub-1.20 level.
The resulting candle for the Friday session is a shooting star at the very bottom of the recent downtrend. The strength in the Franc is abosultely killing any sense of competitiveness by the Swiss, and as a result, the SNB will simply have to work against the strength of it. The Swiss send over 80% of their exports into the EU, and simply are finding that the Europeans cannot afford their goods anymore. The effect has been brutal on Swiss growth, and there is a real chance of the Swiss economy going into recession as a result.
Also, it should be noted that the Swiss will have to intervene for simple credibility. If the SNB actually didn’t get involved, there is a real chance the markets would pile into the short side of this pair. The market would certainly punish the Swiss for standing aside and the plunge would be massive.
The breaking of the bottom of the candle would normally be a sell signal, but seeing as the market is just 60 pips or so above that magic number, we are not willing to sell. The buying of this pair is without a doubt the preferred trade, but there are no positive signs at the moment that would get us in the market.
A break of the top of the shooting star would have us buying, or even a retest of 1.20 with some kind of supportive action has us long as well. The market can only be bought, and until the Europeans get their collective act together, we will simply have to wait for these couple of signals to buy. If the solution is ever found to the European debt crisis, this pair will be a massive buy and hold market.
AUD/USD rose again on Friday as the Dollar continues to get sold off. The bad GDP numbers out of the United States certainly did nothing to inspire confidence in the economy, and as a result, traders went to other countries to look for yield. The Aussie has been strong lately, and has even broken out of a massive triangle that measures for a move up to the 1.12 level. The pair could pullback in the near term, and if it does – we would be buying those dips. We will not consider shorting this pair until we close well below the 1.04 level.