USD/CHF fell during the Thursday session as originally the markets decided to go out on the risk spectrum. The Swiss National Bank is still willing to sell off the Franc if the value of it gets too high, so selling the XXX/CHF pairs isn’t advised. The Dollar is the last safe haven currency out there, so a rise in this pair makes sense over time with all of the turmoil in the market overall. The 0.93 level is massively resistive however, and because of that, we want to see a daily close above that area. If this pair falls a bit, we would be willing to buy it on the dips.
The USD/CAD pair skyrocketed during the session on Thursday as the “risk off” trade came back into the fray. The Canadian dollar is tied to the risk spectrum and highly sensitive to the price of oil, which fell hard during the session. The oil markets continue to be rocked by the problems in the EU, and the economic issues suggest that perhaps the world is going into a larger recession than originally thought.
The risk of contagion out of Europe has people buying US Treasuries and selling the commodity markets overall. The oil markets are still in the recent range, but did shed as much as $2 during the day. This pair looks like it has found massive support at the 1.01 level again, and at this point in time we think that this could be the start of a move higher, perhaps to the top of the recent range at the 1.07 mark. However, the 1.03 level is going to be resistive as well, and could cause a pullback in the process.
It is hard to imagine a scenario that the pair breaks below the 0.99 level, which is the absolute bottom of the support zone going down from the 1.01 level. The markets are far too jittery at the moment to think they will be willing to stick their collective necks out there like that and as a result we think that any move to the downside is extremely limited.
The oil markets will have to be watched, and the $95 level in the Light Sweet Crude contract is one place where we could see action that will lead this pair. If that level gives way – this pair will be running hard to the upside at that point. The $105 level in the Brent market will also be an area that Canadian dollar traders will be watching as well, and you should too. The markets certainly have plenty to worry about at the moment, and as a result we prefer to be on the long side of this pair as the Loonie looks vulnerable overall.
NZD/USD fell on Thursday after first rising due to the market perceiving the EU rate cut as a good sign. The lack of bond buying in the statement however had the markets concerned, and we fell from the “risk on” trade every since then. The pair is very risk-sensitive, and should continue to be at the whim of the headlines coming out of Europe over the next couple of days. With the outlook of the EU summit becoming more and bleaker, we think that the breaking of the bottom of the recent range on Thursday will be the start of a move back down to the gap from two weekends ago at the 0.74 level. We won’t buy this pair until we can get above the 0.80 level.
The GBP/USD pair poked above the 1.57 level on Thursday as traders got long of the pair on optimism about the outcome of the EU summit. However, as headline after headline came out, the markets got more and more disappointed in the possible outcomes, not to mention the lack of bond buying by the ECB made the “risk off” trade the one to go with. The 1.58 level has held yet again in this pair, and the pressure to the down side is certainly building.
With this in mind, we are expecting the 1.58 – 1.55 level to be the consolidation that the pair chooses in the short-term. The 1.55 level is the start of massive support down to the 1.53 level. The breaking of the 1.53 handle would have us selling very aggressively as it would be a major break of support in this pair. The cable pair is very risk-sensitive pair, so that fact that it fell isn’t much of a surprise, and the problems in the EU are going to have a severe effect on the cable and Pound specifically. The UK sends over 30% of its exports to the EU, and as a result the economy in Britain will certainly be exposed to issue on the continent. Because of this, the cable pair could be just as volatile as the EUR/USD pair over the next 24 hours.
When the announcement from the EU summit comes later, the world will sit still. If the market doesn’t like the “solutions” that the Europeans come up with – this pair will fall hard. The Dollar will certainly be the currency that people will want to be in at that point in time. The safe haven status of the Dollar will continue to be a magnet for the market until the EU mess can get taken care of. All should be known by Monday morning on how the risk appetite will play out in this and many other pairs around the Forex market.
Although it looks very bearish at the moment, trading this pair before the EU announcement is probably akin to gambling. The outlook doesn’t look good, but there is always time for a surprise between now and then.
The EUR/USD pair fell during the session on Thursday as the world first reacted positively to the rate cuts out of the EU, only to be disappointed by the lack of bond buying in the press conference statement. Because of this, the Euro had a very rough day, chopping traders up in the process. The pair has a decidedly bearish tone at the moment, and all eyes are on the EU summit and any possible solution coming out of it. However, the leaks and rumors are suggesting that there is a lot of disappointment coming for the markets, and as such we don’t trade this pair until the announcements come out, as there is simply too much risk in either direction currently.
EUR/GBP fell fairly hard during the session on Thursday as the Euro region continues to find one problem after another. The headlines coming out of Europe aren’t overly positive at the moment, and the world is waiting for the end of the EU summit in order to see a possible solution. It looks like the markets might be disappointed though, based upon the leaks that are coming out of those meetings.
The daily candle formed a hammer right at the 0.85 level, and this shows the support level is still intact. The breaking of the daily range from Thursday would be very bearish indeed and have us aggressively short of this pair. A break of the top of Thursday’s range has us in a short-term scalp for about 50 pips on the long side.
The EUR/CHF pair fell on Thursday despite the Swiss National Bank providing a backstop for this pair below. The selling of the Euro continues in other pairs as the world simply doesn’t believe the EU summit will produce acceptable results. The pair has been in a range between 1.22 and 1.24 for the last few weeks, and there is very little to suggest that it will break out of the range. However, there is an announcement coming later today, and this could produce a move. A move lower will almost undoubtedly produce intervention from the SNB if the market reaches 1.20, and a break above the 1.25 level (in the case of good news) would be a long-term buy signal. Until one of those two things happen, this pair will continue to chop around.
AUD/USD had a rough day on Thursday as it both shot straight up, and then fell apart. The original move was in reaction to the EU announcement of a rate cut, something the market desperately wanted. The initial reaction was short-lived though as the statement was trumped by the news conference that Chairman Draghi gave afterwards. The lack of ECB commitment to buy bonds in Europe spooked the markets, and it was all downhill from there.
There were several rumors coming out over the course of the day, and the markets reacted in kind to them. The AUD/USD actually broke the bottom support level we have been watching as represented by the hammer from Tuesday and Thursday of last week. That level was pierced and represents a real attempt at breaking the support overall. If this level can be broken back below, the market will look very bleak for the Aussie as it is a risk-related currency.
The gap from two weekends ago is calling it appears, and if we are to close it – a failure to come to a widely accepted agreement out of the EU summit on Friday could be the catalyst to see us try and fill it. If so, this pair can head back to 0.97 over the course of the next several days. In fact, it could be in a very short time as it is quite possible we could see panic at that point.
The upside might be somewhat limited as the 1.05 is massive resistance. The Aussie will react to market sentiment overall, and we think that the odds are certainly stacked against the bullish case. However, the meeting can produce headline events – and we think the real move will come after that announcement. In the mean time, it is possible that we will see choppy movement. The breaking of the daily range on Thursday has us selling this pair aggressively as the gap will more than likely be filled in short order, and the Dollar will continue to be favored in this scenario. If we rally, there will still be stagnation in the EU, and the world economy could very well slow down. At the 1.05 level – we would look for shorts as well.
The EUR/USD pair continues to tread water just under the 1.35 level as the markets are patiently waiting on the result out of the EU summit. The Wednesday action ended up unchanged after going back and forth in this highly volatile market. The pair is currently under a lot of pressure, but the fact is that it simply won’t go down for any real length of time. With this in mind, it is difficult to short this pair, and even harder to go long. We advise staying far away from this pair until after the meeting this week in Europe.
USD/JPY had a fairly quiet day, albeit negative on Wednesday. The pair continues to grind lower every time it rises, and this latest sequence of trading days does nothing to suggest this will change anytime soon. The pair is to be sold only, and on rallies if possible. The Bank of Japan is intervening in this pair from time to time, but at levels lower than here, namely the 75 – 76 area. Because of this, we continue to be short of this pair for another 100 pips or so.
The GBP/USD pair rose quite strongly on Wednesday as traders rallied the Pound in general. The move to just above 1.57 is the 5th attempt to break above it lately, but each time it gets this high it fails. The recent range has been between this area and 1.56, and unless the market suddenly gets overly bullish, there is no real reason to expect this to change. The 1.58 level looks resistive as well, and as a result we don’t buy this pair at this level. In fact, we are looking for shorter-term weakness candles from which to try to play the recent range to the downside.
EUR/GBP fell hard on Wednesday as traders continue to sell the Euro. The Pound was actually fairly strong during the session in general, so this pair only had one way to go in the end. The 0.85 level below continues to hold as support, so the move was somewhat limited, and a downside break below that number is what it would take to get us to sell at this point. The most likely scenario is that we could continue to see consolidation between the 0.85 and 0.8650 levels, and this is what we are expecting to see as these two economies are so intertwined. The EU summit meeting over the next couple of days will be important to the future direction of this pair, so we are holding off on trading this pair currently.
USD/CHF continues to tread water under the all-important 0.93 level as the market dynamics are pushing people away from risk, and into safety overall. The Swiss Franc used to be a safe haven currency, but with the Swiss National Bank actively working against the appreciation of the Franc, it no longer can be thought of as “safe” to own. The US dollar is the last safe haven, so it makes sense to think that the pair should rise.
The 0.93 level is a massive resistance level, so breaking through will be difficult, but over time, we think it should happen. The recent lows are much higher than the previous one, and as a result we think this shows real buoyancy to the pair. The pair will struggle, but as long as there is fear in the market, the Dollar will be the natural trade for most traders. This should have the USD/CHF pair reaching 0.95 before too long, and possibly parity after that.
Further compounding the case for a bullish USD/CHF pair is the fact that there are rumors out of Switzerland that the central bank may raise the “floor” in the EUR/CHF pair to 1.25, or even as high as 1.30 or so. This would have a weakening effect n the Franc in general, and could very well push this pair up again. With this possibility, and the willingness of the Swiss National Bank to intervene, this will keep the sellers at bay over time.
We believe the floor in this pair is current at 0.90, and a daily break above the 0.93 level would have the market moving higher. We like buying on a daily close above that level, and are interesting in buying short-term dips in this market as long as we are above the 0.90 level. Until the macroeconomics in Europe change, we think the “fear trade” should continue to serve trader well over time, and we are willing to express this through this very obvious currency trade as the world loves Dollars, and cannot buy and hold Francs presently.
EUR/CHF originally was bullish for the Wednesday session, but the 1.24 – 12.5 level turned out to be far too strong in its resistance again. The pair is beholden to two separate forces currently: the Swiss National Bank and its “floor” at 1.20, and the lack of desire for traders to own the Euro in light of the massive debt crisis engulfing the continent currently. While we don’t advise selling this pair in general, there are scalping possibilities at this point as the pair looks set to grind lower. The buying of this pair isn’t going to be possible until we get a daily close above the 1.25 level as the move would show a serious break out.
AUD/USD rose on Wednesday after printing a hammer on Tuesday to show support again. The Aussie is a “risk on” currency, and with each rumor that looks like the EU will get some kind of relief, this pair rises. The recent action has been consolidative, and needed for that matter after the recent parabolic jump in the pair. The market is trying to anticipate some kind of solution on Friday out of the EU summit to the debt crisis in Europe. The biggest problem with this is that every time this has happened, the markets have been disappointed.
The pair is likely to continue to have a bit of a bid in it until after the meeting on Friday. The next 200 pips are fraught with resistance, and it really will take something of a fix in order to push this pair above 1.05 in our opinion. Because of this, we are still apt to sell this pair on signs of exhaustion. However, the next two days might be better off if leaving this pair alone was your strategy. Remember though, this is a risk-sensitive pair, so any disappointment out of Europe on Friday will affect this pair negatively.
With this in mind, we are going to let the members of the EU summit dictate what we do in this pair. The selling of this pair will be our trade with about 90% probability being the case. If this pair rises too much before the meeting, it will more than likely be a “sell on the news” event, and if the meeting produces nothing, the pair will be a sell as well. Either way, we don’t see this pair rising over time unless we get that serious fiscal reform out of the EU that we have yet to see. Fiscal union is really what the market wants, and until it gets it – we are going to be very headline driven in the future. This pair looks to have resistance at 1.05, and support at parity. This is the area we are trading it in at the moment, and continue to see the two as a boundary.
USD/CAD had a very neutral day on Wednesday as the market attempted to break the pair down below the 1.01 level and failed. The resulting daily candle was a doji, and finished just slightly positive. The oil markets are struggling to get over the current resistance levels, and as long as that is the case, we think this pair will be able to hold the current support level between 0.99 and 1.01. The candle sets up an easy trade – if we break the top of the Wednesday range, we would buy. We won’t sell down here as the 200 pip support level is just below.
NZD/USD had a fairly neutral day on Wednesday as the market went back and forth in this pair. The resulting daily candle is a doji, and the day finished down just slightly. The NZD is highly sensitive to the risk appetite of the global markets, and as a result is currently treading water while the world waits to see if the EU summit on Friday can produce any announcements of success. The EU coming up with a viable and believable plan should be supportive of this pair, but the market has been disappointed time and time again as the leaders simply cannot come up with the tough decisions. The pair will probably be very quiet until after this meeting, and we are not trading it until the start of next week as a result.
Light Sweet Crude
The CL contract had a fairly quiet day on Wednesday as traders continue to argue about whether or not the $100 level is too high for crude or not. The resulting daily candle is a doji, and we are presently sitting just above the $100 mark. The resistance area going up to the $103 level has been significant, and should continue to be so. The volume in the oil pits is fairly light at the moment, and the market could be waiting to see if the EU can come up with some kind of solution to the debt crisis before making a move. Presently, we are very flat of this market.
Brent markets fell on Wednesday as the market continues to grind away in the vicinity between $107.50 and $110. The market is very quiet presently, and the continued tightening of the price range has been indicative of the uncertainty surrounding the global concerns of economic slowdown. With the recent price action, we believe this market is leaning lower, but we need to see a move below $107.50 in order to short it.
The natural gas market fell again on Wednesday as traders continue to press the bottom of the recent range, and attempt to break through the lows. The hammer from Tuesday is where we consider support to be, and a break below that would have us selling again. Any rallies can be sold as well, and we know that this market simply cannot be bought. The supply of natural gas continues to be far above and beyond what the demand is, so we see the downtrend continuing.
Gold markets first fell on Wednesday, but bounced later in the session to form a second hammer in a row for the day as the $1,700 level continues to push prices higher in this bullish market. The buying of gold has been the only way to go for over ten years now, save a few pullbacks here and there. With this in mind, we have been calling for support at $1,700 and it looks like that has been confirmed again.
The crisis in Europe is taking all of the headlines, and many traders are buying gold back up in order to protect wealth. The rise of the Dollar has been slightly troublesome for the gold markets from time to time, but in general – they both have been going up over time. The recent low is higher than the one before it, so we are fairly confident in our bullishness in the short-term as well as the long-term. The concerns over fiat currencies should continue, and with the debt situation in the United States not being too much better than Europe for the long run, we feel there will always be at least some underlying demand for gold.
The past two days have both shown that traders are willing to step in and buy when the markets fall, and this is our thesis going forward. The buying of dips is the way to go, and the massive support level from $1,600 to $1,700 can be thought of as a floor now. The recent high at $1,800 is our first target, and we are willing to step in and buy on short-term dips, or even at this point presently. With the crisis going the way it is, there is far more risk of bad headlines our there than good ones, and either should propel the gold market upward as it not only serves as a safe haven, but also as a risk asset simultaneously. The recent action has been strong, and we think that going into the new year this trend should continue for quite some time.