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Hi 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 Tuesday the 5th to Wednesday the 6th of October 2010.
ALERT!!! A DOLLAR COLLAPSE IS HIGHLY POSSIBLE IF CURRENT LEVELS DO NOT HOLD AT 77.5 AND A QUICK DROP TO 75 BEFORE THE ULTIMATE USDX TARGET IS 71 BY NOVEMBER. The buying of the Euro and the Aussie at will in expectation of a new round of quantitative easing by the U.S. Federal Reserve and the BOJ and it’s a race to the bottom. Sentiment is getting very extreme at these levels and a wash out spike up in the USDX could occur at any time given the right catalyst. Position yourself accordingly and with caution as although a deeper retracement is expected soon a wash-out low to 75 can occur if the 77.5 level is broken in the USDX.
Despite possible occasional positive reports other fundamental indicators, the overall economic situation in US and corresponding US Fed’s policy will hold the USD under pressure. At the same time, the EU problems did not disappear and an argument can be made that the EUR is a bit overvalued and think that GBP is more attractive currency. Nevertheless, if negative data continues to come from US, EUR/USD can run further. I contend that in time the ECB will start talking EUR down.
The U.S. Dollar weakness looks overdone (but can be more so) after touching a five-month low against the Euro which looks tired at current price levels, but is not likely to turn bearish longer term until support at 1.3510 is violated. The primary trend is still down for the U.S. Dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. The all sell the USD signal is back in force but with daily and weekly retrace levels looking increasingly irrelevant points of entry are just guesses at this point. Longer term a real collapse is expected, but this first week should confirm a bounce or a collapse with a continuation into a 2-year cycle low by the end of the month. At the moment as stocks are being bid up as bonds and the Dollar are sold off. While I expect this to continue longer term we are ripe for a countertrend bounce in bonds and possibly the dollar and will look at retrace levels to scale in positions. Overall, economic data continues to be abysmal if arguably less so from a strong dollar currency standpoint.
For the EUR, in summary, the weekly chart is set up for a strong retracement to 1.333 expected but the trend is not one to fight at this point. The Euro held a test of a minor interim retracement levels so far. The EUR pairs are expected to be overall weaker than the corresponding correlated GBP pairs. The topping action in the USD can also be confirmed against the bottoming action in the EUR as mirror images of each other and the EUR chart can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, is trending above the 50 and 200-day moving averages and will take a wait and see approach although a bounce is expected it could be fast and be ready to jump on if it moves.
Traders should still use caution should the JPY pairs be traded for the time being as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
On a new currency front, the Aussie is again at its near term high and looks like it wants to make a run towards parity with the US dollar. It is rapidly approaching levels last seen prior to the onset of the credit crisis back in 2008. Unlike the Euro, the AUD/USD was able to post a daily closing price reversal top. The sell-off in the U.S. equity markets helped to lead the charge lower. Technically, the Aussie Dollar is still trading inside a small range of .9462 to .9733. This makes .9598 to .9566 a retracement zone target. This is really nothing compared to the bigger picture. The longer rally from .8770 to .9733 makes .9251 a potential downside target once the reversal top is confirmed. An up-trending Gann angle at .9290 could slow down the pace of an expected decline. New highs obviously would negate all that though. The AUD is seen here, http://www.stockcharts.com/charts/gallery.html?$XAD, hanged up at recent highs.
There are many activities and reports that I note this week that will factor in some trading sessions going forward. The end of this week is data heavy and policy heavy so sentiment is key going forward.
Most of this week’s key reports are towards the end of the week. They are:
1. Wed. Oct. 6, 2010 (8:15am EST) US ADP Non-farm Employment Change.
2. Thurs. Oct. 7, 2010 (4:30am EST) UK Manufacturing Production and (7:00am EST) UK Official Bank Rate and (8:30am) US Unemployment Claims.
3. Fri. Oct. 8, 2010 (4:30am EST) UK PPI and (7:00am) CAD Employment Change and Unemployment Rate and (8:30am) Non-Farm Employment Change and Unemployment Rate.
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!
There is no swing trade for today’s Asian-London-U.S. session.
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