USDCHF – Time is running out!
The EUR/USD pair fell during most of Monday’s session, but managed to bounce back in the end in order to form a hammer. The pair looks like it wants to go higher, but it should be mentioned that this pair will continue to suffer at the hands of headline risk going forward. Certainly, most people are painfully aware of the issues with European debt at the moment, but there are always going to be chances for the news to be worse than feared. After all, the market seems continent to simply overlook quite a bit. Those of you who traded in 2007 will undoubtedly remember what a market that refuses to come to grips with reality looks like when it finally has to. And that is the real fear that any bull has to have in the back of their mind.
The 1.3250 level has been rather supportive lately, and this makes sense as it was so resistive earlier. The level is a bit of a “midpoint” between the two larger ones, the 1.30 and 1.35 handles. Because of this, we aren’t as excited to be involved in this pair until we reach one of those larger levels. It is at these “bigger areas” that we find the best trades, and the most reliable ones for that matter.
The last few sessions have all produced hammers, so certainly the risk in the near term seems to be to the upside, and as a result the short-term trade may find value in going long for the next couple of days. However, as we are a bit more conservative, we prefer to see what this pair does at the 1.35 level, as it should continue to be a larger guide for the market overall.
Signs of weakness at that level are what we expect, and we wouldn’t hesitate to sell form it if we get them. Perhaps a shooting star or a bearish outside candle would be a nice signal from there. We think that a short from that position would have room to run, perhaps down to the 1.30 level. Again, the shorter-term trader may find a break of the Monday highs as a signal to buy, but we prefer to look at larger levels in markets that are as prone to shocks as this one has been lately.
The USD/JPY pair had a rough day on Monday as the bears sold this pair off. The resulting candle is a long red one, and it is sitting right on the 0.82 support level. The pair looks weak at this point, but the area it is sitting in is significant support. We like buying this pair only, and will do so on supportive candles. We are at the right spot, but we haven’t seen the right candle yet. We also like buying at the 80 handle as well, so supportive candles at that point will be bought as well. Selling isn’t an option until sub-80 on a daily close.
The GBP/USD pair rose again during the Monday session, but finished a bit flimsy. The 1.60 level has been broken, but the pair is closing as a bit of a doji, if not a semi-shooting star. The candlestick would have us leery of going long at this point, although the momentum is clearly to the upside. The breaking of the ends of the candle shall be our guide, as if we break higher – then it shows that the momentum has picked back up. If we break lower, this would show a failure to find follow through on the breakout.
The EUR/GBP pair fell for the Monday session, only to bounce a bit off of the 0.83 support level. This area has been stubbornly holding the market up, and it appears that we are simply not ready to break below it yet. The upside is capped by the 0.84 level, and we suspect that the next move may be up – but it won’t get above that mark. As a result, this is a “scalper’s only” type of market. We are interested in buying once the Monday session is over, but only for a quick 50 pip grab, nothing more, and nothing less. Selling will be our plan for a longer move if we can close sub-0.83 on a daily chart.
The EUR/CHF continued to grind along the “floor” of 1.20 on Monday as the pair can’t pick up any traction. Certainly, if it weren’t for the Swiss National Bank implementing a “minimum acceptable exchange rate” of 1.20 in this market, the pair would be much, much lower. The pair obviously can only be bought at this point, and the trading plan is quite simple: We simply buy this pair when it falls, and the closer to the 1.20 level the better. We take profits after a couple of dozen pips, and repeat. Of course, we could have the market move against us as we buy – but that will bring intervention, which will bring much larger profits – fine with us. Selling can’t be done obviously.
The AUD/USD pair fell for much of the session on Monday, only to pop back up and print a hammer in the previous gap by the close. This signals that we could perhaps get serious support in the area, and we certainly see this market as being in an uptrend as well. The pair is currently stuck in a bit of a descending channel though, so we aren’t sure that the usual “buy at the break of the hammer strategy will serve us well. Because of this, we need to see the channel broken, or a print above the 1.05 handle.
The USD/CAD pair fell on Monday as the oil markets perked back up. The pair has been stuck in consolidation lately, capped by the parity level on the upside, and the 0.9850 level on the lower part. In fact, there are many support levels in which to pay attention to below us, as it is because of this that we think this market could bounce again. In this type of environment, we prefer to trade in the same direction as the overall trend, which means selling. However, we don’t see large trades forming. We are presently selling every time we reach the parity level. Selling at this point isn’t advisable as the support levels are too great below.
The NZD/USD pair fell during the Monday session, but bounced in the end to form a hammer. The pair has been bullish for some time, but has recently found itself in a bit of a pullback. The hammer signals that the market will more than likely try the 0.8250 level again, and we think that a daily close above this resistance level is a good enough signal to go long.
The 200 day EMA is just below, so we can see the trend traders jumping in as well. The 0.80 level is also supportive, and the handle is between the 38.2 and 50% Fibonacci level. The pair will move with the overall commodity market, so bullish moves there will support the bulls in this market. We buy on a daily close above the 0.8250 mark, and won’t sell until we clear the 0.80 by a large margin on a daily close.
Silver is a new contract for our analysis videos. When trading silver, it is important to know that it is not only a precious metal, but it also has quite a few industrial uses as well. The market for silver can be a bit more volatile than the gold markets, but it does tend to stick to fundamentals as well as any other market out there.
With this in mind, the silver markets have made a potentially significant breakdown below support at the $33 handle recently. Perhaps it is due to perceived economic slowdown, or perhaps it is due to a sympathy move with gold. Either way, the breakdown mattered as it was such obvious support for about 6 weeks.
Since the breakdown, we have seen a drop to the $31 level, and have now pushed back up against the $33 level, and are presently testing it as potential resistance. It is a points like this that we need to pay special attention, as this could end up being a bit of a clue as to how the market is going to move for the next several weeks or even months. This is because we know that what was once support can often become resistance when broken down.
We will have to keep an eye on this level, and where the market closes in relation to the $33 level. The breaking and close above that on a daily timeframe would suggest that we are about to reenter the previous consolidation level. A failure on the daily close, perhaps a nice hammer or something like that, would signal that the market is about to continue the fall.
Needless to say, a move to the upside would have to keep an eye on the $35 level, as it was previous resistance. (Perhaps even just a slight bit lower than that.) If we manage to break down from here, the $31 level should be supportive as well, but the bulls would have to consider that an important area as if it gives way – this should run the market much lower as the $30 level will come into play, but below that looks to be short of support for some time.
The Light Sweet Crude markets initially fell during the Monday session, only to turn around and pop during the later hours of the session. The oil markets have been held hostage by the situation involving the Iranians and the West as the nuclear program standoff continues between the two. In all practicality, it is very unlikely that the Iranians will block the Strait of Hormuz, but this threat is what started all of this in the marketplace. Many traders are starting to wonder whether or not the Israelis are going to act on their own, and this gets the markets nervous.
Leaving the Middle East alone, there is a significant amount of demand coming out of the emerging markets at the moment. True, the United States is lagging a bit as far as consumption lately, but the Chinese and Indians seem set on making up the difference. With the announcement of a slightly stronger than expected PMI number out of China over the weekend, it suggests that the Chinese are moving right along, and this would mean continued demand out of that large market.
Looking at the charts, the $104 area is still significant, and should continue to support the market. However, what was once a clear flag now looks more and more like a descending channel – a very bearish sign. Because of this, we have to be cognizant of the barriers in order to look for some kind of breakout in either direction. The channel itself is a bit tight, but when it gives it should lead the way for the immediate future in this market.
The Dollar keeps gaining against many other currencies, and as a result the value of it grows. This tends to drive the price down for oil as the stronger Dollar means that it takes less of them to pay for a barrel. With today’s action, we actually like the long side of this trade, but need to see the top of the descending channel broken in order to get involved. Selling is still hard for us to do until we get below the $95 level.
The natural gas markets fell for much of the Monday session, only to bounce back in the end. The resulting candle was a hammer, and this candle has formed just above the $2 level. Because of this, it appears to us that a bounce is imminent, but buying it is far too speculative for our tastes. The trend is far too negative to consider buying this market under any circumstances, and we simply look at potential bounces as an invitation to sell from higher levels, with particular interest at the $2.40 level. The selling of rallies is certainly by far the most obvious move for us from this point on.
The gold markets rose during the Monday session as the “risk on” trade came back due to the better than expected Chinese PMI numbers over the weekend. The market looks strong, and the $1,700 level certainly looks like it is our next destination. We like buying gold on the pullbacks, and will continue to do so until we break below the $1,500 level. As such, we like adding to our positions above the $1,700 level as well, as a break of that next resistance mark signals momentum working in our favor. Entering into the gold markets on the long side via short term charts is our preferred method at the moment.
The EUR/USD pair rose during the session on Friday in order to trigger the buy signal by breaking above the top of the hammer from the Thursday session. The 1.3250 level below is a support level, as it was also recently resistance. The 1.35 level above is a substantial resistance area, and with all of the issues in Europe at the moment, we aren’t big fans of holding this pair to the long side for great lengths of time. The candle for the day also featured a bit of a pullback from the highs, so it is obvious that traders are a bit leery of holding Euros over the weekend as well – not a good sign of confidence.
None the less, we think the short term move for this pair is probably up, but any longs would be of the short-term variety as there are so many headlines that could come out of Europe in order to push this pair back down. While the short-term can be long, we actually prefer to sell this pair in one of two scenarios: A break below the bottom of the hammer printed on Thursday, or a sign of weakness at the above 1.35 level.
The breaking of the 1.35 level would give us more confidence in owning this pair longer-term, but the reality is that there are concerns with bond spreads in the EU, and the banks in that region are certainly going to be difficult to own as well since they are so heavily exposed to bad debt. The region will more than likely go into a recession, and some are even thinking that it will be a severe one that could take a few years to climb out of.
Over all, we prefer to sell the Euro all things being equal, but we also must acknowledge that the short-term action looks fairly bullish. This is why we prefer to simply wait for one of our selling scenarios to pop up as we believe those trades will be the type we can hang onto for much longer than buying.
The USD/JPY pair rose after originally falling for the Friday session as the support level at 82 held true yet again. The pair has recently enjoyed resurgence in the bullish case, and as long as the Bank of Japan continues to buy JBGs, they are essentially printing Yen and flooding the market. This should continue to weaken demand for the Yen, and as a result we expect this pair to continue to gain overall. We are buyers of dips, adding to our core long positions at this point. It would take a sub-80 daily close in order to get us selling this pair.
The GBP/USD closed the session just above the 1.60 level, and as a result we think the pair has entered another leg up. However, the close isn’t convincing yet as it is just ten pips above the handle. Because of this, we are waiting to see if there is some follow through. On the event that we can close the Monday session above the handle, we are buyers. We would also buy if we can break above the 1.6050 level as well. We are sellers if we see weakness at the handle, but only for the short-term as it looks as if there is real pressure to the upside now.
The EUR/GBP fell on Friday as the pair continues to bounce around between the 0.83 and 0.84 at the moment. The pair seems content to sit in this range, and as such this pair is a scalper’s type of market in the near-term. The pair is more than likely going to suffer low volatility as the two economies are so interconnected, and the situation in Europe still has so much uncertainty to it. We are not involved in the pair, and won’t buy until we see a daily close above the 0.85 level in order to buy, and a daily close below the 0.83 level in which to sell.
The USD/CHF pair fell on Friday as the Dollar remains under pressure. We have been waiting to see some kind of supportive candle in the 0.91 to 0.90 range, but simply haven’t seen anything to get excited by. Because of this, we are flat of this pair at the moment. However, the 0.90 level is just below, and the last hopes of the bulls will have to be seen soon and in the immediate area in order to go long. Unless we get a supportive candle in the next 50 pips, we will simply leave this market alone for a while as the Swiss National Bank is currently working against the value of the Franc in general.
The EUR/CHF pair fell on Friday as traders sold off the Euro late in the session. The pair features a “minimum acceptable exchange rate” of 1.20 as defined by the Swiss National Bank. It is this fact that has us curious as to why traders seem interested in shorting the pair at the moment, especially since the whole world knows about this level.
The fall looks like the type of action we could buy in this market. The lower we get in this pair, the more interested we are in buying as the SNB is our ultimate backstop. The gains may or may not be large, as if the SNB doesn’t have to intervene, the pair will more than likely drift higher again, but it could be a few days before we see the gains that we have come accustomed to. The gains are generally only good for 20 to 30 pips, but pips are free essentially, and over time can add up.
The swap is also positive, although barely just. The situation in Europe needs to get better for this trade to pay off over the long run, but if the market falls too much – we could see that intervention by the Swiss. Looking above, the 1.24 level seems as if it is a natural place for a move like that to run to.
The pair obviously cannot be sold. The central bank will have to get involved sub-1.20, as its very credibility will be questioned if it doesn’t. The market would find itself as low as 1.10 in very short order if the Swiss were to be found bluffing. Also, one must remember that the central bank has intervened several times over the last couple of years, so this is a threat that must be taken seriously.
One of the comments by Swiss officials was that the central bank was willing to buy an “unlimited amount of Euros” to defend the level. We may just see how many it takes in the near future. Longs only, you simply do not want to be on the wrong side of an intervention.
The AUD/USD pair fell during the Friday session, after forming a hammer on Thursday. Because of this, we are looking at a market that could be heading into a consolidation move. The 1.04 level is important, and extends down to the 1.03 handle. The 200 day EMA is just above the pair, and as a result we think that there is a serious debate going on at the moment. The area will be a great entry point from the long side, but we need to see some kind of bounce at this point. If we break the bottom of the hammer on Thursday, we would see further weakness in this pair. On a daily close above the 1.04 level, we would go long again.