On A Positive Note

The euro remained steady its early morning rise on false information.

All eyes and ears will be on tomorrow’s meeting of the EU where they will be discussing leveraging the European Financial Stability Facility. By using leverage the EFSF can increase their lending ability many times over. Leveraging is a tool used by Forex and Option traders, who use small amounts of the portfolio to purchase large amounts of currency, commodities and options. It is a good tool when used wisely, it also allows for much larger losses.

The hopes of global investors are at least a firm plan and a course of action by the EU and a meeting of the minds so to speak between French President Sarkozy and Chancellor Merkel. These two have been at odds over risk and growth. The pair has taken on the role of leadership in the past many months, but have recently been at odds, which has upset economists and investors. With the turmoil throughout the EU, leadership and command are required. Plans of Action are needed, guidance and stability are required.

The markets today were up on the good news from the US and the chance that tomorrow’s meeting will finally have some firm directions for the Eurozone.

Economic news from the US continues to reflect an improvement in the economy. Early results on Cyber Monday, the day dedicated to internet holiday shopping, the counterpart to Black Friday show great promise for incredible results.

The disturbing report release by the OECD the Organization for Economic Cooperation and Development might really upset the markets tomorrow.

The growth figures for the US were positive and give some hope that it might be the US that is the locomotive with the power to pull the global economy back from the edge. Just a few months ago, we were hoping that Germany might be the driving force, but that is not the case. The new report released paints a bleak picture for Europe and the United Kingdom. The report predicted rising unemployment in the UK, with the jobless rate increasing from 8.1% in 2011 to 9.1% by 2013 even as the economy recovers. For the UK, the OECD’s predictions are a 0.03% contraction in growth this quarter and a further 0.15% next. And the eurozone would shrink in the fourth quarter by 1% and by 0.4% in the first quarter of 2012.

The overall report was bleak with the US and Japan showing some positive results.

Overnight, investors and economists, traders and politicians will begin to digest and factor in this report which might have some negative effects on the markets.

The worrisome news today was the treasurys, rates continued to rise. Yields on the 10-year note added 14 basis points to 2.03%, touching a high of 2.08%. A single basis point equals 1/100th of a percentage point. Watch the markets closely for clues tomorrow.

USD/JPY Forecast for the Week of Nov. 28, 2011, Technical Analysis

The USD/JPY pair had a very positive week for the last 5 sessions, but one has to keep in mind the extreme amount of bearishness in this pair to begin with. The longer-term weekly charts clearly show that the 0.80 level is a massive resistance area, and we feel that this area should continue to serve as being too strong to be overcome anytime soon. The rise of the USD in this pair probably has more to do with the run to the Dollar in general as the EU crisis gets worse. The Yen will also be considered a safe haven as well, so to think this pair rises above 0.80 is probably wishful thinking at this point. A weekly close above that level would have us second guessing this idea though. In the mean time, we will probably see opportunities to sell this pair on rallies.

USD/JPY Forecast for the Week of Nov. 28, 2011, Technical Analysis USD/JPY Forecast for the Week of Nov. 28, 2011, Technical Analysis

USD/JPY Forecast Nov. 28th, 2011, Technical Analysis

The strong rise in the USD/JPY on Friday was certainly impressive, and many traders would probably feel fairly good about buying this pair at the moment as the Dollar is quickly becoming the currency to own overall. However, the Yen is also considered a safety currency as well, and the 0.80 level above is going to continue to serve as massive resistance going forward. With this in mind, we look for rallies to sell until that level is overcome. We could see more runs to the USD in the short-term, and as a result, we think we can short from higher up if we are patient.

USD/JPY Forecast Nov. 28th, 2011, Technical AnalysisUSD/JPY Forecast Nov. 28th, 2011, Technical Analysis

USD/JPY Forecast Nov. 25th, 2011, Technical Analysis

USD/JPY fell during the Thanksgiving session as traders continue to buy the Yen against all other major currencies. The pair has been intervened in a couple of times recently, and we think that it is probably going to happen again, but not in this area. The pair is decidedly bearish, but the move down will be very slow at this point as the easy pips from the intervention are already been collected. Selling on rallies is a viable strategy in this pair, and buying at a much lower price such as 75.50 is possible as well – knowing that the BoJ will step back into the markets if the pair falls too far.

USD/JPY Forecast Nov. 25th, 2011, Technical Analysis USD/JPY Forecast Nov. 25th, 2011, Technical Analysis

USD/JPY Forecast Nov. 24th, 2011, Technical Analysis

The USD/JPY pair rose during the Wednesday session as the run towards the US dollar continues. The pair is backed by the Bank of Japan and its intervention to weaken the Yen. The move was fairly impressive, but long-term this pair is massively bearish. The move will more than likely turn out to be another chance for sellers to come into the market. Because of this, we are not buying at this point, and will look for weakness to sell.

USD/JPY Forecast Nov. 24th, 2011, Technical Analysis USD/JPY Forecast Nov. 24th, 2011, Technical Analysis

USD/JPY Forecast Nov. 23rd, 2011, Technical Analysis

USD/JPY rose during the session on Tuesday, only to fall again and form a shooting star at the close. The pair is decidedly bearish, and as a result, traders took the spike upwards during the session as a chance to sell the pair again. The Bank of Japan is sitting below, so long-term sell and holds are going to be very difficult. However, rallies can be sold in this pair as it simply will not stop falling. The pair could be intervened in by the BoJ again, but not likely until we get close to 75.

USD/JPY Forecast Nov. 23rd, 2011, Technical Analysis USD/JPY Forecast Nov. 23rd, 2011, Technical Analysis

USD/JPY Forecast Nov. 22nd, 2011, Technical Analysis

The USD/JPY pair rose during the session on Monday, showing signs of support just below the 77 level. The candle from Friday was a hammer, and shows just how well supported this area could be for the pair. The Bank of Japan has been intervening in this pair over the last several months, and could be tempted to do it again if we drift lower from here. Because of that, we can’t sell, but the trend is firmly down – so we can’t buy at this point. We like buying much lower, around the 75 handle – a place where the BoJ might step in again.

USD/JPY Forecast Nov. 22nd, 2011, Technical Analysis USD/JPY Forecast Nov. 22nd, 2011, Technical Analysis

USD/JPY Forecast Nov. 21st, 2011, Technical Analysis

USD/JPY fell during the Friday session, but managed a bounce to form a hammer at support. The pair looks like it is ready to bounce a bit, but buying isn’t advised. The pair is decidedly bearish, and any rally that could come of this candle will more than likely be looked at as a chance to sell again by the trading community. Because of this, we are waiting for a bounce – and then selling.

USD/JPY Forecast for the Week of Nov. 21st, 2011, Technical Analysis

USD/JPY continued to grind lower after the intervention by the Bank of Japan this last week. The pair is going to be tough for long-term traders as the range simply is too tight for a long-term trade. The selling of this pair has been the only way to go, but occasional interventions make that a dangerous proposition from time to time. Because of this, we advise long-term traders to avoid this pair currently.

USD/JPY Forecast Nov. 18th, 2011, Technical Analysis

The USD/JPY fell again on Thursday as traders continue to express a real lack of confidence in the global markets. The Bank of Japan has been intervening in the markets, pushing prices higher form time to time. The pair is in “No Man’s Land” at the moment, and cannot be bought or sold at these levels. The lower area around the 76 mark could invite intervention again, and a buy position down there could be enticing. Until we get down there, we don’t have much in the way of desires to trade this pair though.

USD/JPY Forecast Nov. 17th, 2011, Technical Analysis

The USD/JPY pair fell slightly during the session on Wednesday, but only slightly so. The Bank of Japan is still supporting this pair, and as long as they do – the selloff will be slow. The pair cannot be bought, and quite frankly – cannot be sold at this point either. Because of this, we feel waiting until much lower levels to buy could be the next trade, as we would be getting in line to be there when the Bank of Japan intervenes yet again. In the mean time, there is no trade.

USD/JPY Forecast Nov. 17th, 2011, Technical Analysis USD/JPY Forecast Nov. 17th, 2011, Technical Analysis

USD/JPY Forecast Nov. 17th, 2011, Technical Analysis

USD/JPY Forecast Nov. 16th, 2011, Technical Analysis

USD/JPY initially spiked during the Asian session on Tuesday, only to spend the rest of the day falling. The downtrend remains intact as usual, and the selling should continue. However, we are getting to retrace about 50% of the recent intervention and the easy pips have already been had. We look for a slow grind lower at this point, but are finding a new position in this pair to the short side untenable. The buying of it is a loss waiting to happen, at least until we get much, much lower and trigger more intervention.

USD/JPY
USD/JPY Forecast Nov. 16th, 2011, Technical Analysis

USD/JPY Forecast Nov.15th, 2011, Technical Analysis

The USD/JPY fell during the session on Monday, but managed a bounce late in the session to form a hammer at the 77 handle. Because of this, it looks like it may want to bounce, and a break of the highs from Monday would trigger a buy signal as well. The Bank of Japan is willing to intervene, although probably not at this level. However, the move up here could be a nice trade if we get it. We would not short it at this level as we are getting towards the low area of the consolidation that keeps getting the BoJ to intervene.

USD/JPY Forecast Nov.15th, 2011, Technical Analysis

USD JPY Weekly Outlook, Nov 14, 2011

Weekly USD JPY Pattern, Price & Time Analysis

The USD JPY closed lower last week which could be a sign that short-traders are attempting to regain control of the market following the Japanese government’s intervention the week before. The previous week’s range was 75.57 to 79.53. This range has created a retracement zone at 77.55 to 77.08. This retracement zone may begin to control the short-term direction of the currency pair by acting as a pivot.

Technically, the intervention which drove the market from 75.57 to 79.53 turned the main trend to up on the daily chart when this currency pair crossed the last swing top at 77.48. This means that the current downdraft could be corrective in nature and may begin to attract buyers. It’s hard to come up with a scenario that will drive the USD JPY higher other than another intervention or a complete reversal of the lingering debt issues in Europe, but stranger things have happened this year in this market.

Another intervention by the Japanese government at current price levels will mean that it is no longer content with defending its currency when this pair reaches a new low but instead feels now is the time to finally put this matter to bed by driving it completely away from the all-time low. A move at this time will send a message to traders that this matter is serious enough to warrant an aggressive strike to protect the Japanese Yen from excessive speculation and volatility.

This week traders will be watching the release of Japan’s 3rd Quarter Gross Domestic Product report. Forecasts call for growth of 1.5% versus -0.5% last quarter. A positive growth figure will indicate that Japan is recovering from the March 2011 earthquake and tsunami. It may also prove that intervention is working because it protected the country’s export business by slowing down the rise in the Yen caused by excessive speculation and demand for the safe-haven currency during unstable times in the Euro Zone.

Traders should note that a positive GDP figure will only mean that Japan is in the early stages of recovery from the earthquake and tsunami. It should not be interpreted as though the country is ready to put all of its problems behind. There may be some swings in the country’s GDP moving forward, but construction in the damaged areas should provide enough support to keep government officials optimistic.

A friendly GDP figure poses a problem for the Bank of Japan if it remains committed to a weaker Japanese Yen. A better than expected number could send traders in the Yen, triggering a rise. In addition, as long as Euro Zone officials don’t have a solid solution to the lingering sovereign debt issues plaguing the area, there is going to be the possibility of risk aversion. This will send down demand for risky assets and drive up the need for safe haven currencies such as the U.S Dollar and the Japanese Yen.

If the Japanese Yen begins to rise for this reason then the government is going to have to consider whether it wants to continue to fight the trend with additional rounds of intervention. It may decide that the market forces are just too strong for it to work in the long-run. After all, the Swiss National Bank had to abandon its intervention program because it simply began to cost too much. It eventually turned to pegging its currency against the Euro.

It may not be this week, but the Japanese government and speculators seem to be on a collision course and the one who blinks first will end up the loser. Not only will the Japanese government be out its intervention funds but the economy may take another turn south if a sharply higher Yen kills the small growth in its GDP.

USD/JPY Forecast Nov. 14th, 2011, Technical Analysis

The USD/JPY pair fell during the session as the Dollar got sold off against almost all currencies. The recent intervention in this pair has already been retraced by half, and we think that the unilateral nature of this latest intervention should make it vulnerable to the markets. The moves like this normally are doomed to fail sooner or later, but the closer we get to the bottom of the intervention candle – the higher the possibility of the Bank of Japan intervening again. As such, we feel this pair falls more, but the gains are going to be limited to about the 76 handle.

USD/JPY Forecast for the Week of Nov. 14th, 2011, Technical Analysis

The USD/JPY pair fell during the past week as traders retraced the previous week’s intervention by almost half. The market really took it to the Dollar on Friday, and as a result the pair fell. The Bank of Japan is certainly watching this, and will more than likely start jawboning again in the vicinity of 76 or so. Because of this, we feel there are absolutely no long-term trades in the pair at the moment, and probably not until it begins to reverse the trend – something we don’t see anytime soon.

USD/JPY Forecast Nov. 11th, 2011, Technical Analysis

USD/JPY had a slightly down session on Thursday as traders continue to grind this pair lower. The post-intervention reaction is the standard one, as the market will try the patience of the Bank of Japan as they always do. The bank intervened on its own, so there is a real chance that we will revisit the low levels on this chart again. Because of this, we are sellers, but understand that the movement might be very, very slow.

USD/JPY Forecast Nov. 10th, 2011, Technical Analysis

USD/JPY rose during the session on Wednesday as the flight to safety actually pushed this pair in the opposite direction that we are used to seeing. It appears that traders are quite happy to sit on Dollars at this point in time, and the threat of Bank of Japan intervention makes shorting this pair a bit much to stomach at this point for many. However, the interventions that the Bank of Japan has taken upon itself to do have all failed as they were unilateral. Because of this, we think this pair will continue to fall over time. It will be a grind, and there will be days like this – but over time this seems to be the behavior of this pair. Until we close above 80, it is impossible to buy this pair though. Selling a rally is probably the best way to enter at this point.

USD/JPY Forecast Nov. 9th, 2011, Technical Analysis

The USD/JPY pair fell during the session on Tuesday as traders shorted the Dollar against most major currencies. The pair is being supported by the Bank of Japan via intervention, so the move down will more than likely be a slow and brutal grind, but we know this intervention was unilateral – which fails most if not all of the time. We are ready to take profits well before the lows, as we think the central bank will intervene again if this pair falls too much.

USD/JPY Forecast Nov. 8th, 2011, Technical Analysis

USD/JPY continues to hang in around the 78 handle, and as such – it is providing little in the way of short-term trading opportunities. The intervention has scared many of the traders away, but these unilateral interventions almost always fail. In fact, the last one did in just 5 days! The move down should be coming, but it will likely be a grind rather than a free fall. Because of this, if you are already short of this pair, patience is the key. We are short, and presently holding on until about the 77 handle.