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GreenForexTrading.com
ForeX-tra Gr€€n
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, Wednesday the 3rd to Thursday the 4th of November 2010.
The FOMC kept the fed funds rate in its record low range of 0-0.25% as expected but more importantly detailed some of their plans for quantitative easing (flagrant money printing). They committed to buying $600 billion in longer term treasuries by the end of the second quarter of 2011. This makes for a total of $850 to $950 billion in purchases when including the already ongoing reinvestment purchases detailed at an earlier meeting. The USDX waffled near unchanged before the fed announcement and eventually dropped modestly afterwards. Treasuries rose noticeably before the fed announcement and dropped like a stone afterwards.
I no longer expect a Head and Shoulder neckline underside retest in the 79-80 area…basically….this suckers going down. The daily close-up shows once again how important the 200-day moving average (DMA) is in flagging the next major direction for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$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. Longer term a real collapse is expected to start now 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 again and I expect this to continue longer term.
A choppy decline of the EUR/USD is over and a PPO buy signal looks to be starting. This consolidation ending before bumping into the rising 50-day moving average before the EUR moves higher, possibly to the 1.442, 1.495 and 1.600 areas. The EUR chart seen here, http://www.stockcharts.com/charts/gallery.html?$XEU shows these areas now on a sell signal. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
An ABCD technical pattern is seen in the GBP that seems to temper Sterling's strength. Recent pound strength has been sort of feeble compared to previous real rallies seen. Although we have seen cable at 160, we would warn of the key round numbers to 161 being a key to be bested. It's been over a month and below you can see why we view the recent strength as simply 400 pip range bound activity in the process of being broken out of. The GBP is still in bullish alignment with the 50 and 200-day moving averages as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, and traders should take a wait and see approach although a trading range is expected it could be fast and be ready to jump on either way if it moves.
For the JPY intervention is still in the cards and a daily rising trend-line, be wary of the wash and rinse instead of a fast move in either direction that would normally be expected before the turns but looks to be rolling over longer term. Traders should continue to 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?$XJY.
On the commodity currency front, the Aussie now at parity after an unexpected rate hike by the central bank is likely to continue to the upside even though it looks extended the fundamentals are supportive and should look on the long side on any pullbacks. The AUD is seen here,
http://www.stockcharts.com/charts/gallery.html?$XAD.
Most of this week’s key reports are soon upon us with a heavy dose on Friday. They are:
1. Thurs. Nov. 4, 2010 - (8:00am EST) UK Official Bank Rate; (8:30am EST) US Unemployment Claims and (8:45am EST) EUR Minimum Bid Rate decision.
2. Fri. Nov. 5, 2010 - (5:30am EST) UK PPI; (7:00am) CAD Employment Change and Unemployment Rate and (8:30am) US Non-Farm Employment Change and Unemployment Rate.
This is a starting to be a wild week in the market. Keeping position sizes small and using protective stops is crucial during times like these. We will take profits quickly on some of any positions taken and/or move stops to breakeven for the balance just in the case of a crash or blow-off move. Overall, I am now bearish the dollar and so bullish on all dollar denominated pairs till Friday going into the major, possibly trend changing events/reports at the end of the week. That being said…note the swing trade below:
The swing trade for today’s through tomorrow’s Asian-London-U.S. session is to BUY the EUR/USD @ 1.410 -1.411area with a STOP @ 1.3987and a TARGET of 1.4195 for over 80 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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