FunnyMentals indeed, we started the week with a flurry of data that after all things being said and done, finds us mixed for the USD pairs and curiously firmer among the JPY crosses. While there should be nothing unusual about this what I find to be a ‘funnymental’ here was that sustained movement did not come from the dollar pairs where releases turned out mostly inline with the consensus expectations (confirming that US manufacturing is now at a contraction). But with the JPY pairs, extending an earlier rally though this appears to be more of a limited unwinding from last weeks massive shorts.

The more interesting results actually came out of Canada, here we saw month-on-month GDP for December dropping -0.7% well short of the -0.2% consensus and a first since August of 2006. These are numbers that affirm the idea that a strong loonie and Canadian growth would not be both sustainable. Plain as that statement may sound we still have to deal with the fact that the loonie is a commodity currency, with oil pretty much seeing new highs almost constantly simply dumping the loonie is an exercise of bravery bordering on the foolhardy. For now I will continue to look for a build up of ‘fundies’ reinforcing the idea of a weakening Canadian economy and then and only then would I start to discount the currency’s seeming strength.

Turning to the charts yesterdays data and price action has me more and more convinced that some pull back is still needed for both Euro and Cable vis-à-vis the US dollar. Sure we saw mostly inline numbers for the manufacturing surveys but in the end a contraction is still a contraction and with ISM Manufacturing at 48.3 (a second bust over the last three months) one would have expected that knee jerk reactions to the top side would have been sustainable considering their own 52.3 and 51.3 reads.

Particularly in the Euro’s case, the fact that after fresh highs we saw a close right around where we started the day does suggest that despite all the bullish talk going one no one is willing put money where there mouths are. Where are the buy stops above 1.5240? With the apparent attempt to run the price area ending for naught we now have a chart that is more and more looking ripe for a pull back. Add to that what has long been an over bought daily chart all I need now is some for of catalyst, be it some positive new out of the US, poor Eurozone results or simply a close below 1.5160 in the daily charts. Medium term though I continue to be bullish for EURUSD with targets at the 1.5500 area, just need that pull back for a better entry.

At this point we take a look at what’s ahead and we have Australian policy rate decisions at 0330GMT where market is already pricing in a another 25bps move. Thing could get tricky ahead for the Aussy pairs given the surprisingly flat Retail Sales numbers for January and a close read of the accompanying statement would be needed. Any hints that this latest move could be the last may just be the trigger needed to break that long trend line from January 22 lows which could set us up for a pull back to the 0.9100 area right around your 38.2 fib retracement for the rally.

Dollar falls against all major after disappointing data.

US Consumer Confidence printed 75.0 against the forecast of a fall to 82.0, Which Triggered a rally In All the Majors.

With EUR/USD finally hits the elusive 1.5000 level, and AUD/USD back above 0.9300.
PPI m/m printed 1.0% above expectations of 0.4%, And Core PPI printed 0.4% above expectations of 0.2%.

A drop in Consumer Confidence, which indicates a Slow Growth in the Economy, together with Above expectations PPI which means a Higher Inflation sign, only complicates matter for FOMC in terms of their Interest Rate Decision Making.

Forget Recession, US Economy is entering a Stagflation Economy. It will be interesting to see what move FOMC will take. Will they ease The interest rate again to boost growth, like what most People are assuming right now. Or hold rates as it is to deter any possible rise in inflation? (more…)

Hello again everybody,

We started the London session today with a look at the Yen pairs, which are all close to confirming bearish setups mid-term - by the time of this writing there has not been a clear breach of the support lines yet.

EURUSD reached up to 1.4862 and seems to be losing momentum, our analysis shows the possibility of a retracement back to 1.4780 and lower based on the wide range we can observe on the daily charts.

GBPUSD confirmed a bullish mid-term outlook and completed a bullish EW on hourly charts, which is why we are bearish on it down to 1.9560 (200MA on 1h and 38.2 fib of the entire wave up) but bullish starting with that level, as a larger formation is possibly starting to unfold towards 2.0200 during the following weeks.

Have a great weekend!

Well, From the Previous Market outlook, everything seems to go as predicted in that outlook.

No Major News Coming out on the 8th of January 2008.

Market went Out “GUNS BLAZING” yesterday after the interest rates statements from ECB and BOE, US Data came out lower but still better than previous month’s drop. All This Weighing down on Cable and EUR/USD.

The Previous Charts i posted is still Valid for Friday, so a move to the downside for Both Cable and Euro is still probable. I’m Leaving that aside for now, and I’m Going to have a look at AUD/USD today. (more…)

Awaiting Interest Rate Decisions

Hi everyone! As the market is awaiting the interest rate decisions on GBP and EUR, we focused during our London session on GBP-based pairs and EURUSD, trying to get a technical direction BEFORE the news announcement.

The picture does not really leave room for many options, apparently. Several indicators and wave formations point towards a possible support in GBPUSD and EURUSD, as well as GBPJPY, support levels that would stand at 1.9473, 1.4580 and 207.21 respectively. A clear break and close below these levels would indicate further down moves in these pairs, as new bearish formations would get confirmed.

To the upside, the EURUSD seems capable of retracing up to 1.47, 1.4750 and 1.4810 during the next sessions, a move confirmed by a close above 1.4670. Personally I lean towards this bullish possibility, as even further dollar gains would have to be sustained by an appropriate pullback before a possible rally down.

Also, on GBPUSD a move above 1.9605 would clearly tip the scales in favor of the bulls in short term, with a possible 1-2-3 formation triggering a long trade.

Looking forward for the interest rate decisions to see which of these scenarios will unfold.

We also examined the USDJPY charts, looking quite bullish on major timeframes - I am planning to take a long starting 106.85. Once this level is reached I would be using any pretext on a small timeframe to go long for a target of 108.20. Stop should be somewhere in the 106.30-106.40 area. Will keep you posted about the progress of this trade, if the entry gets triggered.

Happy trading today, and see you all tomorrow!

Riding the “Post-Interest Rate Decision” Rollercoasters

Hey guys, choppy market action today after yesterday’s interest rate decision - 0.5% cut and more cuts expected, so the headlines read: broad bearishness for the dollar. Which is why we focused on some short-term SHORT setups on EURUSD, GBPUSD At times like this when the market actors agree on a certain scenario (in our case the dollar falling), I’m thinking they will probably be right, but NOT RIGHT AWAY. Remember - the fundamentals are not what they appear…

EURCHF displayed an excellent shorting opportunity (a perfect wave formation backed up by divergences and trendline break) - we went in 1.6103 and closed the position during US session for 71 pips (the trade of the day).

We also took a short GBPJPY - low risk position for a large target - our 30 pips stop got hit by 2 pips and price rallied to our target just after that - better luck next time!

Also, took a short EURUSD on a retracement however the pair went up again in a 3rd test up and we got stopped out for -35.

Overall a positive day, however the effects of rollercoaster rides in the main currency pairs obviously didn’t help our technicals.

We also observed bullish scenarios in EURCAD and bearish on all yen pairs - it was only during US session that the yen started to gain some ground (after the US jobless claims report) .

Let’s see what tomorrow brings - I’m still bearish on EURUSD and GBPUSD, for as long as they don’t break the triple tops on the large charts, in which case I’m expecting a sharp rally up that would put an end to the current correction.

Ahead of the Fed Interest Rate Statement

Today our main point of focus is the Fed interest rate statement, a decision that is far from being clear at this point. The market is getting ready for some action tonight, and breakouts are highly possible in almost all currency pairs.

EURUSD and GBPUSD might get ready to take off on a nice rally (EURUSD heading up to 1.4820 at the time of this writing), however I’m still expecting the moves to cool off starting with the US session open and prices getting back in range. Technicals are pointing towards a possible retracement on the higher timeframes, however any down leg needs to be confirmed by the fundamentals, otherwise we are looking at a continuation up.

In the (for me unlikely) situation that the interest rate favors the dollar short-term, the move down in EURUSD and GBPUSD just after the news could be a good opportunity to re-enter long on the larger bullish trend on these pairs.

Hello everybody!

We started today’s London session with an careful look at GBPUSD and GBPJPY, where the overall sentiment seemed bullish at the time. With the EW picture suggesting both pairs possibly getting out of the minor correction down started on Friday and short-term technicals also confirming reversal (including 200MA signal on 15m) we went LONG on cable @1.9808 on a trendline break confirming a 1-2-3 setup. Stop was placed below the trednline @1.9758. Our target is the possible top of a 5 waves formation up at 1.9915 (where another pullback can be expected).

Also, GBPJPY seemed to continue the large retracement move started last week and so far we have a good support @209.61, a previous resistance and supp. As long as the pair is holding above this level, we are still on a bullish retracement scenario, with initial target @212.10, followed by 214.00 and 217.50.

EURUSD looked like trading in range, and we expect it to continue some range trading until the interest rate decision on Wednesday. No trades on this pair today.

USDCAD has confirmed already a bearish move on Friday, and we are looking for possible entries short.

See you tomorrow!

Hi everybody! We mainly focused on EURUSD today, as the pair seems to be starting a consolidation phase 1.4490-1.4780 with direction to be settled during the next days. For now, it appears that the larger timeframes are somehow ambiguous, but the 1h and lower are showing possible retracement down after yesterday’s sharp move. Also noticed bearish signs on GBPUSD and AUDUSD short-term, however they seem to be part of larger consolidations.
Will keep an eye on the market for possible trading setups on these pairs.

Wednesday’s Jan 14th midday analysis -13.00 GMT

EurUsd retraced in the Asian session to the 50% Fibonacci line of yesterday’s down move and finding resistance at the 1.4850 area resumed the move down breaking below 1.4800. Without any surprises as we’ve had recently the pair should continue toward the 1.4700 target zone.

GbpUsd covered over 120 points so far today but failed to move decisively under yesterday’s low at 1.9550; until we see this happening the pair will maintain trading inside the current range between the 1.9550 support and below 1.9670 resistance.