USD/CAD

Welcome back. After a long weekend markets opened the week with not quite a bang but some interesting numbers and equally interesting moves among the majors and their crosses where we saw textbook reactions and some funnymentals off the commodity group.  

With European markets closed for Easter Monday volumes were thin and news sparse allowing us to focus on the only release of note US Existing Home Sales coming out at 5.03 million firmer than consensus expectations of 4.85 million right around the edge of our +/- 0.18 trigger for reacting to the figure. As it is the results should add to the camp of dollar optimists as further evidence that we have already seen the worst of the US downturn.  

Though too early to conclusively say the numbers suggest we may have seen the bottom for US housing in the January/December periods prompting some textbook response with respect to Euro and Cable where knee-jerk reactions saw a firmer dollar even as there is growing evidence that a housing slump is now taking root in their respective economies. Chart wise failure to break key daily Fib retracement levels in EURUSD and GBPUSD however should keep markets on its toes today with the return of liquidity. 

For the commodity pairs however reaction to the numbers appears to be a funnymental with a convoluted intermarket cause and effect. We actually saw the Aussy, Loonie and Kiwi firming after initial whipsaws on the idea that stabilizing US housing should mean the commodities pullback will not be severe, this complementing with charts where much as with the European currencies the dollar is facing some key daily price levels with these currencies.  

And then we have the Yen pairs where we have gotten used to such convoluted intermarket reactions that lately it has become axiomatic that anything that’s good for the US is taken as good for risk taking appetite and likely to push currencies paired with the JPY higher.  

Going forward high impact figures will be coming out of Canada with January Retail Sales on the cards where consensus expectations for the headline figure is at 1.1% and ex-Auto numbers are seen coming out at 0.5%. At this point focus should be on the core numbers where a bounce off the unexpected contraction in the prior month should tie in well with what we are seeing from the charts where USDCAD is coming off stiff daily resistances.  

Something to help this bearish view for USDCAD is US Consumer Confidence for the month where market is expecting to see fresh lows with median forecasts at 73.6 a number that could put a quick end to the greenbacks recent bounce.

We started the week with weak global equities as the US recession story continues to haunt investors. This has lead to continued risk aversion that’s seen Yen firming against high yielders while interestingly enough the dollar for its part has come off lows for what some could say is a ‘funnymental’, but is it really?  

People cite Fridays payroll results where NFP’s came out at -63K with previous figures also revised lower to -22K for two months of job losses. This should have been license to sell the dollar right? While I basically agree with that statement, we did fresh highs in Euro and knee-jerk reactions in other dollar pairs, we should also consider the technical picture. We have seen across-the-board sales for the greenback for sometime now that we’ve basically been overbought in Euro and company for sometime that fresh money was just not coming in. Add to that your usual weekend position squaring and you have a recipe for dollars bounce in the end.  

So the question for us now is what then is instore. This week sees high impact numbers roughly distributed among the majors and through out the week. Friday is worth special mention given inflation measures, consumer sentiment and a Bernanke appearance but other wise lets just take things from day to day. 

For Tuesday main numbers for us will be trade figures from both Canada and the US and as such will have me looking for activity in USDCAD. First things first consensus forecasts, for Canada median figures are at CAD 2.6 billion while the US for its part is looking at a -$59.5 billion read, both numbers are for January which should make for an interesting comparative.  

While it would be easy to say look you have a negative figure for the US we must consider that market is already inured with that. The mover here is likely to come from Canada where the stronger Loonie is likely to have some adverse impact. True the loonie is a commodity currency and commodities the world over are rising yet with its main trade partner to the south on the brink/or in recession a weaker than forecasted read is looking very likely. Chart wise to me this could be a recipe for us to see parity yet again though I will be looking at how market reacts to the 1.0011 area, 61.8 fib off the drop from January 20 highs.  

From a broader perspective we would like to note the on going dollar bounce is at the brink of those long awaited pullback in Euro and Cable while Aussy and Kiwi to me appear to have started its moved with the break of their respective support levels yesterday. Having said that, note that as we get closer and closer to next week dollar bashing should again go back into fashion with the FOMC set to meet Tuesday and another easing sought by the markets.

Two days into the week and we still find ourselves little change between the dollar and Cable and Euro. Thus far we have seen data to support the weak dollar scenario yet daily resistances for both pairs have pretty much kept them from making any headway with mere knee-jerk reactions giving us daily highs only to close right around the open. Meanwhile brewing trouble elsewhere has actually seen the dollar in a limited rally against its neighbor to the north and with the currency from down-under.  

Latest releases from Canada have underscored the difficulties posed by a strong currency, while demand for its commodity exports remains strong the higher currency actually means that on a local currency basis we have seen exports dropping accounting for much of the GDP surprise Monday. This in turn has also seen the Bank of Canada going for a more aggressive 50bps easing yesterday, rather note worthy given that decisions by the Governing Council is not a mere vote but consensus that all six members have to agree on. In practical terms this more aggressive policy will now have me searching for possible shorts in the Loonie.   

For USDCAD this means our daily close above the 0.9895 (38.2 Fib of the drop from 2/20 highs) should be seen as a signal to seek out higher ground. Immediate objective right now would be a return to parity and from there 1.0090.  It has to be noted though that the coming days will sorely test this scenario given the US own vulnerability (if not more so) to poor economic numbers. What is important for core positions at this juncture is that we do not see prices dipping back below the 38.2 Fib levels at 0.9895.   

Our other mover Tuesday was the Aussy seeing numbers of its own with another rate hike to 7.25% and a none textbook reaction of a drop. As previously stated the move was largely expected and in the context of a surprisingly flat Retail Sales for January only underscored a growing belief that this could be the last. With the subsequent fall in the Aussy breaking our trendline from Jan-22 lows in AUDUSD we are now in search of a confirmation for this break an immediate objective being a close below 0.9263. Consistent with trend break outs we look to establishing new shorts at the pull back towards the trend line with generous stops above it on the odd reentry.  

Looking ahead we have another one of those days when Eurozone, UK, and US releases are on the same page, “what’s happening in services?”, though I have serious doubts that we are going to get markets reacting much to this.   

The more interesting results to me will be the ADP hiring figures where median forecasts call for a sharp drop to 17.5. Originally seen to provide a gauge on the official NFP figures from government note that ADP is now also seen as a high impact indicator by itself though its ability to consistently predict the official payroll results is far from desirable. For now I leave you with a number +/- 55,565 (from the median) the allowance I am going to use as a trigger whether to expect the initial volatility that accompanies the release to be sustainable or not.

Hi everybody!

We started the London session today with a look at the AUDUSD, which at the time was in a minor bearish correction but still strongly supported for upmoves, targets @0.9270, 0.9334. At the time of this writing the first target was reached, waiting to see the reaction to the 2nd target.

EURUSD and GBPUSD looked overbought, possibility of consolidation down however the bears have not yet stepped in with serious momentum. Charts look like forming a narrowing range which at the moment points down, with a more bullish bias for GBPUSD (it seems to have started rallies across the board).

USDJPY and GBPJPY both looked bullish, with USDJPY confirming earlier and giving a stable rally on overall yen weakness, which we expect to continue.

However, the big winner of the day remains the CAD, which managed to rally against all the majors, especially agains the JPY and EUR. USDCAD looks like in the first stage of a much larger leg down, a move that we are currently focusing on.

Happy trading!

Hi everybody!

Today the AUDUSD presented an interesting bullish opportunity, we got a confirmation for a long and we are now looking for a buy@0.9050-0.9065 – let’s see if this trade comes into play later today.

Also, GBPJPY looks bearish short-term, with a possible target at 211-210.80 possibly supporting a new rally up with 214 as a main target (2 sets of double tops in the area).

USDCAD continues to look bearish, with repeated tests down at 0.9965 creating a downward slope favorable to the bears – but momentum still expected to build up to sustain a short trade. In standby for now…

Happy trading!

Hi everybody! We started our late session today with a look at USDJPY, which seems for the moment trapped in a 4h triangle threatening to break anytime now – bias remains to the upside as a larger retracement wave up in this pair seems possible on the daily charts.

On EURUSD and GBPUSD we were looking for possible breakout points both ways just before the NY open, with EURUSD confirming breakout above 1.4555 or below 1.4490 (at the time of this writing EUR has already broken the upper trendline and is now facing resistance at 1.4620 with further room to go up) and GBPUSD breaking a nice upward channel on 1h just above 1.9560 (later found resistance at the 1h 200MA at 1.9625.

USDCAD was displaying a bearish setup just below 0.9950 that finally failed, EURCHF looked bullish at the time while EURJPY and GBPJPY seemed to continue the upward large retracement targeting 157.16 and 210.20 respectively (both targets almost met at this time).

Looking forward to meet you all tomorrow in the LTR for more setups, trades and market action.

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!

This is a video summary of the Live Forex Trading Room session on October 16, 2007.

Today’s Summary, by Sunil Mangwani:

As I have mentioned often – its not the trade that is important, it is the method, and the tools you use to analyze your trade. We have an agenda here in the Live Trading Room – to train our members to analyze the markets in the correct fashion. Once you can do that, you are well set on your way, and correct trades should follow.

Lets jump straight into the intraday activity of today’s session.

We have been following the USD/JPY at a longer timeframe, and having been Long on a swing trade, we still expect the price to go further up. Today on an intraday basis we had entered into a Short trade. When you have a trade which is against the main trend, but you have sufficient confirmations, there is no harm in taking it.

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This is a video summary of the Live Forex Trading Room session on October 12, 2007.

Today’s Summary, by Sunil Mangwani:

There are a couple of intraday trades which we will follow up today. As I have said before, the method of analysis is more important than the result of the trade. Mind you, the result better be good – we are here to make money after all. But if you know which techniques to apply to which situation, you are more than halfway through.

Every situation warrants a different tool and a different set of techniques, and traders must be aware of what is going on around them. That is what we practice here in the Live Trading Room – chart time, chart time, chart time! The more you do it, the more familiar you get with it, and results follow.

GBP/JPY on 30 minute timeframe gave us a Regular Bullish Divergence, with the price making lower lows, and stochastics (or any other oscillator) giving higher lows. According to our “Rules of Thumb”, this is a kind of divergence we label as a “Class A” divergence. This type of divergence warrants an aggressive trade. (more…)

This is a video summary of the Live Forex Trading Room session on October 11, 2007.

Today’s Summary, by Sunil Mangwani:

Lets go over a couple of situations demonstrating the use of the tools which we employ here in the FX Instructor Live Trading Room for our analysis. It is critical to know which of your trader tools to use in which situations. Getting a good result from your trade becomes secondary – if it is technically correct, you have done your job as a trader.

On the USD/CAD, 4h charts, we see a strong, consistent downtrend. For this situation – a strong existing trend – we look for Hidden Divergences. According to our “Rules of Thumb” for Divergences, we use Fibonacci Fans and Fibonacci Expansions to determine our entry points and targets, respectively.

So far prices are heading well into the range of our target and are still going strong. The point of this exercise is – we have been taking decent trades in the Live Trading Room, because we have been applying the right strategy for the right situation, according to our methodology. Any upwards pullback in such cases would be seen as simply an excuse for a better position.

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