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Hello Everyone,
In this email I am going to give you my view on the market for the Asian/London sessions in the market for today, spanning Monday the 21st to Tuesday the 22nd of June 2010.
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The expected retracement of the USD’s slow relentless drip decline has started. The “demand for risk” will now take a back seat for now to the news out of China that has knocked the sovereign credit woes off the radar screen for the time being in the investment community. Any appreciation in the yuan and subsequent economic effects are not going to occur overnight and does nothing to change the fiscal condition of any of the nations involved at the center of these concerns; nor the fact that the West is spending way too much money. It is only encouraging traders to temporarily reverse the “demand for risk” positions placed earlier in the month and in the reversal in the U.S. Dollar. The USD’s weekly closed under our key pivot of 87.0 and bounced just 1 tick from the bottom of the range at 85.01, giving an outside reversal bar, as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD . An advance above 87.0 is possible for this retrace with the 61.8% Fibonachi level at 87.3 and a gap to fill from 87.0 to 87.4 this is a likely target but price action will ultimately determine how far this runs; after which a resumption of a new strong USD downtrend would be expected to commence. Caution is warranted in this range until today’s high at 86.04 is exceed as a breakdown could occur if USD persistent weakness returns and new positions are abandoned as quickly as they were put on. The resultant chop would be very hard to play until the chop drops and allows a low risk entry, perhaps at the top of the range at 87.0 to 87.4. Either way, volatility gets another boost and we should start thinking about initiating core positions on any USD strength to play its eventual weakness.
In terms of technical considerations in the EUR/USD, two potentially bullish scenarios are still intact but on hold pending this expected retracement to take place. From a weekly long term standpoint, the main trend is down, but the currency was able to pierce through a retracement zone at 1.2164 and could not hold above 1.233. This move most likely took out stops on the way up, clearing the way for a small leg down. The main intermediate term trend is still up and expected to weaken before a move to and through the 1.245 – 1.246 pivot area is achieved. The question now is how significant the expected retrace becomes before; then the continuation of a 2 - 3 week rally with the 1.278 region the next potential upside target area. In summary, the weekly chart is set up for a strong retracement rally to 1.2784, provided that the Euro holds a test of a minor interim retracement levels. The topping action in the USD can also be confirmed against the bottoming action in the EUR as mirror images of each other and the EUR chart can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. We will play both ways with a long bias; anticipating trades back to defined retracement levels. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
The JPY broke above the 200-day moving average; after bouncing hard at the lower 50-day moving average and quickly gave it back and looks to chop around it for the time being with an upward bias of a short term uptrend maybe giving a clue to the USD expected retracement, as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY. The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, also looks to have stalled at its 50-day MA which also coincides with the 50% retracement of the prior April-May decline; so a pullback or consolidation at the minimum is expected here for a while at these levels. A solid break above 148.1 would set up the GBP for a quick pop to the 149.5 level.
There are no reports of significance to trade through today. Now with the picture slightly less hazy in terms of the USDX and EUR related pairs, we will cautiously play some retracements and continuations.
The swing trade for today’s Asian-London-US session is to SELL the EUR/JPY in the 112.05 to 112.15 area with a STOP @112.37 and a TARGET of 111.37 for 70 PIPS.
That's it for today. Remember that I trade in the Live Forex Trading Room between 1am-6am Eastern Time. I will be hosting my regular 3-4 hour session and assessing and exploiting PIP opportunities as they arise.
Enjoy trading and good luck everyone!
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Risk Warning! Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All information posted on this website is of our opinion and the opinion of our visitors, and may not reflect current situations and occurrences. Please, use your own good judgment and seek advice from a qualified consultant, before believing and accepting and acting upon any information posted here or on this website.
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