The AUD/USD pair surged in the early part of the Tuesday session to retest the parity level. However, during the session we saw a failure to breakthrough, and the pair looked weak in the end. The AUD is a “risk on” currency, and will get sold off in times of trouble. With the action late in the US session, one has to think that the parity level will continue to serve as huge resistance in this market. Because of that, we are selling rallies and will get much more aggressive to the sell side if we can close below 0.97 on the daily chart. We cannot buy until the parity level is completely cleared on a daily close.
The gold markets fell hard on Monday, but bounced to form a hammer at the $1,600 mark. This shows that a lot of buyers stepped in to bargain hunt in this strong bull market at the big figure. We suspected this area might produce some support, and it appears that it is going to do so now. A break of the Monday high is a strong buy signal, while a break of the low is a strong sell signal. For now, we wait to see which one happens first, but with the trend being so strong – we know which direction we prefer!
Natural gas markets had a rare strong day on Monday as traders played a bit of a bounce. The $4 level overhead still looks very resistive at this point, so the pop in price is more of an opportunity to sell at this point than buy. The fundamentals for the natural gas markets are simply too poor to believe in the long-term bullish scenario. We are sellers of rallies, and especially so when we get close to the $4 – $4.10 area.
Light Sweet Crude
The CL contract fell on Monday, but found massive support at $80. The level has produced an impressive bounce, and it looks like the floor is currently being set by some. The candle formed was even a hammer. The overall global outlook for economic growth is poor, but the crude markets seem to be stubbornly staying in a range between $80 and $90. A break of the Monday highs would have us buying for a $5 gain or so.
Brent markets had a very similar day as the CL. It also formed a hammer, and it looks like the $100 – $105 level is going to at least produce a bounce at this point. We would buy for a short-term trade on the upside if the Monday highs get broken. We will see if we can close below the $100 level.
EUR/USD had a wild back and forth day on Monday as traders continue to weigh everything European. The end of the US session received an announcement that the Europeans are in the middle of formulating a large-scale funding structure to recapitalize the EU’s banks. This lead to a rebound in the currency pair, and it even formed a hammer for the day at the 1.35 level. This shows that the level is going to be tough support, and a bounce is more likely than not at this point. However, until we get more clarity out of the EU, this pair will remain pressured to the downside, effectively slowing any potential gains. We would buy on a break of the highs from Monday, but would be quick to move protective stops up in the case of bad news. A breaking of the lows form Monday is a massively bearish sign.
USD/JPY had a fairly quiet day again on Monday, with a slightly negative bias to it. The pair is still being held afloat in the 76 area, as traders simply haven’t been able to test the resolve of the Bank of Japan openly. The central bank is rumored to be clandestinely intervening around the area, so shorting isn’t advised. We would be interested in buying, but only on signs of strength, of which there haven’t been any lately.
GBP/USD had a strong day on Monday as traders bought risk around the globe. The cable popped back over the all-important 1.55 handle, and it looks like the area is going to be massively supportive at this point. The pair looks like it is ready for a bounce, but with the way it has acted recently, we still prefer selling at this point. However, we will need to see weakness at higher levels from which to sell now that we have made this bounce.
USD/CHF rose a bit during the Monday session, only to be repelled for the second time in three sessions. The 0.9000 level sits just below, and it looks like it wants to hold this pair up at this point. Since the Swiss National Bank is actively working against the Franc, we wouldn’t short this pair anyway. We are waiting for a supportive candle at the 0.9000 level from which to buy. If that doesn’t appear – we would be even more interested in buying at the 0.88 level if we get the chance.
EUR/CHF fell on Monday as traders sold the Euro off in general. However, in the later hours there was an announcement that a plan was in the works to shore up the European banks. This lead to a leg up in the Euro, and this pair gained back some of its losses for the day. None-the-less, it still looks very slow in its movement, and as such we don’t suggest trading it just yet. Shorting isn’t possible with the Swiss National Bank waiting to intervene, and the situation in the EU is still too cloudy to buy this pair. For the time being, we are leaving it alone.
AUD/USD fell hard on Monday, but managed a large bounce in the US session to form a hammer at the 0.97 support level. The level looks like it is going to produce a bounce, and this would not be unexpected in the big scheme of things. This area is going to be a sort of “last stand” for the Aussie, as if it gives way – the pair would fall much, much farther at this point. However, even if we do pop to the upside from here, we see the parity level just above as massive resistance at this point and would be quick to take any profits in the case of a long position. For the most part, we are content to wait until parity to short this pair on signs of weakness.
USD/CAD rose back above the 1.03 handle on Monday, only to fall back below it later in the session. The rebound that the oil markets saw certainly played a part in this, and the pair looks like it needs to bounce around between parity and the 1.03 level for a while. This should lead to range bound trading for the next few session, with those areas being some kind of “barrier” in the meantime. Watch the oil markets – when they go up – this pair falls. When they fall – this one goes up.
NZD/USD fell on Monday, only to turn around completely and form a hammer at the close. The pair looks like a pop is coming, and this could lead to a short-term trading opportunity. We still think the 0.80 level is one that should give this pair a reaction – as it was such strong support previously. The pair could pop, and then continue its fall from that level. As a general rule, we feel much safer shorting form the 0.80 level on signs of weakness, but a small long position could be taken on a break of the Monday highs until we get there.
EUR/USD had a whippy day on Friday as traders aren’t sure what the G-20 conference will produce over the weekend. Without a doubt, the debt crisis in at the fore front on the meeting, and any announcement will certainly have an effect on the pair’s price action Monday. More ominously will be if there is no statement or action. If that is the case – this pair will come undone in a hurry. Because of this, we expect to see something pro-Euro, but the most likely outcome of that is a selling opportunity from higher levels. For the time being, one has to wait for a statement to have any real analysis of the short-term direction. The long-term certainly looks bleak for this pair though.
USD/JPY rose on Friday as traders continue the back and forth dance with the Bank of Japan at the 76 handle. The pair can’t be sold, as the area is certainly being watched and possibly protected by the BoJ at this point. However, most buying opportunities seem to be of the scalping variety, and as such – we only recommend short-term trades at this point to the upside. It seems that every time we get down to 76, the pair wants to rise about 80 pips. Because of this, a small scalp is possible from the lower levels until they are breeched. Selling just isn’t advised until the Bank of Japan gets out of the way.
The GBP/USD pair fell after rising to the 1.55 level on Friday. The area was recently support, so a retest of it as resistance would be expected by the markets, and it did in fact fail to break above that area. This is a very bearish sign as it shows that the market cannot break above, and there isn’t significant buying pressure to continue anything of substance for any great length of time. Because of this, we are still selling the cable, and will continue to do so anytime it rallies. We believe that 1.55 could be an excellent entry as we consolidate just under it. A fresh low also gets us selling again.
USD/CHF rose, but fell as well on Friday and then gained some ground back in the end of trading. The pair is decidedly bullish, and we now see dips as buying opportunities. The Friday action saw this pair test the 0.9000 as support, and it held. In our opinion, with the Swiss National Bank actively working against the Franc, this pair will probably hit parity in the relative near term. It will rise as global fears rise. Because of this, we like buying dips from this point on, as long as we can stay above the 0.88 level.
EUR/CHF fell on Friday as traders sold off riskier currencies. We warned that this pair could fall a bit, but it cannot be sold with the Swiss National Bank setting a floor at 1.20, and until the EU gets its act together, we are going to have a hard time buying it either. In some ways, this could be the most sensitive pair to the crisis in Europe, at least if they find a solution. If so, this pair will skyrocket. If not, it could fall, but that is only inviting intervention by the Swiss. We are watching both the debt crisis in the EU and this chart for a signal, but see none at the moment.
The AUD/USD pair fell again on Friday as traders continued to sell off riskier assets around the world. The resulting bar was a bit of a hammer, and a bounce wouldn’t be out of the question at this point. The parity level is the area we would like to sell from if we get the chance, as it could be very resistive. The breaking of fresh lows would be a decent selling opportunity as well. We aren’t really interested in buying the Aussie at the moment as there are simply far too many headline risks around the world in which to spook this risk-sensitive market presently.
USD/CAD climbed again on Friday as traders sold oil markets off in large amounts. The oil trade is directly related to the USD/CAD trade, and such we expect the CAD to gain in value as oil rises, and vice versa. The day’s action saw another attempt at 1.03, and although we did break through again, it was much more muted on Friday than Thursday. It makes sense that we could see a pullback at this point, as the oil markets look like a bounce is in the cards. We suggest that pullbacks are to be welcome buying opportunities at this point. The parity level should be massive support now, and so could a couple of the “round numbers” below. 1.02 and 1.01 are areas that we are looking for supportive candles from which to buy.
NZD/USD fell again on Friday as traders are selling any and all commodities. Being so sensitive to commodities has really punished this currency over the last couple of days, and as the world continues to worry – this pair will continue to fall. A bounce could be coming, but quite frankly – as long as we stay under 0.8000, it will more than likely just be a selling opportunity. The world is slowing down economically, and this is bad news for the Kiwi that is so export-driven. Selling rallies and fresh lows is the way to go at this point.