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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 Thursday the 18th to Wednesday the 19th of November 2010.
The Dollar had pushed through the declining 50-day moving average on its chart and looked as if it was making an upside run towards 80 but it has retreated on news about Ireland. We will have to keep a close watch on its chart to see if we can spot any clues as to what is coming next. As long as market participants are convinced that the ECB will be successful at containing any spread of financial contagion, the Dollar will encounter selling pressure. Any shift of focus back onto China and rate hike talk will spur Dollar buying and commodity selling. Take your pick as to what traders are going to be looking at on any given day. That is why it is still best to use the longer term charts such as the weekly to get the main trend of these markets and try not to let the day to day gyrations captivate your attention too much. Too short sighted of a focus will end up only giving you a case of severe whiplash and PIP deficiency. Suffice it to say that any crowd of traders who throw away most of their positions one day only to put them all back on the next are not making informed calm decisions but are trading emotional swings. Learn the fundamentals of the markets you trade and let these bozos set up opportunity for you from which you can profit. Very few of them are going to survive the mess that they have made of our markets .
The countertrend rally back towards 80 on the U.S. Dollar Index is playing out. I suspect before the year is out (keeping in mind markets thin out as we get later into December) we shall see a resumption to the downside and hit my first downside target of 74. The U.S. Dollar is terminally ill. QE2 is more alcohol to an alcoholic, it will wear off leaving the world’s biggest hangover. Make no mistake about it, the U.S. started a currency war and it can’t win it. For the USDX, a trade to the 79 area in the USDX coinciding with the 50-day Moving Average was exceeded with the daily close-up showing once again how important the 200-day moving average (DMA) is in flagging the next major direction for the dollar with the 80 - 81 areas now in play which should be the underside neckline test of a major head and shoulder top in the USDX, as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. The EUR pairs were expected to be overall weaker than the corresponding correlated GBP pairs however there still appears to be rotation of relative strength between the two currencies from day to day. A longer-term collapse of the dollar is expected once bearish Dollar sentiment has been corrected and a continuation into a 2-year cycle low is now delayed possibly into spring of 2011.
After a choppy decline of the EUR/USD to the 1.348 area is set-up and a retest is expected after which the EUR is expected to move higher, possibly to the 1.442, 1.495 and 1.600 areas. The EUR chart seen here, http://www.stockcharts.com/charts/gallery.html?$XEU shows these areas now on a sell signal. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
An ABCD technical pattern is seen in the GBP that seems to temper Sterling's strength. The key round numbers of the 161 area is a magnet and now is being chopped around with no bias long or short. The GBP is now in bullish alignment with the 50 and 200-day moving averages as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, and traders should take a GBP weakness to look for entries to go long so long as the 50-day moving average holds.
For the JPY intervention is still in the cards and a daily rising trend-line, be wary of the wash and rinse ahead of a fast move in either direction that would normally be expected before the turns but now looks to be rolling over longer term. Traders should continue to use caution trading against the Yen, should any JPY pairs be traded, especially if the 50-day moving average gives way as this could leave some serious Dollar dumping being also on the same side as the BOJ for the time being, as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
On the commodity currency front, the Aussie was at parity after an unexpected rate hike by the central bank but with commodities in corrective mode, for the time being a consolidation is likely before more continuation to the upside to work off an extended condition. Even though it looks extended, the fundamentals are supportive and should look on the long side on any pullbacks. The AUD is seen here, http://www.stockcharts.com/charts/gallery.html?$XAD.
Precious Metals - I need to say something that’s not directed to the typical currency trader but people in general. I know the answer to my own frustration as I’ve made it a critical point in my bullish argument for years: most on Wall Street and the media dislike gold and what it stands for. They live off of financial assets and consider gold the enemy of financial instruments like stocks, bonds and currency. With that in mind, we’re at another of those points in this “mother” of all precious metals bull markets where a pullback causes these “wrong way” characters to again fill the airwaves and print media with bubbles-bursting, tops and all their typical anti-gold/silver rhetoric. Do yourself a favor…turn some of your PIPS into gold or silver when you have them.
This sessions is data light and Central Bank pontificating heavy, be careful:
1. Fri. Nov. 19, 2010 (1:00am - 11:00am EST) CAD, US and EUR Central Bank Members Speaking.
Reminder: We are still in a very choppy market for US Dollar pairs. Chop is to be expected as the dollar rally is merely a bear market bounce in an otherwise continuing long-term down trend. Adjust position size accordingly. Sooner or later the Trading Gods deal harshly with trading arrogance. Best to keep that in mind, or maybe tape it to one of the trading screens and don’t fight the chop.
The swing trade for today’s Asian-London-U.S. session is to SELL the EUR/USD @ 1.3640 with a STOP @ 1.3670 and a TARGET of 1.3550 for 90 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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