Monday, February 8, 2010

Analysis and some charts

Volatility rules! Risk aversion is in but pullbacks are inevitable. Stop levels and SR levels seem pretty obvious at least for the dollar crosses. If risk aversion continues then the yen looks set to strengthen further. The Greek disease seems to be spreading to Portugal and might be infectious. And no doubt RBS results won’t be happy for Sterling.
The end of day rally in the US indices on Friday was heavily touted on CNBC as exhaustion of selling, bargain basement prices and they predicted a big rally from here. I’m not convinced it wasn't just some profit taking at a 10% retracement point and will wait to see how the daily hammers on many charts play out from here.
This week has GBP inflation report, Euro GDP numbers, Australian employment and US advance retail sales in a news week that looks thin compared to last week but the Sovereign debt story could continue.

Dollar Index - Last week hit 7 month highs running straight through the round number resistance at 80.00. Stronger resistance is looming at 81.35/81.40 and closest support now at 80 (Weekly chart):

Crude. Bearish weekly engulfing candle, a break of the key pivot level at 72.50 (check a daily chart) and the last major daily trendline support means I continue to sell rallies looking to the December swing low at 68.69 initially. I expect a pullback up to resistance at some point and I see a retest of the levels at 72.50, 74 and 75 as a good levels. Below 72.50 is a very key pivot level for me.   You might be wondering why I draw fibs from the Oct 08 highs instead of the all time highs.  I have found that quite a few instruments (Cable is a good example) really respect the levels from the 08 highs to the December08/March09 lows.

Gold. Downtrend, massive weekly bearish engulfing candle which has closed below round number 1100 and key pivot level at 1074. I am a seller of rallies. It is interesting that in a risk averse week more money didn’t make its way to gold, preferring more liquid treasuries. Or perhaps the market thinks the price is a little to rich at those levels. I am selling a retest of 1074 from below and looking for a break of last weeks low at 1044 where support is.

Silver. Downtrend continues, a similar chart to gold but looks to be trading better! Last week broke the last daily trendline and also back through the 50fib level of the 08 highs and lows. Price has stalled on previous resistance level at 14.650 and I am a seller of rallies below 15.00. Retracement to 16 is possible and I would be looking for price action to short there also.

Currencies - Majors

AUDUSD Weekly and daily bearish continuation. Last week price broke December support at 87.30 which confirms the double top. I am anticipating a short term bounce and a continuation to 84, the projected level of the head and shoulders that broke in December.

NZDUSD – strong downtrend. Below 71.50 I am selling rallies with a target of 65 or 6450 where there are a mass of fib levels. Retracement resistance is at 69.77

GBPUSD – down trend – I have spent hours today drawing lines on this one chart. I see a diamond top and we have broken – very bearish and gives a downside target below 1.50. I am selling rallies and looking at resistance levels at 1.5730, 1.5780 and possibly 1.60 for short entries.

EURUSD – strong downtrend – My lowest target from last week of 1.35 was almost hit and I favour more downside but a corrective rally seems inevitable. I am a seller of rallies and would look for a short entry in the 1.3825 / 13860 levels (if it makes it that far). Only a break above the last swing at 1.4030 changes my bearish view.

USDJPY – Downtrend, contained within a downtrending channel, only a break above 9380 changes my view and I am a seller of rallies whilst price remains below 90.00 (I am looking at 89.80 for an entry). A daily bearflag looks to be forming and I may also short a break of support.


AUDJPY – strong downtrend- Hit my target at 76.30 and has stalled. I remain a seller of rallies and my target is 70.75. Has to break above 80.73 to get me to buy dips.

NZDJPY - strong downtrend, it broke the diamond top formation on the daily. If you project a target using that top then the level is the previous support at 52.89 I am selling rallies, resistance at 62.16 and 64.71

CADJPY – strong downtrend, I am selling rallies and looking at resistance at 84.21 and 86.15 for entries. My target is the bottom of the range at 75.

AUDNZD – Uptrend, but not a trade for me. Support at 1.24 and resistance at 1.2775

EURNZD – Lower highs and lower lows mean a low is in place and uptrend underway. I would buy dips but the important 2.00 level is looming and I would buy a break and successful retest of this level. Failure to break and close above this level and I am a seller of rallies. Until then I wait.

GBPAUD – uptrend correction in longer term downtrend. The weekly tells the story, the daily is still in uptrend mode. Price looks to have failed to break above the previous swing high and I think this might be an interesting non-dollar trade Monday, looking to retest the lows. Price has to break above the top of the range at 1.84 would have me looking for a long.

AUDCHF - Strong uptrend has stalled and Daily is making clear lower highs and lower lows. However weekly rules and up trend is still in place. Once to watch.

AUDCAD – Price has made a lower high but needs to break and close below 91.950 to confirm downtrend and top is in place. I am waiting to see but I am favouring the short side.

GPBJPY – downtrend – The big drop happened and I had key support at 1.3930 which I did not expect to be breached on Friday, this area has been tested 4 times before and held. There is the potential for quite a bounce here if history repeats itself. However I remain a seller of rallies and I am looking at 141.50 / 142.00 for entry (if it gets there). (I am wondering, having read my forecast last week, how I managed to trade this so badly. Just goes to show reading the chart and actually trading it are two different things.)

GBPCHF – This pair is at the top of the range and looks set for a decent swing trade short here. I usually like to trade this pair but the interventions last week by the SNB (in the middle of the night) means this is off my menu whilst EURCHF is at such low levels and further intervention is possible.   Price has to break and hold above 1.71 for me to change my bearish view. In the meantime I will switch my attention to EURGBP.

EURGBP – downtrend but like a rally here off the bottom of the weekly trendline. Longer term I am bearish this pair, and I would look to sell a rally to 88.53 (my target for a long). However a break of the rising daily trendline gets me short.

EURJPY – downtrend – this pair have broken out of the 9 month range. I am a seller of rallies looking at a rally to the SR level at 124.80 for a short entry. A corrective rally could get as high as 1.2730 Only a break and close above 129 changes my bearish view.

EURCHF – Downtrend but No, thank you

USDCHF – uptrend handily assisted by SNB. A bottom is in place confirmed by a higher low and higher high. I would buy a dip to 1.0645, or better 1.05 if it gets down that far. Only a break and close back below 1.05 changes my bullish view.

USDNOK – uptrend – Bottom is confirmed this week with a higher high to follow the lower low. I would be a buyer of dips and I am looking at pullbacks to 5.925 for an entry to give me a cushion trying for a break of the 6.00 level. Otherwise I would buy a break above and retest of 6.00 Below 5.80 is a no trading zone for me and a deeper correction could be forming.

USDSGD - uptrend - Similar chart to USDNOK a bottom is confirmed by a higher log and price is all set to break resistance and December 09 highs. A good looking inverse head and shoulders appears to have formed with a target of around 1.43. I would look for a pullback to 1.4120 / 1.4135 for a long entry. A bigger pullback to 1.40 is not impossible.

USDZAR - Uptrend, a bottom is not yet confirmed but looks possible and price has broken up out of its range. Price has stalled on a long term descending trend line from the high of October 08. Not a trade for me until it breaks this last line. I am neutral until then.

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