Going to the close of Asian markets we have a mixed performance from the regions equity indices through broader trend is still for caution and weakness if not as bad as previous. Event risks for today is largely all about the US Employment Situation report where expectations point to a bleeding jobs market with the unemployment rate seen pushing to 6.3% and Non-Farm Payroll expected at -200,000, arguments to extend risk aversion. From the charts it is worth noting that hourly candles in EURUSD and GBPUSD have pulled back to the 23.6 Fib retracement levels of the latest sell-off with candles thus far showing difficulties in pushing higher though no outright rejections. What’s interesting here is that hourly oscillators themselves for the pairs are coming off overbought level which suggests we may be poised for a retest of the Asian lows paving the way for a break once we’ve confirmed the US numbers.

by Johan Kriek (jkriek@fxinstructor.com)

Notes:

- BoE and ECB slashed interest rates with 150bps and 50bps respectively yesterday

- US NFP today will be very significant. Employment rate is expected to increase to 6.3%

Probability Studies:

The ECB cut rates with 50bps and price started to trend lower very slowly after the initial reaction. The direction of highest probability is still bearish as long as price stays within the ranges of the bearish 60minute trend. A bearish stoch cross will place the EUR in a suitable bearish trading condition

Still bullish. I know the range of the 60minute trend is a bit large but this still reflects the most active cycle within the underlying current trend according to the probability study technique. A bullish cross on the 1 hour stoch will place the CHF in a suitable bullish trading condition

Risk aversion is back (moderately I have to say) and therefore the bearish probability. Unfortunately the no trade zone here will only evolve in a bearish trading condition if the stoch cross bearish and confirms it

No Trade Zone, bearish probability. The 60minute trend is still intact though.. Also, we can see a serious Head and Shoulders continuation pattern on the higher time frames:

Here we can see how the neckline has been violated already. The target of this pattern is all the way to around 1.46 figure. It seems that price just came back to test the violated neckline (now resistance) to confirm the break out. It looks like we going to get ample shorting opportunities today on this one

The AUD is bearish as well. The previous bullish 60minute trend has been violated to the downside and we even got lower significant peaks to identify the new bearish 60minute trend. A bearish cross on the 1 hour stochastic will plunge this one in a bearish trading condition once again..

I hope you have a great trading day today and start to your weekend. Amidst all the volatility we have seen during this week the probabilities still prevailed and it always a good thing to limit risky trades by using the direction of highest probability as a trading context

Have a good one!

Johan Kriek

Fri, 07th of November, 2008
By Setyo Wibowo (analyst@fxinstructor.com)

EURUSD Outlook
The EURUSD continued it’s bearish momentum yesterday. The pair bottomed at 1.2675 and closed at 1.2678. The 1.2630 level could be a key level at this phase as a break to the downside could trigger further bearish momentum and technically  ready to set up another journey heading for 1.2333 once again. My model remains mixed with downside bias. CCI about to cross -100 line down on 4h chart and heading down towards -100 line on daily chart suggesting a potential downside pressures. However CCI about to cross -100 line up on hourly chart, suggesting a potential minor upside corrections testing 1.2750 resistance level. Be patient. Eyes on US NFP data today.

EURUSD Daily Supports and Resistances:

• S1= 1.2584
• S2= 1.2490
• S3= 1.2305
• R1= 1.2863
• R2= 1.3048
• R3= 1.3142

GBPUSD Outlook
The GBPUSD also continued it’s bearish momentum yesterday. The pair bottomed at 1.5558 and closed at 1.5569. It looks like the pair is in a strong bearish pressures. My model goes short targeting 1.5400. CCI about to cross -100 line down on daily chart suggesting a potential bearish view. However, hourly CCI about to cross -100 line up so watch out for a minor upside corrections testing 1.5640 resistance level. Be patient. Eyes on US NFP data today.

GBPUSD Daily Supports and Resistances:

• S1= 1.5404
• S2= 1.5240
• S3= 1.4922
• R1= 1.5886
• R2= 1.6204
• R3= 1.6368

USDJPY Outlook
The USDJPY was traded softly weaker yesterday. The pair bottomed at 97.38 and closed at 97.46. Early today in Asian session the pair continued to push lower, traded around 97.05 at the time I wrote this comment. We have a valid bearish channel on hourly chart. My model remains mixed with downside bias. Immediate resistance is seen at 97.50. Initial support at 96.30. CCI heading down towards -100 line on daily chart suggesting a potential downside pressures.

USDJPY Daily Supports and Resistances:

• S1= 97.00
• S2= 96.54
• S3= 95.71
• R1= 98.29
• R2= 99.12
• R3= 99.58

USDCHF Outlook
The USDCHF failed to maintain it’s bearish momentum yesterday. The pair topped at 1.1795 and closed at 1.1791. The key level at this phase is 1.1800. A break to the upside from that level could trigger further bullish scenario towards 1.1950 area. My model is mixed with neutral bias. CCI in overbought area on 4h chart so we might have some downside consolidation.

USDCHF Daily Supports and Resistances:

• S1= 1.1640
• S2= 1.1489
• S3= 1.1412
• R1= 1.1868
• R2= 1.1945
• R3= 1.2096

Have a great weekend!

US stocks markets again ended-up deep in red as weak economic numbers continue to pile up ahead of Friday’s all important employment situation report for October where the Non-Farm payroll figure is forecasted at -200,000. What makes the drop all the more disconcerting is that it comes following another round of rate cuts that saw the BoE taking an unexpectedly aggressive 150bps move which takes the Bank Rate down to 3.0%. Meanwhile in currency action weak fundamentals eventually reasserted themselves after the close of whippy Europe with the Yen broadly firmer on risk aversion and the dollar trailing a close second. Going forward we are looking forward to the open of Japanese markets with fresh liquidity from Asia likely to trigger some upside in already oversold intraday charts though we remain in favor of selling into strength given an already weak open from the ASX 200. 

Reports point to pretty savvy reading of the markets by some sovereigns with everyone thinking rates cuts and indeed a sharp proactive 150bps move from the Bank of England better pricing was available leading to a quick short squeeze and dealing rooms left to ask what was happening with some research teams now turning bull on the British currency. At this point note this is not exactly a unique situation with yesterday’s early NY trade exhibiting the same action on what should have been weak fundamentals to drive risk aversion. As such for the rest of the NY market we will be looking at economic fundamentals to once again slowly reassert themselves to the market with such a sharp easing hinting of just how bad conditions are and panicky policy makers.  For now the key for Cable and the rest is to see and hold new lows reminding markets of what textbook reaction means.

Once again weak shorts are getting squeezed out of the market as the open of the rest of Europe brought out the big guns hitting a short market, just with the surge in NY markets though this is a liquidity issue rather than any broad based buying of Euro and Cable. With equity indices as they are, down across the board, and Halifax HPI dropping a sharp -2.2% vis-à-vis a -0.5% consensus risk aversion remains our theme. Going forward event risk now will be the ECB and BoE interest rate decisions with consensus forecast for a 50bps cut for both at 3.25% and 4.0% respectively though talk call for a more aggressive 100bps easing in the UK following remarks from the Confederation  of British Industries.

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

Thu, 06th of November, 2008
By Setyo Wibowo (analyst@fxinstructor.com)

EURUSD Outlook
The EURUSD attempted to pushed higher yesterday. The pair broke 1.3048 resistance, topped at 1.3116, but closed lower at 1.2927 ( A false breakout). This fact should keep the bearish scenario intact. My model remains mixed with downside bias. Immediate resistance is seen at 1.3003. Initial support at 1.2850 followed by 1.2705. CCI just cross 100 line down on 4h chart suggesting a potential downside pressures.

EURUSD Daily Supports and Resistances:

• S1= 1.2774
• S2= 1.2621
• S3= 1.2450
• R1= 1.3098
• R2= 1.3269
• R3= 1.3422

GBPUSD Outlook
The GBPUSD attempted to make a further upside corrections yesterday. The pair broke the 1.6130 resistance, topped at 1.6197, but closed lower at 1.5887. Early today in Asian session the pair continued to push lower, traded at around 1.5825 at the time I wrote this comment. For now, this fact should keep the bearish scenario intact. My model remains mixed with downside bias. Immediate resistance is seen at 1.5990. Initial support at 1.5810 followed by 1.5750. CCI heading down towards -100 line both on hourly and 4h chart suggesting a potential downside pressures.

GBPUSD Daily Supports and Resistances:

• S1= 1.5692
• S2= 1.5497
• S3= 1.5245
• R1= 1.6139
• R2= 1.6391
• R3= 1.6586

USDJPY Outlook
The USDJPY failed to continued it’s bullish momentum yesterday. The pair bottomed at 97.75 and closed at 97.97. The bullish channel on hourly and 4h chart is violated to the downside. This fact force my model to go mixed with downside bias. Immediate resistance is seen at 98.40 followed by 98.85. Initial support at 97.35. CCI in neutral area on daily chart.

USDJPY Daily Supports and Resistances:

• S1= 97.17
• S2= 96.37
• S3= 95.00
• R1= 99.34
• R2= 100.71
• R3= 101.51

USDCHF Outlook
The USDCHF continued it’s bearish correction yesterday. The pair bottomed at 1.1549 and closed at 1.1589. My model remains mixed with downside bias. Immediate resistance is seen at 1.1710. Initial support at 1.1555 followed by 1.1475. CCI just cross 100 line down on daily chart suggesting a potential downside pressures.

USDCHF Daily Supports and Resistances:

• S1= 1.1510
• S2= 1.1431
• S3= 1.1314
• R1= 1.1706
• R2= 1.1823
• R3= 1.1902

Have a great day!

Equity market correlations appears to have loosen up with sharp declines in Asian indices thus far having little knock-on effect in the currency markets as Yen pairs remain tightly coiled with hourly candles shouting indecision. For the dollar pairs we have eased off slightly but here too little signs of the usual speculative activity people refer to as ‘risk aversion’ trades. As such for now we wait staying sidelined though with bias still looking for a stronger Yen and Dollar even as we cannot emphasize enough the need to see new lows for EURUSD, GBPUSD, EURJPY and GBPJPY if bears are to regain control of the market.

Hi there fellow traders!

Herewith is my daily video recap for November 5, 2008, in which I discuss what happened on the market today, in our Live Forex Trading Room.

To learn more about the Live Trading Room, please click here.