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Hi everyone,
In this e-mail I am going to give you my view on the markets for Sunday the 12th to Monday the 13th of June 2011 and the week.
WEEK AHEAD: This week we expect the US dollar will strengthen and then weaken as looking on to the long-term USD Index chart, we see that index levels recently moved below the 2009 lows and then reversed direction. It is possible that we could see a choppy bottom/consolidation here at 74-75 as there is a support line here created by the 2009 November low. Fundamentally speaking, the situation favors a short-term rally. The markets are digesting news that we won’t see QE3 soon and that the supply of the USD will be at least somewhat limited. On the other hand problems within the EU make many market participants believe that EU will monetize its debt either directly or indirectly (without calling it such). This makes for a short-term bullish picture for the USD Index (recall that the EUR:USD exchange rate is the most important part of the USD Index). In addition, the US Federal Reserve sent a strong signal late last week that despite weaker economic data it is not planning to loosen monetary policy and that the recovery “appears to be proceeding at a moderate pace”, in other words, no QE3, at least not for now. Note that the news initially caused a move back to the Dollar however, and is now trading above the 50 day moving average but still below key pivot resistance in the 75-76 area before going back down to 73, a level which is extremely, and I do mean, 'extremely' critical from a technical support level. This week will offer more on the data front with various UK and US Reports this week. The Dollar now at 74.9 with the possibility of more U.S. Dollar chop given the weakness of last week’s data against more concerns about the EU.
The USDX has become bullish at least for the short term and the EUR Index conversely appears to be in an analogous period of decline. These changes reflect the news of no QE3 that some market participants were counting on. Expect more U.S. Dollar printing to continue after QE2 is set to end in June and continue under a new QE3. Finally, in the broader context, the monthly chart shows that the rising trend line that is now broken and a falling trendline broken on the weekly charts and so a somewhat mixed picture mid- term. The USDX is now under a Weekly PPO BUY signal with a fresh Daily PPO BUY set-up and we are currently flat as I believe these signals are somewhat late in forming, as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
The EUR/USD (and other EUR crosses) continues to rally after brief consolidation at the 50-day Moving Average and appears poised to take out the 1.432 level and target 1.400. The EUR is the inverse of the USDX and with the backdrop of a PPO on a daily BUY signal against a Weekly PPO SELL signal attempting to turn into a BUY, resistance at 1.472 and 1.50 as seen in the chart here, http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
New long entries in the GBP/USD are possible but caution is advised as a PPO Daily BUY signal rolling over into a SELL signal against the backdrop of a Weekly PPO SELL signal looking to turn to a BUY while still in bullish alignment and turned up from 161 as LONGER TERM THIS CHART IS BULLISH (unless the 200-day M.A. gives way below 159). Make cable a long play on a deeper pullback with defined stops, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
The JPY was overbought as USD/JPY and a pullback has occurred as expected from these extreme levels to create another run in the opposite for another set of extreme levels which will be defended at all costs with newly printed yen from the BOJ and so a nimble sell (BUY for USD/JPY in the 80.0 area) as can be played as a return trade to near/between the 50 and 200 day moving averages to go long (short USD/JPY @ 82) is expected for the time being as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
The AUD is another Daily PPO SELL on a Weekly PPO SELL and if more weakness continues, could really breakdown here but is really expected to consolidate here before the next move higher after the 1.075 is cleared and more consolidation before it moves to possible 1.13 - 1.15 on a safe-haven/interest rate differential bid as a long entry as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XAD.
This weeks tradeable/impacting reports and events are mostly to be reported later in the week. They are:
1. Mon. June 13, 2011 - AUD, CHF and EUR Bank Holiday.
2. Tues. June 14, 2011 - (4:30am EST) GBP UK CPI and (8:30am EST) US Retail Sales and PPI.
3. Wed. June 15, 2011 - (4:30am EST) GBP UK Claimant Count Change and (8:30am EST) US CPI.
4. Thurs. June 16, 2011 - (3:30am EST) CHF Libor Rate decision and SNB Monetary Policy Assessment; (4:30am EST) GBP UK Retail Sales; (8:30am EST) US Unemployment Claims and Building Permits and; (10:00am EST) US Philly Fed Manufacturing Index.
5. Fri. June 17, 2011 - (9:55am EST) US Preliminary University of Michigan Consumer Sentiment and Inflation Expectations.
Banks facilitate the majority of foreign exchange volume. When they are closed the market is less liquid and this can lead to both abnormally low and abnormally high volatility and chop...so...There is no swing trade for today’s Asian-London-U.S. session due to US Bank Holiday.
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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