Best Thread FXCM/DailyFX Signals and Strategies

[Jason Rogers]

EUR/USD: Trading the FOMC Interest Rate Decision

Written by David Song of DailyFX.com

As policy makers in the world’s largest economy anticipate to see a moderate recovery going forward, the Federal Open Market Committee is widely expected to maintain its current policy in August, but the policy statement accompanying the rate decision is likely to stoke increased volatility in the U.S. dollar as investors weigh the prospects for future policy.

Trading the News: Federal Open Market Committee Interest Rate Decision

Why Is This Event Important:

At the same time, market participants speculate the central bank will take additional steps to reinforce the recovery as households continue to face tightening credit conditions paired with the deterioration in the labor market, and Fed Chairman Ben Bernanke may look to support the economy going into the following year in order to stem the downside risks for growth and inflation.

What’s Expected:

Time of release: 08/10/2010 18:15 GMT, 14:15 EST

Primary Pair Impact: EURUSD

Expected: 0.25%

Previous: 0.25%


Will This Be Market Moving (Scenarios):

A Bloomberg News survey shows all of the 74 economists polled forecast the Fed to hold the benchmark interest rate at the record-low of 0.25% this month, with investors pricing a zero percent chance for a rate hike according to Credit Suisse overnight index swaps, while Fed fund futures are showing at 60.5% chance for the central bank to keep rates on hold versus a 39.5% likelihood for monetary policy to be ease further. As a result, the FOMC is likely to maintain its currency policy in August and reiterate its pledge to hold borrowing costs close to zero for an “extended” period of time, but increasingly dovish comments following the rate decision could weigh on the greenback as interest rate expectations falter.

The Upside

A financial conditions improve, with MPC board member Thomas Hoenig continuing to dissent against the majority, the central bank may drop its highly dovish outlook for future policy as it expects to see a moderate recovery going forward. As a result, Fed Chairman Bernanke may talk down speculation for further easing and see scope to normalize policy over the coming months as the monetary and fiscal stimulus continues to feed through the real economy.

The Downside

However, the ongoing slack within the real economy paired with the weakness in the labor market could lead the Fed to ease policy further, and the central bank may see scope to expand its balance sheet going into the following year in order to stem the downside risks for growth and inflation. Accordingly, the U.S. dollar could come under increased selling pressures as policy makers see the recovery in the U.S. lagging behind the rest of the industrialized nations, and the central bank may make another attempt to jump-start the economy as it aims to promote long-term growth and deliver price stability.

 

[Jason Rogers]

British Pound Falls as BoE Cuts Economic Forecast, Euro Pares August Rally

Written by David Song of DailyFX.com

Dovish rhetoric from the Bank of England weighed on the British Pound, with the exchange rate extending the previous day’s decline to reach a low of 1.5666 during the European trade, but the overnight decline appears to be tapering off as price action hold above the 20-Day SMA at 1.5603.

Talking Points

- Japanese Yen: Rallies Across The Board On Risk Aversion
- Pound: Jobless Claims Falls Less-Than-Expected
- Euro: Pares Rally From Earlier This Month
- U.S. Dollar: Trade Balance, Monthly Budget Report on Tap

The BoE forecasts economic activity to expand at an annualized pace of 3% over the next two years and sees inflation falling back below 2% around 2012, but expects price growth to hold above target in the following year as a result of the rise in the value-added-tax (VAT).

Moreover, the central bank reiterated that the MPC stands ready to shift monetary policy “in either direction” as it maintains its dual mandate to ensure price stability and promote full-employment, and went onto say that the risks for growth remains weighed to the downside given the substantial margin of slack within the real economy. At the same time, BoE Governor Mervyn King noted that the central bank could increase the scope of its emergency program if conditions deteriorate further and maintained a cautious outlook for the region as households and businesses continue to face tightening credit conditions, and said the MPC’s current stance for monetary policy remains appropriate as the economic outlook remains clouded with uncertainties. As the central bank talks down the risks for inflation and continues to see a risk for a protracted recovery, the BoE is likely to support the real economy throughout the remainder of the year as the government tightens fiscal policy and targets the budget deficit. Nevertheless, the economic docket showed claims for unemployment benefits slipped 3.8K in July, which missed forecasts for a 17.0K decline, while the claimant count rate held steady at 4.5%, which was largely in-line with expectations.

The Euro continued to lose ground against its major counterparts, with the EUR/USD paring the advance from earlier this month to reach a low of 1.2988 during the overnight trade, and the single-currency appears to have carved out a near-term top ahead of 1.3400, which should lead to a corrective retracement as the daily RSI continues to fall back from overbought territory. With the euro-dollar slipping out of the downward trending channel, the break below 20-Day SMA (1.3039) could lead to a test of the 100-Day SMA at 1.2813 later this week, but price action could hold around 1.3000 throughout the remainder of the day after falling nearly 200 points from the open.

The greenback continued to gain ground against its currency counterparts, while the USD/JPY slipped to a fresh yearly low of 84.72 as the Japanese Yen strengthened across the board, and market sentiment is likely to dictate price action in the North American trade as the economic docket remains fairly light for Wednesday. Equity futures are foreshadowing a lower open for the U.S. market as market participants scale back their appetite for risk, and the shift in market sentiment may continue to drive the dollar higher as it benefits from the rise in safe-haven flows. Nevertheless, the trade deficit for the world’s largest economy is forecasted to narrow to $42.1B in June from $42.3B in the previous month, while the monthly budget statement is expected to show a shortfall of $169.0B in July following the $180.7B deficit in the month prior.

 

[Jason Rogers]

Forex Crowd Sentiment Points to US Dollar Rallies against Euro, British Pound

Written by Written by David Rodriguez of DailyFX.com

A substantive US Dollar bounce has been met with a noteworthy correction in forex crowd sentiment, and a shift in positioning gives us contrarian bias to call for further USD gains against the Euro and British Pound.

-EURUSD – Euro Likely to Fall Further Against US Dollar
-GBPUSD – British Forecast Turns Bearish on Sentiment
-USDJPY – Japanese Yen Outlook Remains Bullish
-USDCHF – Swiss Franc May Strengthen against Dollar
-USDCAD – Canadian Dollar to Consolidate vs USD
-GBPJPY – British Pound Forecast to decline Against Japanese Yen

Traders had previously been aggressively net-short the EURUSD and GBPUSD up until yesterday, and the subsequent decline in short interest and surge in long positions suggests that the tide has turned. There is always risk that the US Dollar will consolidate after such dramatic single-day declines, but very recent momentum and forex trading crowd sentiment point to further USD strength through near-term trade.

 

[Jason Rogers]

Forex Fundamental Trends Monitor 08.16.2010

Written by Ilya Spivak of DailyFX.com

Currency market price action remains firmly anchored to broad trends in investor sentiment. Although the path of least resistance points to risk aversion, the safety-linked US Dollar and Japanese may pare some of their recent gains in the near term.

Major Currencies vs. US Dollar (% change)
09Aug 2010 – 13Aug 2010

General Comment:

Last week, risk aversion has staged a comeback, with stocks reversingsharply lower having tested May’s swing top to post the worst weekly performance in over three months. This seems reasonable considering most of the engines of the global economic recovery are meaningfully faltering. Indeed, European growth is likely to remain lackluster as the region tries to trim its sovereign debt burden, Japan remains in deflation, China is willfully pulling on the brakes amid fears of overheating, and the US has notably lost pace.

With that being said, risky assets seem to be scope for a corrective rebound in the near term given the intensity of last week’s selloff as well as expectations of some encouraging results on second-tier US economic indicators. Producer Prices are set to rise for the first time in four months, Industrial Production is expected to pick up momentum, and Housing Starts are set to snap a two-month losing streak in July. Traders have long looked to the health of the world’s largest consumer market as a proxy for the global recovery at large, and while these results are unlikely to prove sufficient to stop risk aversion in its tracks, they could certainly engineer an upward retracement across global stock exchanges and bring correlated currencies along for the ride.

 

[Jason Rogers]

EURUSD and AUDUSD Near Term Targets

Written by Jamie Saettele of DailyFX.com

Expectations are for the US Dollar advance to accelerate. A closer look at the EURUSD and AUDUSD reveals the near term potential for a USD rally.

The EURUSD (60 minute chart) corrective advance may be complete. This morning’s top was near the price extreme of the former 4th wave, a common area for corrections to end. Coming under 12820 would more than likely confirm the top and shift focus to 12730. A break there exposes 12340-12420. The decline from this morning’s high is either a 3rd or C wave, so the drop will be sharp. Above this morning’s high would delay the bearish outlook and expose 12935 and 12985/13010.

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The same can be said for the AUDUSD (60 minute chart). A top is probably in place at yesterday’s high and the decline from there is either a 3rd or C wave. Expectations are for price to drop below 8855 and on towards 8720, which intersects with support lines early next week. Dropping below the lines would shift focus to 8500. Again, the decline should be sharp. Above 9085 would delay the bearish outlook and expose 9145/65

 

[Jason Rogers]

Japanese yen nearing historic level

Prepared by Jamie Saettele of DailyFX.com

8480 (2009 low) has been broken and focus is now on the all time low just below 80 (1995 low). A multi month resistance line has held and the downside is favored against 8640. 8290 may serve as support (161.8% extension) on a break to a new low.

 

[Jason Rogers]

U.S. Dollar Benefits From Risk Aversion, Japanese Yen Rallies To 15-Year High

Written by David Song of DailyFX.com

Market participants continued to scale back their appetite for risk, with the EUR/USD extending the previous day’s decline to reach a fresh monthly low of 1.2603, and the shift in market sentiment may continue to drive the greenback higher throughout the day as it benefits from the rise in safe-haven flows.

Talking Points
Japanese Yen: Hits 15-Year High Against Greenback
Pound: Home Loans Slip To Five-Month Low
Euro: Germany Expands At Record Pace
U.S. Dollar: Existing Home Sales on Tap

Meanwhile, European Union Commissioner for Economic and Monetary Affairs Olli Rehn said that there is a “gradual stabilization in market sentiment toward Greece” as the region takes unprecedented steps to manage its public finances, and went onto say that the efforts “should lay the ground for an eventual orderly return to market access” according to an article in the Wall Street Journal.

Moreover, Mr. Rehn supported implementing additional commercial bank stress tests during an interview with Bloomberg Television and said that it is a “very useful instrument of reinforcing confidence for transparency and sound and solid analysts,” but went onto say that the slower pace of growth in the U.S. and Asian could weigh on the global recovery. Nevertheless, the final 2Q GDP reading for Germany confirmed economic activity expanded 2.2% from the first-three months of the year to mark the fastest pace of growth on record, led by a surge in exports and business investments, while the annualized rate increased 3.7% from the previous year amid an initial forecast for a 1.6% rise in the growth rate. At the same time, industrial new orders for the Euro-Zone jumped 2.5% in June, which exceeded forecasts for a 1.5% rise, and the expansion in economic activity may continue to gather pace throughout the second-half of the year as the region benefits from the rise in global trade. As a result, the European Central Bank is likely to hold an improved outlook for the economy and may look to increase its growth forecast over the coming months, but the austerity measures taken on by the governments operating on the single-currency is likely to weigh on the recovery as they tighten fiscal policy in an effort to reduce the budget deficit.

The British Pound slipped to a low of 1.5372 as investors continued to scale back their appetite for risk, but the GBP/USD appears to be finding intraday support ahead of the 50-Day SMA at 1.5352 as price action bounces back to hold above 1.5400 just ahead of the U.S. trade. However, as the U.S. dollar benefits from the rise in risk aversion, the exchange rate may continue to push lower throughout the day, which could lead to a break below the 50-Day SMA and would expose the 100-Day SMA at 1.5124. Meanwhile, a report the British Bankers’ Association showed loans for home purchases in the U.K. slipped to five-month low of 33,698 in July from a revised 34,575, which was slightly weaker than the 34,000 projected by market participants, and the Bank of England is likely to support the economy throughout the second-half of 2010 as households and businesses continue to face tightening credit conditions.

The greenback continued to advance against most of its major counterparts, while the USD/JPY slipped to a 15-year low of 84.14 as the Japanese Yen rallied across the board, and the low-yielding currency may appreciate further in the North American trade as equity futures foreshadow a lower open for the U.S. market. At the same time, economists are forecasting existing home sales in the world’s largest economy to fall 13.4% in July to an annualized pace of 4.65M from 5.37M in the previous month, and the data could fuel the rise in risk aversion as investors maintain a cautious outlook for global growth.

 

[Jason Rogers]

U.S. Dollar Continues To Lose Ground, European Central Bank Holds Rate at 1.00%

Written by David Song of DailyFX.com

Talking Points

- Japanese Yen: Gains Ground Against Most Counterparts
- Pound: Manufacturing Expands at Slower Pace
- Euro: 2Q Growth Rate Expands 1.0%
- U.S. Dollar: Pending Home Sales, Factory Orders on Tap

At the same time, ECB President Jean-Claude Trichet will be holding a press conference at 12:30 GMT regarding the decision made by the Governing Council, and the central bank head is likely to talk down the risks for the region as he expects to see a moderate recovery going forward.

Nevertheless, the preliminary 2Q GDP reading for the Euro-Zone showed economic activity expanded 1.0%, which was in-line with expectations, while the annualized rate increased 1.9% from the previous year amid an initial forecast for a 1.7% rise in the growth rate. The breakdown of the report showed household consumption increased 0.5% to top projections for a 0.2% rise, with government spending increasing 0.5%, while gross fixed capital formations advanced 1.8% from the first three-months of the year. At the same time, a separate report showed producer prices in the region increased at an annualized pace of 4.0% in July to mark the fastest pace of expansion since October 2008, and the data reinforces an improved outlook for growth and inflation as the recovery gathers pace. As a result, the ECB may look to revise its economic assessment and drop its dovish outlook for future policy as it maintains its one and only mandate to ensure price stability, and the Governing Council may see scope to reestablish its exit strategy going into 2011 as growth prospects improve.

The British Pound pared the previous day’s advance and slipped to a low of 1.5372 as the economic docket reinforced a weakened outlook for the region, and the GBP/USD may continue to trend lower over the near-term as it maintains the downward trending channel from the August high (1.5997). Meanwhile, the International Monetary Fund warned that the U.K. will need long-term reforms to manage its public finances as the group sees the region’s debt-to-GDP ratio more than doubling by 2015 from 44.1% in 2007, but went onto say that “current market indicators of default risk seem to reflect some market overreaction” as the government takes unprecedented steps to lower the budget deficit. At the same time, the economic docket showed home prices in the region fell more than expected in August as the Nationwide index tumbled 0.9% amid forecasts for a 0.3% decline, while prices increased 3.9% from the previous year, which marked the slowest pace of growth since November. As policy makers withdraw fiscal support despite the ongoing weakness in the real economy, the Bank of England is likely to maintain the expansion in monetary policy as it aims to encourage a sustainable recovery, and the central bank may hold a wait-and-see approach over the coming months as it aims to balance the risks for the region.

The greenback continue to lose ground against most of its major counterparts, with the USD/JPY retracing the previous day’s advance to reach a low of 83.99, and the dollar could face increased selling pressures throughout the day as the economic docket is expected to reinforce a weakened outlook for future growth. Pending home sales in the world’s largest economy is forecasted to fall 1.0% in July after contracting 2.6% in the previous month, while final 2Q reading for nonfarm productivity is projected to show a 1.9% decline amid an initial forecasts for a 0.9% drop. At the same time, factory orders are anticipated to rise 0.2% in July after falling 1.2% in the previous month, but the majors may hold its current range ahead of Friday’s Non-Farm Payrolls release as market participants forecast the U.S. economy to shed another 100K jobs in August.

 

[Jason Rogers]

Australian Dollar Support Begins at 9050

Written by Jamie Saettele of DailyFX.com,

The AUDUSD surge on Friday may have been a thrust from a triangle. If so, then the AUDUSD should come down to at least 9050 this week. As such, favor the downside from here. The top side of a former resistance line may be support as well. That line is at 8967 today and decreases about 11 pips per day.

 

[Jason Rogers]

Swiss Franc Likely to Strengthen Against Dollar

Written by David Rodriguez of DailyFX.com

Choppy US Dollar price action has made for similarly indecisive moves in forex crowd sentiment, but the most recent move towards USD shorts against the British Pound and Euro leaves us modestly bullish the US currency through short-term trade. Yet traders remain very heavily net-long USD versus the Japanese Yen, Swiss Franc, and Canadian Dollar—warning of further losses against said currency. The effectively mixed view on the Greenback leaves us with little conviction, and we may need to wait until further clarifications in price action before taking a stronger stance in our USD forecasts.

SWISS FRANC LIKELY TO STRENGTHEN AGAINST DOLLAR

USDCHF – The ratio of long to short positions in the USDCHF stands at 4.06 as nearly 80% of traders are long. Yesterday, the ratio was at 3.39 as 77% of open positions were long. In detail, long positions are 1.8% lower than yesterday and 11.3% weaker since last week. Short positions are 17.9% lower than yesterday and 4.6% stronger since last week. Open interest is 5.5% weaker than yesterday and 0.3% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

 

[Jason Rogers]

US Dollar Could Strengthen if Advance Retail Sales Data Disappoints

Written by David Rodriguez of DailyFX.com

The US Dollar traded slightly higher against major forex counterparts in an uneventful week of trading, showing little impetus to break important support or resistance levels on similarly lackluster price action across broader financial markets. A pickup in US economic event risk promises stronger volatility in the week ahead, however, and it seems only a matter of time before currency pairs break out of narrow ranges. Relatively steady gains in the US S&P 500 and a multi-month downtrend in the US Dollar suggest that risks remain to the downside. Yet a fragile recovery in financial market risk sentiment could just as easily falter and send the safe-haven USD higher against the Euro and other currencies.

Calendar highlights in the week ahead include an often market-moving Advance Retail Sales report, Industrial Production numbers, Consumer and Producer Price Index inflation results, and University of Michigan Consumer Confidence survey data. The Retail Sales release may be especially contentious given its strong influence on the US S&P 500 and broader risk sentiment; recent fears of faltering US economic recovery could make disappointments especially market-moving. CPI and PPI data could likewise influence market expectations on the future of US Federal Reserve monetary policy.

The US Dollar lost substantially when the Fed first announced and implemented Quantitative Easing measures to boost monetary supply and stave off the risk of deflation. Fed Chairman Ben Bernanke has openly discussed various tools at the central bank’s disposal to counteract sluggish growth and promote price stability. If CPI and PPI surprise to the downside, pressure may increase on the Fed to announce fresh QE measures—likely driving the US Dollar lower against major counterparts.
One gets the sense that risks remains to the downside ahead of these key US consumer-centric economic releases, and significant disappointments could easily jolt the fragile recovery in financial market risk sentiment. Any such deterioration in ‘risk’—especially as seen through the S&P 500—could be enough to force the US Dollar through key resistance levels against the Euro and British Pound in the week ahead. Yet traders should likewise watch CPI and PPI data; any significant downgrades in inflation could just as easily force US dollar declines. - DR

 

[Jason Rogers]

EUR/USD: Trading the Federal Open Market Committee Interest Rate Decision

Trading the News: Federal Open Market Committee Interest Rate Decision

Why Is This Event Important:
Beyond the interest rate decision, the economic assessment held by the central bank is likely to have a greater impact on the exchange rate, and Fed Chairman Ben Bernanke may hold a cautious outlook for the nation given the ongoing slack within the private sector.


What’s Expected:

Time of release: 09/21/2010 18:15 GMT, 14:15 EST

Primary Pair Impact: EURUSD

Expected: 0.25%

Previous: 0.25%


Will This Be Market Moving (Scenarios):
The FOMC is widely expected to hold the benchmark interest rate at 0.25% in September, with market participants anticipating the central bank to maintain its pledge to keep borrowing costs close to zero for an “extended” period of time as it aims to stem the downside risks for growth and inflation. At the same time, we are likely to see MPC board member Thomas Hoenig dissent against the majority for the sixth time and push for a rate hike in order to give the central bank increased flexibility to manage monetary policy, but a growing split within the MPC could spark choppy price action in the exchange rate as interest rate expectations falter.

The Upside
The recent economic developments for the U.S. have largely been in-line with forecasts, with the private sector continue to show a mild improvement. Retail spending increased for the second month in August, with private sector employment advancing every month this year, and the data could lead the Fed to raise its economic assessment as growth prospects pick up. As a result, the central bank may drop its dovish rhetoric and see scope to normalize monetary policy going into 2011 as the economy emerges from the recession.

The Downside
However, tightening credit conditions paired with the ongoing weakness in the housing market may continue to instill a weakened outlook for the economy, which could lead the Fed to lower its assessment for the economy. Accordingly, the FOMC may turn increasingly dovish and see scope to expand monetary policy further over the coming months as it aims to encourage a sustainable recovery.

How To Trade This Event Risk
Trading the given event risk is not as clear cut as some of our previous trades as the FOMC is widely expected to maintain the expansion in monetary policy. Nevertheless, we used the policy statement to gauge the central bank’s sentiment towards future policy, and price action following the rate decision could set the stage for a long U.S. dollar trade. Therefore, if the Fed holds an improved outlook for future growth and no longer sees a need to expand monetary policy further, we will need a red, five-minute candle following the statement to establish a sell entry on two-lots of EUR/USD. Once these conditions are met, we will set the initial stop at the nearby swing low or a reasonable distance after taking market volatility into account, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade reaches it mark in order to preserve our profits.

In contrast, the uncertainties surrounding the economic outlook paired with cooling recovery could lead the central bank to maintain a dovish tone as it aims to stem the downside risks for the region. As a result, if the Fed keeps it pledge to hold the interest close to zero for an extended period of time and sees scope to expand monetary policy further, we will favor a bearish outlook for the greenback and implement the same setup for a long euro-dollar trade as the long position laid out above, just in reverse.

 

[Jason Rogers]

Looking to See if the Market Can Close Above 1.3335

Written by Joel Kruger, Technical Strategist for DailyFX.com

EUR/USD: The break and close above 1.3175 (78.6% fib retrace of August high-lows) on Tuesday ends the immediate prospects for a bearish resumption and likely opens some fresh upside over the coming days. For now, we are watching the August high by 1.3335 and will look to see if the market can establish a close above the level. A close above 1.3335 will open a test of psychological barriers by 1.3500 which also coincides with a major 50% fib retracement off of the major 2009 high- 2010 low move. Daily studies do still show room to run, but there is also the risk for a pullback, with the RSI crossing above 70 and the market putting in a 7th consecutive daily higher low to warn of exhaustion. The 200-Day SMA was broken for the first time since early 2010, and we would look for pullbacks to now be well supported by this former resistance now turned support which comes in by 1.3215. Ultimately, a break back below 1.3055 would now be required to negate bullish structure.

 

[Jason Rogers]

CAD/JPY Reversal Waits for Risk Appetite

The CAD/JPY has retraced most of its post BoJ intervention losses as weakening Canadian fundamentals and growing pessimism has weighed on the pair. Despite the spike higher on the central bank’s selling, the pair remained within its ascending channel. The potential for a second round of action from policy makers could limit downside potential. The pair is currently testing the lower channel bound, opening the door for a retracement back to the upper channel bound near 84.50. Canadian event risk is non-existent over the next week, which will make our set-up dependent on a return of risk appetite or a second round of intervention.

Levels to Watch:
-Range Top: 84.50(Trend, Pivot)
-Range Bottom: 81.50 (Trend, Pivot)

 

[Jason Rogers]

EURUSD Maintains Tight Ascending Channel Ahead of the U.S. Consumer Confidence

TUESDAY, SEP 28
U.S. Consumer Confidence (GMT 14:00)
Expectations: 52.1
Prior: 53.5

Fundamental Outlook
Consumer confidence in the world’s largest economy is forecasted to drop to 52.1 in September from 53.5 the previous month. Expectations for a decline in the confidence report comes to no surprise as the economic outlook for the region remains unclear. Consumers are concerned about a double dip recession in addition to tax policy. At the same time, the labor market continues to stumble over hurdles, and the employment sector remains shaky. Also weighing on the report will likely be recent comments from Federal Chairman Ben Bernanke.

During his recent speech at Princeton University, Mr. Bernanke said that the recovery is too weak to reduce joblessness, and added that the U.S. economy is recovering at a slower pace than the central bank wants. Meanwhile, during the FOMC monetary policy meeting, the Fed held a cautious tone. The committee said that consumer prices will likely remain subdued for some time, and noted that they are prepared to provide additional accommodation if needed to support the economy. In turn, the central bank will unlikely raise its key overnight lending rate until the recovery is cemented as the economy faces major headwinds ahead. All in all, a consumer confidence report worst than expectations may add further weight on the outlook of the world’s largest economy and will validate further gains in the euro against the U.S. dollar.

Technical Outlook
EURUSD: The pair has worked its way into a ascending channel, which has remained intact since the beginning of September. At the same, the recent crossover above the 200-day SMA signals for further upside gains. This level is of particular importance in that it has served as a moving average since January of this year. Meanwhile, the 20-day SMA has crossed over above the 50-day SMA, and also points to additional advances.

 

[Jason Rogers]

Canadian Dollar Triangle Pattern

Written by Jamie Saettele of DailyFX.com

A multi month triangle support line is holding as support. At minimum, I am looking higher to 10515 in wave e of the triangle. Bears will have the opportunity to short the wave e rally for an expected break below 10100 and probably 9900. The wave e rally should begin soon (if it’s to begin at all).

 

[Jason Rogers]

Euro Sentiment Extremes Warn of Reversal – But When?

Written by David Rodriguez of DailyFX.com

The Euro finished the week sharply higher on continued US Dollar weakness, easily closing above the psychologically significant 1.35 mark and poised to test the next substantial hurdle at 1.40. The single currency did this without any worthwhile support from domestic fundamental developments. In fact, one could argue that recent European fundamental trends should have been enough to slow the significant EURUSD uptrend. Continued concerns over debt growth in Spain, Ireland, and other Euro Zone members did little to stir currency markets. Instead a continued uptrend in the US S&P 500 and other risky asset classes made the risk-sensitive Euro the top-performing G10 currency to round out the week’s trade.

Markets now turn their attention to a busy week of economic event risk out of the Euro Zone and US economy, and substantial USD declines leave clear risk for short-term corrections across Greenback pairs. The infamous US Nonfarm Payrolls report and the usual slew of early-month economic data should dominate EURUSD trading in the days ahead. Yet traders should likewise keep an eye on several key Euro Zone releases. Though region-wide Producer Price Index, Purchasing Managers Index, and Retail Sales numbers don’t often move markets, consistent disappointments or positive surprises could set the tone for EUR price action.

Heavily one-sided EURUSD-bullish sentiment warns that a correction may be near, and we would argue that risks remain to the downside ahead of key economic reports. Non-Commercial futures positioning and FX Options sentiment show that traders remain very much net-short and bearish the US Dollar. Though sentiment can obviously remain extreme for extended periods of time, any near-term USD reversal could invite a pronounced wave of short-covering and force significant EURUSD losses. We cannot responsibly advocate selling the EURUSD into such strength. Yet any signs of price reversal could present an attractive short opportunity. The busy week of economic event risk could easily set the tone for the rest of October, and it is particularly worth noting that currency highs and lows for the month are most often established in the first and last week of trading. - DR

 

[Jason Rogers]

Gold Tests Trendline

Written by Jamie Saettele of DailyFX.com

Daily RSI is now above 83 but still below the November 2009 reading of 85. An objective going forward remains $1405, which is the 100% extension of the $1048-$1270 advance. The short term trendline is at $1337 today and may serve as resistance. Only a drop below $1300 would suggest a trend change.

 

[Jason Rogers]

Euro Channel Resistance at 13950 Today

Written by Jamie Saettele of DailyFX.com

The EURUSD continues to advance and channel resistance is at 13950 today. Eventually, the EURUSD is expected to reach the 100% extension of the 11875-13340 rally at 14140 in order to complete the 3 wave rally from the June low (intersects with corrective channel on October 25). 14 day DMI (directional movement) is at its highest level since December 2008, which saw the 14700 top. A pullback would encounter support at 13640 and then 13510.

 

[Jason Rogers]

USD/JPY Classical 10.7

Written by Joel Kruger of DailyFX.com

USD/JPY: The latest break back below 82.85 confirms a fresh medium-term lower top by 86.00 and now likely opens the door to the next downside extension towards the record lows from 1995 by 80.00. Daily studies still show plenty of room for weakness at present, and although we like the idea of considering the establishment of meaningful longer-term long positions at current levels, short-term technicals still seem to want to continue lower. For now, a break back above 84.00 will be required at a minimum t relieve current downside pressures.