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GreenForexTrading.com
ForeX forX-tra Gr€€n
Hi everyone,
In this e-mail I am going to give you my view on the markets for Tuesday the 29th to Wednesday the 30th of March 2011.
Dollar strength is the result of downgrades to Portugal and Greek debt which is weighing slightly on the Euro. The Yen is seeing some strong selling pressure today also. Even at that, the Dollar is only marginally higher so no real change from yesterday, just more chop. So repeat from yesterday. Currencies such as the Euro and the Pound are hitting at near last year highs vs. the dollar so do we extend the up run or reverse right about now? When trying to assess the long term play of any market it is important to use weekly charts to devise trendlines which stretch back over previous years. At this moment in time as the dollar sits near the lows and the EUR, GBP and AUD and on sit near highs we are at some serious junctures where things could go either way. Caution is required at this moment in time as uncertainty should warrant for the best trade of all: no trade! All of this has put added strain on the US Dollar and will continue to do so for some time. With each subsequent bounce becoming smaller and smaller in the USDX, a fast move to 75 is in motion followed by a collapse to as low as 72 but beware that continuing the bounce is possible here as sentiment, again, has gotten a little ahead of as the USDX is in a zone of weekly support at 75.5-76.5. Finally, in the broader context, the monthly chart shows that the rising trend line that forms the bottom of a reverse pennant formation is now at 76.7 and a retest of this level is possible before a decisive breakdown from symmetrical pennant to below 75.5 (USDX now at 76.2) would have serious implications regarding the potential downside.
Therefore, I am still looking for continuation entries into U.S. Dollar denominated longs on any USDX strength for both scalp and longer term positions. Witness a weekly PPO SELL signal with a new daily SELL in conflict. So look to scale back until to go long U.S. Dollar denominated pairs on any weakness (USDX strength) into some retracement zones anytime this week, although I expect this USDX rally early this week to weaken as the USDX runs into these retracement zones, as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
Last week's highs were later followed up by weakness in which the Euro closed under 141. Why did we back off and will we head higher and lower? The highs of 2010 were at the levels of 142 after which a 1200+ point's fall occurred. That is the first reason why we have backed off this week from the highs. The second reason can be seen from looking at the previous years AND this is the advantage to using longer term charts such as the weekly. From this we can acknowledge the 2008 highs, the 2009 highs and the current 2011 highs. If you pair the three together you will form a downward sloping trend line WHICH defines another reason why price may have backed off this week. Finally, longer term charts also represent a few intersecting trend lines over the previous years in which they meet at the current highs of last week.
At this moment in time having evaluated the chart above you can definitely signify that price is in an up-trend, however that was true at the start of 2011 when price was at 130. It is said so many times that the trend is your friend but if you buy the Euro at 142 and another 1000 point drop occurs then what will happen to the trend if your friend. This is why it's important to use some common sense in terms of risk/reward. Over the next week we will have to acknowledge the highs and also acknowledge moves below 140. The EUR is the inverse of the USDX and with the backdrop of a PPO that now has triggered a daily BUY signal against a weekly BUY signal extended from the 50-day moving average, and the bounce here looks to continue and now look for some bottom action on lesser time frames to enter and go long. Now look for 1.419, and with retrace to 1.405 expected, we can look for chop again in the 1.402-1.405 area and even 1.392 before 1.425, 1.45 and 1.50 can be seen in short order, as can be expected on future dollar weakness as seen in the chart here, http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
The GBP is being held at lofty levels and the question is are we head higher and move towards 170 or is 150 on the cards again? I would say 150 will be met but at this stage we need to work out if 170 will be on the cards first. Interest rate increases seem plausible for this year in the U.K. but the price seems to be factoring this in. In addition, 2009 and 2010 lows are forming a base line for the Sterling which could be met at some point this year which would require price to move lower. If we take the 2009 highs and the double top highs late in 2009 coupled with the highs of 2010 in line with current levels then a trend line pitched in conjunction with these levels would show a downward sloping trend line. We would also see a breakout as price moved above this line earlier this year and so far as just about remained above it. A break below this line would bring the base line into play. Holding this line would take us higher in which 16300 will be knocked out of the way. The GBP has seen some serious choppy swings and a reversal upon reversal bar on the daily and we have been avoiding this on of late but still watching it with no bias as it becomes less stretched on the long side, but needs to reclaim the 50-day moving average. A new PPO daily SELL against the backdrop of a weekly BUY signal makes cable choppy as of late. All these cross-currents still make cable a cautious play either way, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
The JPY caught the “safe-haven” BID and intervention is again in the cards and the USD/JPY 80.0 level is where some nimble BUYS can be set as that area will be defended at all costs with newly printed yen. No other recommendations on JPY that can be played as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
The AUD ended up catching the “safe-haven” BID and was shaken out of a trade only to see it again making new highs. No other recommendations on AUD yet but still watching for a pullback to enter as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XAD.
This week’s activities and reports of consequence are:
1. Wed. Mar. 30, 2011 - (5:30am EST) CHF KOH Economic Barometer and (8:15am EST) US ADP Non-Farm Employment Change and (8:30pm EST) AUD Retail Sales.
2. Thurs. Mar. 31, 2011 - (8:30am EST) CAD GDP and US Unemployment Claims and; (7:50pm EST) JPY Tankan Manufacturing Index.
3. Fri. Apr. 1, 2011 - (4:30am EST) UK Manufacturing PMI and (8:30am EST) US Unemployment Rate and (10:00am EST) ISM Manufacturing PMI.
The swing trade for today’s Asian-London-U.S. session is to BUY the GBP/USD @1.5984 with a STOP @ 1.5969 and a TARGET of 1.6057 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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