Wed, 11 Sep 2008

by Johan Kriek (jkriek@fxinstructor.com)

Well, well, well. The EUR finally took out the low at 1.4000, thus the bearish probability is still intact. Interestingly enough, price is now consolidating below 1.4000 and as soon as market rhythm starts to trend lower it will give us a bearish cross on the 1 hour stochastic and then the bearish trading condition will resume.

Keep in mind that 1.3870 IS a serious support level as it resembles a possible pivot for the overall bull trend we can see on  the weekly charts, so please be careful. I would refrain from trading as soon as price nears this level and wait for it to be breached first.

The CHF took out the highs at 1.1370 as the Dollar Index creeps higher. The bullish probability is still intact but first wait for the 1 hour indicators to cross bullish before you attempt any trades. As I always say in the Live Trading Room: “Be patient to wait for the best trading condition and your patience will be rewarded”

The Cable is threatening to violate the 1.7470 low and as soon as I see a violation and a confirmation to go with it, the Cable will be situated in a bearish trading condition once again. 1.7550 is the resistance line to watch as it resembles the bearish 60minute trend resistance line. Should this resistance be violated we will have a bullish probability. So wait for that trading condition or stand aside

Also, we have the MPC Treasury Committee Hearings in the UK today and anything said about inflation and interest rates from any member could have a probability changing effect. So I will watch this hearing closely before trading. You are more than welcome to give me your thoughts on future rate expectations. After all, interest rates and investors’ expectations determine the value of a currency

The JPY is really between a rock and a hard place and if you trade this one you certainly have “hair on your teeth” because I would not touch this one with a stick. You do have a bearish trading condition due to the fact that the 60minute trend is bearish as well as the indicators. The main concern here is that the Yen is so volatile. Good luck and if you have any strategies you employ to minimize risk on the JPY please let me know.  (It’s all about minimizing consecutive losing trades aka drawdown)

Interesting EUR/GBP observation:

We can clearly see here that the EUR has been strengthening against the GBP for quite a while now. The main contributor here is the bad economic climate in the UK and some carry trade unwinding – risk aversion. At this point in time I can clearly see that the triangular pattern on the daily charts has been violated to the upside, thus signalling possible continuation of the preceding bullish trend.

So by the looks of things the GBP is set to weaken even further against the EUR for a while. A significant bounce on the lows around 0.7960 will be the confirmation here.

Also, as I mentioned in the GBP analysis above, watch the MPC hearings today at 08:45 GMT as more dovishness can send the GBP lower versus its counterparts..

Enjoy your trading day as it might be full or sparks and excitement. Please feel free to contact me with any suggestions, comments or questions and I will be more than happy to have a chat with you.
Have a good one!
Johan Kriek