EUR/USD had a wild day on Thursday as one would expect, given the nature of the financial crisis in European. The markets aren’t really sure what to do at the moment, and with the EU meeting over the weekend – one has to think the markets will simply wait until the outcome of those meeting in order to make a decision. For the Friday session, it is very likely that we see a range again, and probably a fairly small one as traders will not want to be in the wrong position on Monday when they wake up. The outcome of the meetings will more than likely set the tone for the Euro’s next move. We advise staying flat on Friday, unless the meetings are cancelled, or some other massive shock hits the news wires.
EUR/CHF fell on Thursday in a rare show of movement. The pair is still hovering above the 1.23 area, and is likely to only have limited downside potential as the Swiss National Bank is willing to intervene if we get too close or below the 1.20 level. The market is one-way because of this, and quite frankly – we would love to see it fall down towards that area. The reality is that we can only buy this pair because of the SNB, and will have to wait to see what Europe does about its financial mess. The plan that could come out over the weekend is possibly the catalyst for a move up finally. Because of this, we hesitate to put a position on until Monday.
The AUD/USD pair had a wide range during the Thursday session as the global markets continue to go back and forth on headline news and general fears of European debt issues. The candle is another doji, suggesting that the pair isn’t ready to move much for the Friday session. This isn’t a surprise as so much of the world is focusing on the upcoming summits out of the EU during the weekend, and the markets will more than likely be somewhat tame, barring any headlines. (Hardly something that can be promised.) Because of this, we are neutral on this pair, and suspect it will fluctuate between 1.01 and 1.03 at the most.
Light Sweet Crude
The CL market fell on Wednesday as traders began to be concerned about global growth yet again. The $90 mark continues to hold this market back, and should keep it in a range bound scenario for the near-term. The bottom seems to be as low as $70, and the top $90. This is a very wide band in this market, and shows just how jittery the market is. In this particular market, we are willing to range trade it. We are at the upper end of the range, so selling is an option – but buying isn’t.
The Brent markets were pointed out after the Tuesday session as having formed a hammer on the daily chart, but just below the $115 level. We mentioned that a breaking to the up side would be limited because of the massive resistance. The breaking on the bottom end of the candle was in fact a bearish sign, and something we saw during the session. In fact, if we get follow through, it would then be classified as a “hanging man”, which is massively bearish.
The natural gas markets rose during the Wednesday session as the market pulled back from the fall on Tuesday. The bounce was slight, and shouldn’t be considered to mean anything other than some simple profit taking. The market is in a bearish trend, and should continue the overall direction. The market shows absolutely no signs of turning around, and as such – we are shorting after every rally on signs of weakness.
After printing a bullish hammer on Tuesday, the gold markets promptly fell on Wednesday. The candle was bearish, and fairly solid, but short on length. Because of this, we feel the analysis hasn’t changed: We are willing to buy on a break of the Monday candle, as it shows a breakthrough on the resistance area that has been keeping this market down. We are not willing to sell gold at any price, simply because the uptrend is over 10 years old. We simply wait for signs of support and buy on dips at this point.
USD/JPY continues to sit in a tight range, and barely budged during the volatile Wednesday trading session. The market is currently being manipulated by the Bank of Japan as they want a lower valued Yen. The range has been between 76.25 and 77.50, and should continue to be in that area for the foreseeable future, as there is no real reason to sell the Yen, but no real reason to work against a central bank either.
We like selling close to the top of the range in the 77.50 area, and of course buying when the market dips down to the 76.25 level. The trading range has seemed to be oblivious to the wild swing in other markets, and as a result – we expect more quiet trading ahead.
USD/CHF had a bullish day on Wednesday, and even popped above the 0.9000 mark. This was an area that we said we needed to see hold and get broken to the upside in order to buy this pair. Selling was never an option as the Swiss National Bank is threatening to sell Francs, so we are looking for buying opportunities. A breaking of the Tuesday doji would be a good sign that we are ready to continue the up move in this pair. It makes sense – as the Franc can’t be held for safety anymore, and basically makes the USD the only choice out there now for safety.
The USD/CAD continued to respect the parity support area on Wednesday, as not only the demand for “riskier” currencies fell, but the demand for oil did as well. This was a double-whammy for the Canadian currency, and it showed in this market. The resulting candle is a hammer, and it looks like the market is ready to jump back up on any signs of bad news. If the oil markets move to the downside from here, we expect this up move to continue. Watch oil for the bias, and then trade the Canadian dollar accordingly.
The NZD/USD pair rose to the all-important 0.8000 number and promptly fell. The 0.8000 level is in our opinion a massive resistance area, and will have to be overtaken in order to get long the Kiwi for any real length of time. The fall was quite rapid, and the snap back does go in line with the overall trend, which is also down. This gets us selling rallies, or a break of the Wednesday lows.
The GBP/USD pair rose quite a bit during the first part of the Wednesday session, only to pull back in the later hours of the session. The 1.57 level held as support, and this is bullish for this pair, but with the global markets constantly working against worry, any longs in this pair will be overly dependent on the global risk appetite. The headline driven markets are sure to make this pair very volatile over the longer-term, and as such we are very careful about entries. The 1.57 simply must hold if you are to buy this pair on dips. If it gives way – this will become a very bearish market quickly.
EUR/USD rose during the session as traders piled back into the Euro again on hopes of some kind of deal being worked out between Germany and France. (There was a Guardian report out of the UK that said as much.) However, that story was quickly denied, and the move got faded. The fall was pretty impressive, and the 50% Fibonacci retracement has held the price down. The daily candle is a long shooting star, and looks quite bearish. The failure of the bullish move has us thinking that the 1.38 – 1.40 levels should continue to be resistive in the short-term. We feel that selling rallies is the way to go at this point.
The EUR/CHF is a heavily manipulated market currently. The Swiss National Bank has declared the 1.20 level a “floor “in this pair, and as such – it doesn’t dare test it. The Wednesday session saw the EUR/CHF rise for a while though, and this would be the only direction we could take since the other direction has a central bank in the way. However, this market rose, and then fell back forming a shooting star. This doesn’t look overly bearish, rather like a market that simply isn’t ready to move yet. We will be looking for a long-term buy on a bullish candle, but until Europe gets its collective act together, this market will struggle to rise.
AUD/USD had a wild range on Wednesday, as traders originally bought the Aussie in large amounts, only to pullback later in the session. The risk off trade came back into vogue when reports of disagreements came out of Europe, and this sent riskier currencies like the Aussie down in the US session. The shape of the bar is a shooting star, and although not at the top of the range like we normally look for, shows just how hard it is going to be to rally above the massive 1.03 – 1.05 resistance level. The pair remains a “sell the rally” pair in our eyes.
Light Sweet Crude
The CL contract had a very bullish day on large volume on Tuesday. The market is still under the $90 level, and the level seems to be still pushing prices down. Although the move is significant in its strength and volume, $90 simply has to be broken on a daily close in order to get bullish at this point in time. Until proven otherwise, the $90 level – which is just above, should still be thought of as the top of the range. Because of this, we would sell signs of weakness if they appear.
Brent markets actually fell for a while during the Tuesday session, only to pop back up later in the session. The resulting candle was a hammer, and it appears to be a bullish sign at this point. However, with the recent run up being so parabolic, it is hard to buy at this level – especially since the $115 level is above, and has been so resistive. The breaking of the lows from Tuesday would be a massively bearish signal, and we would be more comfortable selling on that event.
Natural gas markets had a very bearish day on Tuesday as the doji we talked about on Monday broke to the downside, and the move only confirms the weakness in this market as every time the market rallies – it only fails in the end. Because of this, we still prefer selling on the rallies, and of course new lows. There is absolutely no reason to be long of natural gas at this point in time.
The gold markets had a wild ride on Tuesday as the market fell most of the session. The headlines out of Europe stating that the EU might increase the EFSF bailout fund to 2 Trillion Euros pushed the market back higher, as it appears that the Europeans are getting ready to “print” more money at this point. It should be noted that the story is unconfirmed at the moment, and this showed up in the gold pits as gold is an investment people will buy in uncertain times.
The market is very leery of printing, and this should only help to bolster the demand for gold. The resulting candle for the day is a massive hammer, and it looks set to bounce from this point. A breaking of the highs from Monday should clear the market to go much higher at this point. It would take a breaking south of the $1,600 level in order to think of selling.
The USD/JPY pair had a fairly quiet day on Tuesday as the range continues to hold in this market. The market closed near the 77 mark, which has been the epicenter of this very tight range recently. The 77.50 area is the top, and the 76.00 level is the bottom.
With the Bank of Japan threatening possible intervention in the marketplace if the Yen appreciates too quickly, it is going to be hard to sell this pair for any serious length of time. The range has held, and has paid traders quite handsomely if they played it. The range continues to be a guideline for scalpers to clean up in this environment. The range should continue to be abided by, with smaller positions to the downside, and larger ones to the upside as the threat of intervention is still out there.
USD/CHF finished the day fairly unchanged as the market continues to run around in circles. The result is a small doji, but the move proved the 0.9000 level should continue to give reactions in this marketplace. The Swiss National Bank is still working against the appreciation of the Franc, so we are not willing to sell this pair under any circumstances. The breaking of the top of the Tuesday session would get us buying though, and is in line with the idea of the USD being a “safe haven” while the Franc is no longer allowed to be. With all of the negative headlines out there – it makes sense to us that the pair should continue to rise over time.
The USD/CAD pair fell during the Tuesday session, and continues to react inversely to the oil markets. The parity level below still keeps this market afloat though, and until we get a close below it on the daily, we are not selling this pair. The 1.0650 level above is massive resistance, but it is far enough that we are interested in buying on a sign of supportive price action, perhaps in the form of a hammer or engulfing green candle.