by Johan Kriek (jkriek@fxinstructor.com)

Key Notes:

- Risk aversion still rive even though President-elect Barack Obama promotes to stimulate economic growth

- BoE, ECB interest rate announcements today. BoE, ECB to cut rates with at least 50bps

Probability Studies:

The EUR violated the bearish current trend (blue line) to the upside but instead of price bouncing on the violated line to confirm the violation, we saw price move all the way back into the bearish current trend’s channel. This is very interesting as I now look at that violation as an exhaustion break. The previous bullish 60minute trend has been violated to the downside as well now and thus the bearish probability all of a sudden. A bearish cross on the 1 hour stoch will give you a suitable bearish trading condition

This is an interesting one as the CHF more or less moves in tandem with  the Dollar Index (and as we know we are seeing dollar strength at the moment) therefore I will watch the falling wedge pattern closely as these patterns normally breaks out to the upside. Should the pattern break out above the 1.1687 upper resistance line we will have a bullish probability. On the other hand if the pattern fails the bearish probability will resume

I adjusted the bearish 60minute trend to reflect the recent high at 1.6197 we saw last night. Therefore we have a bearish probability once again. Should the 1 hour stoch cross bearish again we will have a bearish trading condition. Keep a close eye on the BoE today as they are expected to cut rates. As we all know, when a CB cut rates the underlying currency normally weakens…hmmm

No Trade Zone, bearish probability. Price bounced at the bearish current trend resistance line and even violated the bullish 60minute trend as well. Thus the bearish probability. It seems that we have a new wave of risk aversion on our hands

Bullish probability. Interestingly enough, the bearish current trend has been violated after price tested this line at numerous occasions. The new bullish 60minute trend has been identified already and the 1 hour stoch cross must just be confirmed before the Loonie will be situated in a suitable bullish trading condition

Due to the fact that the 60minute trend has been violated to the downside we now have a bearish probability again on the AUD. Bearish market rhythm will force the hourly indicators South again which will present you with a bearish trading condition once again

Please note that due to the fact that the ECB and BoE are expected to cut rates today both the EUR and GBP can weaken across the board. A 100bps cut from the BoE can cause the Cable to crash again so watch any bullish breakouts very closely and take it with a pinch of salt. If you need any updates come and ask us in the Live Trading Room

Happy trading today! Good luck

Johan Kriek