Natural gas fell hard on Tuesday as traders continued to punish the natural gas markets for the over supply problems that it faces. The trend is down, and we certainly have been advocating selling rallies for quite some time now. This strategy continues to work, and as such we will continue to use it. However, the $3.75 level is massive support, so a bounce here wouldn’t be a surprise. We like selling that bounce if it comes. A close below $3.75 has us selling as well.
The gold markets fell during most of the day on Tuesday, only to bounce back and form a hammer at the $1,700 level. The candle suggests that there is real support in the form of $1,700 and it makes sense as this was a breakout point that we saw just a few days ago. The market has been in an uptrend for several years now, and there is absolutely nothing that makes us think this will change. The jitters in the markets with both the EU-related problems, and stocks potentially falling will more than likely push the price up higher in this market. A break of the highs on Tuesday is a classic buy signal in the market, and we would gladly go long at that point. We won’t sell this market at all.
The EUR/USD pair absolutely fell apart during the Monday session as traders continue to scrutinize the EU bailout plans. The market sliced right through the potentially supportive 1.39 – 1.40 level, and this is a very bearish sign. However, the market did close in the middle of a massive cluster of candles from a few days ago. It appears that the 1.40 area may become a bit of an “inflection point” in this pair, and could be key overall. The market looks bearish, and headline risks could send this pair back down. However, the area we are in presently looks like it could offer some support, so a bounce is highly probable. We will more than likely see a lot of volatility over the next several days in this pair, and going forward for quite some time. With the ECB and Fed meeting this week, this could be the catalyst for a major move. At this point in time we are willing to see if the market breaks below the lows from Monday, and if so – we would sell. Otherwise, we could see selling in the near future, but would need to see a bounce first. Buying isn’t a thought at the moment.
USD/JPY had an interesting day on Monday. The Bank of Japan intervened in the market, driving prices much, higher. The top of the move was 79.50 or so, and it should be noted that the 80 level wasn’t even touched. The move was also mentioned as being unilateral, and as such – it could be very short-lived. The fading of this move has already started. The pair cannot be bought now, it has simply moved too far too quickly. The selling of it can be done, as these unilateral moves tend to be selling opportunities, but the selling move should be carefully considered, and perhaps done with a smaller than usual position.
GBP/USD fell hard during the Monday session, but bounced from the 1.60 level – an area that we said could produce support. The shape of the daily candle is a hammer, and this also shows that the market “prefers” a move to the upside. The area should support the market from here on forward. A break of the highs from Monday is a classic buy signal in the market. The breaking below of the lows from the Monday session would be massively bearish.
The USD/CHF rose during the Monday session as the 0.85 level continues to offer a psychological barrier for the sellers in this market. The pair is the inverse of the EUR/USD quite often, and as a result it rose as the EUR/USD fell. The Swiss National Bank is working against the rise of the Franc, so this move would certainly please them. The breaking of the daily candle from Thursday would be needed for us to get long again, as selling cannot be done with the present environment surrounding the SNB.
EUR/CHF fell on the session for Monday, and the first though someone has to have is that the Euro even managed to fall against the one currency that has its own central bank working against it. The pair has a “floor” at 1.20 as mandated by the Swiss National Bank, and doesn’t allow many to sell this pair, even though it has fallen again. With knowing all of this, we can’t sell from this level, and certainly can’t buy until there is confidence in Europe. At this point, there isn’t much – and as a result – this pair is very much neutral in our minds.
The AUD/USD pair fell during the Monday session and even touched the 1.05 area that we have been watching so closely. The 1.05 level was once massive resistance, and it could now be support. The bounce wasn’t much, but it did hold. With the Reserve Bank of Australia meeting today, this pair could move quickly. The closing of the daily candle below the 1.05 level has us shorting this pair again, and a move up would have us buying again. Either way – trading on a central bank announcement can be bad news, so we will wait until after the session to let the market tell us where it “wants” to go.
The USD/CAD pair rose on Monday as the Dollar got bought in mass by traders around the world. The “risk off” trade came back with a vengeance, and the USD/CAD rose as a result. The Canadian dollar is a “riskier currency” as it is tied to oil and with the oil markets falling – the CAD’s value fell as well. The pair is stopped just at the parity level, and this is considered to be our “line in the sand” in this pair. The daily close above this area has us long again, and the daily close below the Monday lows has us short again. Until then, we will watch the market and act accordingly.
The NZD/USD got clobbered during the Monday session as the commodity markets all took a hit. The Kiwi is very sensitive to most commodities, and as a result it was always going to fall in value. The 0.8000 level still remains underneath, and would certainly be an area where the markets could offer massive support. The 0.79 area would have to be cleared to the downside in order for us to sell. If we can see a supportive candle, something like a hammer or large green one, near the 0.8000 level – we would buy.
Light Sweet Crude
The CL contract fell on the session for Monday as traders considered the area as a “no man’s land” section in the marketplace. The recent breaking above the $90 level was significant, but the $95 level seems to be very resistive as well. The market is going to be sensitive to headline risk coming out of Europe, and as such – will be difficult to hold for anything more than a quick trade. Currently, we like the idea of buying on supportive candles above the $90. If we break below the $90 mark on a daily close – we would consider selling down to the $80 level.
The Brent market fell on Monday, stopping at the bottom of the recent range. The $107.50 level is currently the “bottom”, and the $112.50 level being the “top”. The market seems like it is “stuck” in this area, and consolidation is very likely at this point. If the Federal Reserve meeting this week speaks of quantitative easing, the commodities will get a bid and oil will be no different. However, until we get a move out of the range – we are waiting for directional clues.
The natural gas markets had a slightly bearish day on Monday as the market stopped cold in the $4 area. The market is in a downtrend, and the pop that we saw on Friday was suspected to be an opportunity to sell this commodity. The stance that we have taken at FX Empire for some time is to sell the market on rallies, and as long as we can stay under $4, there is no reason to even consider anything else.
The gold markets fell hard during the Monday session as the situation in the EU continues to dominate headlines. The Bank of Japan also intervened in the USD/JPY pair overnight, and as such the value of the USD rose during the session. The market fell to the $1,700 level, and managed a small bounce from the area. The $1,700 mark looks supportive, and this market is certainly in an uptrend as well. Because of this, we are interested in buying this market as it look like a break out, retest, and possible support at this point – a classic technical analysis set up.
The NZD/USD pair exploded to the upside this past week. The pair marched directly to the 0.82 resistance level, and could see a bit of a pullback at this level. However, if we do, it should more than likely be a chance to buy at cheaper levels. The 0.8000 level looks like it could be massively supportive, so any break below that number would have us short this pair – and in large size. The market looks bullish at this point, but needs a pullback. Supportive candles at 0.8000 are great buy signals.
The EUR/USD pair had a negative day on Friday, after clocking in an outstandingly bullish day on Thursday. The rest isn’t surprising after that massive move, but the market has stopped at a former gap, which has to have some technicians wondering. Personally, we think the rally is somewhat overdone as there are some major details to be worked out in the EU and its bailout. However, the 1.40 level should be a bit of a floor as this market looks to pullback and pick up some more buyers that perhaps missed the move. If we can break back below the 1.39 level – we would be massively bearish at this point.
The USD/JPY fell again on Friday as traders started to lose fear on a Bank of Japan intervention, according to the options markets. The idea that they wouldn’t be as interested in the value of the Yen is probably a dangerous one to trade off of. The market is pressing the patience of the Bank of Japan, and we should see soon if they lose patience. The upside is probably more difficult for traders to stay in, but the 75.50 area has been very strong as support and intervention form that level would certainly knock a lot of the speculative traders out of the markets. Because of this, we buy only – but need to see supportive candle – which we don’t at the moment.
The GBP/USD market rose again on Friday as traders continue to try and sell off the Dollar. The market has found what was once the August lows in the form of the 1.61 area. The market did finish with a green candle, but the rally faded towards the end of the session, signaling a small correction may be in the cards at this point. The 1.60 below should be supportive and somewhat of a floor at this point, and as long as we stay above that area, we will be bullish and buying the cable pair on dips. The 1.6150 level has to give way on a daily close for us to think this move has real legs, but the short-term trade should be fruitful if using the pullback and buy strategy.
The USD/CHF pair had a slightly bullish day on Friday, showing that the 0.86 level is the start of possible support in this market. The 0.85 is a more significant level in our eyes, but this area that we found ourselves in on Friday is the top of the Swiss National Bank’s thrust upward from a few months ago. This should become an area where serious support steps up, and as such we are looking for buying opportunities. So far, we haven’t seen the candles for that – but we are watching.
EUR/CHF continues to sit still. The Swiss National Bank has put a “floor” in on this pair at the 1.20 level, and the whole world knows it. Because of this, we think that the sell side is without a doubt limited at this point. However, what we do find interesting about this market is that even though the EU has “fixed” itself, nobody is buying the Euro against the Franc. One would think that the Franc would get sold off massively as the SNB is trying to make this market rise. While this chart isn’t tradable at this point in time, it does show that not all is what it seems with the Euro perhaps. This chart is an interesting study in market sentiment currently, rather than a trading area.
The AUD/USD pair fell, and then rose again during the Friday session to form a hammer. The candle is at the top of the move up, so it is either supportive – and the rally has been strong, or it will be a “hanging man” if the bottom gives way. Either way, we think the tide has decidedly shifted in the favor of the Aussie for the time being. If we fall from the levels we see now, we think the 1.60 level will be the “floor” in this pair for a while. The breaking of the highs from Thursday will also be a signal to buy as well. We won’t sell until we break the low from Friday, and then only until 1.60 or so – we think the trend is too strong to risk a long-term sell at this point.