As can be seen we had that break below the trend. But what we never had is a consolidation period where the currency pair trades below the trend, tries to trade above and then fails. Without the consolidation phase, such a move is simply momentum dump but doesn't qualify as a breakout play.
Worth watching though to see where it closes for the day.
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Gold Head & Shoulders
Therefore, the game plan is to currently stay short and watch if the Head and Shoulders pattern leads to a breakdown on a 1700 breach. That being said, if 1700 breaks, it could trigger another move to the 1675 level, where I will be covering this time. If 1700 holds over the next few days or we trade back to around 1730, I expect to also cover (I’ll post and email when I do). Although Gold is trading below its 50 day MA, inflation talk has been creeping up again. My take on the dollar’s drop following the elections is that Mitt Romney stated he would get rid of Bernanke. Therefore, with Obama re-elected, it means the FED is slated to keep doing what it has been doing and dollar strength may be capped.
Good luck trading and have a great weekend.
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The AUDUSD briefly cracked the 1.0400 barrier again last week, matching its 1.0410 highs of October. However like much of the rest of the market, the pair dropped to close at 1.0335 after the US’s Non Farm Payrolls beat expectations and triggered dollar strength. This was followed by a late selloff on Friday in US equities which caused an overall risk decline. Coming up this week the AUDUSD will be in focus as a bunch of economic announces are coming out. The fun starts on Monday morning with Retail Sales and Trade Balance figures, followed by the RBA’s Interest Rate Meeting on Tuesday, and then on Thursday we get Australian Employment Change numbers.
RBA Meeting
Analyts are expecting the RBA to cut rates again to 3.00% after last month’s surprise cut to 3.25% from 3.5%. After forex traders had the tended to believe that the RBA was on the sidelines, they are now expecting the central bank to continue with its Dovish measures. The rate cut expectations appear to be the driving force behind the AUDUSD’s lack of being able to maintain any sustained rallies above 1.0400. Nonetheless, with the EURUSD seeing selling pressure again, if the RBA does hold off from cutting rates, it could lead the EURAUD to be in play and it would become a potential long term short position.
Employment Figures
Trading the AUDUSD on the Employment data really depends on the RBA outcome. If the RBA cuts, then we’ll probably already see the Aussie trade lower. In such a scenario, the tradable idea would be to then short the AUDUSD on any possible strength from the Employment figure. On the other hand, if the RBA surprises and leaves rates at 3.25%, a better than expected Employment figure could be the catalyst for the AUDUSD to finally trade and hold above 1.0400 and would lead to a potential extended breakout.
AUDUSD Fails Again At 1.0400
USDJPY Falls After BoJ Announcement
So what happened? The forecasts were beat and it marked two months in a row of BoJ easing? The bottom line was that the headline figures aren’t always what’s important. In this case, some forex traders (and it seems some rather large ones) were expecting to the BoJ to decide to try and do something new to get its economy going. With the BoJ simply applying the same strategies that have done little to get the economy going, these forex traders are expecting growth and inflation to remain stagnant. While such a scenario is negative for the Japanese economy, it leads to greater yen strength as Japanese investors remove funds from riskier assets and return to cash.
Looking ahead, eyes are now on the US and this week’s NFP figures. However, with Hurricane Sandy hitting the US as well as the US elections next week, just like the BoJ release threw the market for a loop, we’ll probably see the same occur again during the upcoming US economic releases. As such, it’s time to Be Careful, and not to get to aggressive during these news announcements.
]]>The strength brought out lots of talk in twitterville about shorting it as it looked overbought and RSI’s were hitting 80 etc. However, as often happens, just because something has moved higher doesn’t mean it can’t keep moving.
Taking a look at the AUDUSD since yesterday afternoon it has been creating a support base just above 1.0360 and unlike other currencies that rallied yesterday, never really had much of profit taking hit the pair. As such, with a rotation occurring back into the Aussie, and demand stepping up to support it at 1.0360, I am taking a long this morning at 1.0394, right around its highs and just below 1.0400 resistance.
While the 1.0400 figure is an important barrier, based on the amount of skeptical traders shorting it as it went ‘overbought’ we could see another upside breakout if it trades above 1.0400 and triggers stop losses.
Target on long of 1.0475 on the trade with stops below support at 1.0355.
]]>In any event, the AUDUSD finally did succumb to the overall buying in the market to take out its resistance level and trade above 1.0300. However, I wouldn’t be surprised if this move had more to do with sellers backing off than real buyers stepping up. As such, I would go short the AUDUSD if it trades back below the 1.0285 level as it would be expected to trigger selling as the short term buyers exits and the longer term sellers return.
Short Aussie On Fall Below Resistance by ronfinberg on TradingView.com
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Gold at 50 Day MA
As I believe either of those scenarios will trigger some stronger selling pressure, I would rather sell first and take the preemptive attack. Selling Gold at 1740.14.
]]>Taking a play from the Bank of Japan’s playbook, the US Fed has been out stating about how bad thing are even though the latest Non Farm Payrolls and Unemployment rate figures knocked the ball out of the park. Like the BoJ which repeatedly has tried to “talk” strength out of the yen, the Fed is trying to convince the public that their latest “bazooka” QE3 plan makes sense.
The latest case of this was seen yesterday when President of the New York Fed, William Dudley spoke at the National Association for Business Economics’ annual meeting in New York. Dudley stated that one or two improved job figures don’t mark a trend and that the labor market remains soft. Also, he added that Fed should have been more aggressive with its monetary stimulus activity over the last few years. While his statements have had more to with restoring the Fed’s credibility, than with effecting movements in the dollar, the rhetoric does sound similar to the BoJ.
Since announcing its QE plans, the forex market has largely reversed any moves with the dollar heading higher overall in October. This contrasts to the initial sell off we saw following the last FOMC Meeting. What’s behind the move? Well for starters, the EU economic standstill continues, while in the UK nothing much has really happened either. Therefore, we are left with the US to search for direction. O that count, traders are seeing a market that continues to slowly improve, while headlines are showing demand for new electronic devices. Whether the improvements are short term or even real, they do convey that the US appears to be a safer place to bet on currently.+ If they are predicting growth, the Yen will weaken as exporters buy foreign currencies to ramp up their production and marketing of goods towards the rest of the world. As such, with the holiday season rapidly approaching and buzz over new products like the iPhone 5, Kindle Fire, and apparently soon to be iPad Mini hitting the markets, Japanese firms could be seeing an opportunity to sell into the US’s (and China) 4th quarter optimism.
Based on the above, I am keeping my eyes on the USDJPY as the longer it can hold its recent gains, the more likely demand steps up and an upside breakout can take place.
]]>EURAUD: Closed at 1.2650, initially bought on Aug 21 @1.1842: This was by far the mega winner which took advantage of a fall in interest in the AUD while the EUR saw buyers return on the heels on monetary support from the ECB. (one downside of this trade is that rollover fees knocked out about 10% of the net gain)
EURCHF: Closed at 1.2087. Had two positions here, one bought at 1.2114 and another at 1.2070. I still think this trade can work, but overall I am looking for a fresh start. Was a net loser as 1.2100 demand had slipped in recent days. But, this pair remains one to watch and I won’t be surprised if I jump back in soon.
EURGBP: Closed at 0.8061. Bought on Sept 19 at 0.8046. This was a small gainer that I had big hopes for. The truth is that it had gone negative pretty much as soon as I opened the position, so even taking a small 15 pip gain is a huge plus.
Looking ahead: Market is sideways, but that usually bodes well for momentum and breakouts occurring soon. One I am watching is the USDJPY which is near its October highs after today’s US Retail News figures were better than expected and follows a pattern of encouraging US data.
]]>After falling steadily throughout the week, the EURUSD finally saw buying demand yesterday on the back of an encouraging Italian bond sale. Also, better than expected US economic results on Thursday led to overall gains for equities which buoyed riskier currencies. So far, the EURUSD continues to see momentum as it trades at 1.2950 this morning and has nearly erased all of its earlier losses of the week.
Looking ahead, a quiet day is expected with the only notable economic releases being Canadian GDP and US PCE figures which will be out later today. Nonetheless, with next week having a full slate of key releases starting with Chinese, US and UK Manufacturing data on Monday, UK & ECB Interest Rate Meetings on Thursday, and the US’s Non Farm Payrolls on Friday, we could see trading become volatile if forex traders begin to position themselves ahead of next week’s action.
Charts to Watch
GBPUSD: The GBPUSD keeps hitting 1.6275 resistance and failing. As such the pair could be a short candidate on ay subsequent moves above 1.6260 with stops at 1.6280.
GOLD: Gold has traditionally been a good long going into the week of a Non Farm Payroll’s release. As such, with the metal trading right around its recent highs (see chart), it could be well poised to rally next week if it closes the week above 1780.
