Tuesday, April 6, 2010

Tuesday 06 April

Turnaround Tuesday came early to FX land this week.  There is much going on ...

Event risk today is the FOMC meeting minutes and perhaps a decision on the discount rate following yesterdays meeting.  Crude, gold and indices may get some direction from there.  FX seems less correlated with risk on / risk off lately or maybe I am imagining it.
The bond market needs a bit of help with a turnaround in indices with yields breaking resistance levels across the curve.  None of this will help a CRE or housing recovery.

The RBA decided to hike so I cut my AUD shorts and I am not trading it long.  The dollar is rallying and it is not the best trade out there IMO.
Sterling fell hard overnight on the setting of a date for the election and a poll in the Guardian showing that Labour are still going to win -http://www.guardian.co.uk/politics/2010/apr/05/icm-poll-labour-conservatives-election.  Because cable has not taken out the 1.5380 swing high the double bottom is not confirmed and it looks like bearish consolidation or a range trade now until the election on May 6th.
Euro is falling becase Greece is not resolved.  Germany wants Greece to pay higher rates and Greece does not want the IMF involved because they may actually have to perform some austerity instead of just talking about it - http://flmu.forexlive.com/blog/2010/04/05/greece-wants-to-amend-emu-aid-deal-bypassing-imf-sources/   Greek bond yields are now at 7.1% -  http://online.wsj.com/article/SB10001424052702303493904575167381495748168.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
EURUSD is set to test the lows and my target is 1.30 / 1.28.  Since the SNB involvement CHF is moving in lockstep.
NZD is the weakest of the commodity currencies, AUD and CAD are the only two I would not short vs the dollar.  I really like USDNOK long, its a good breakout trade.
Tokyo sold all the JPY crosses last night which is dragging USDJPY down.  I have seen this happen before, it is not actually selling of USDJPY but the others that are moving it.  The first level I am looking to buy is 0.93 but I think it could go lower and take a bit of time so I will be patient.
Gold and Silver look like buys.  I hate to say it, I am normally bearish but Gold looks set to rally, I am watching the 1142 resistance area but 1160 or 1200 is possible.  Gold has broken out of its descending channel or wedge and succesfully retested the break.  The neckline of the inverted head and shoulders is around 1160/1162.
The indices look ready to correct.  The bullish cheerleeding on CNBC has reached fever pitch and it might be time, sentiment wise.  Robert Prechter is predicting a sizeable correction between now and May so we will see if he is right.  After the big overnight pullbacks no doubt the momo crowd will see this as a great buying opportunity and we could go up as the US session opens.

Crude is still bullish and I am certain we go to 90 but with the risk off trade across the board it looks like a better short here.  April is seasonally weak for crude.

Sorry no charts, will add later.  I don't seem to have much time lately.

EURUSD closed 50% @3R 1.3410 (+1.5R)
NZDUSD short 70.00 stop 70.20 - addition, flag break
NZDJPY short 65.60 stop 65.90 - addition, flag break
AUDCAD short 0.9240 stop 0.9265 - addition
EURAUD short closed 50% @3R 1.4465 (+1.5R)
CRUDE short 86.75 stop 87.05 target 85.75 countertrend
EURJPY closed 25% @6xR 1.26 (+1.5%)
NZDUSD short addition stopped out (-1R)
NZDJPY addition stopped out (-1R)
AUDCAD addition stopped out (-1R)
AUDCAD stopped out balance original trade 92.55 (+0.5R)

Open trades:
NZDUSD short 0.7095 stop 0.7120 - 1/2
NZDJPY short 66.85 stop 67.0 - 1/2
EURUSD short 1.35 stop 1.3530 - 1/2
EURJPY short 127.20 stop 127.40 - 1/4
EURAUD short 1.4615 stop 1.4665 - 1/2

GOLD daily
technical breakout confirmed
1142.65 a potential sell level


  1. Hey Nic,

    I see Gold going much higher this time for major reason worrying everyone these days i.e. greece. Notice the H&S pattern on gold daily. It broke and I reckon we will break last time high of 122xx this time.

    Best to buy on dips me thinks.

  2. Nic, just curious to know how do you get a target of 1.30 / 1.28 for the EU? I don't see any Fib levels or major support there.
    Btw, your blog is developing quite a following. It is one of the best, objective discussion of tech analysis/FX markets I have come across. Keep up the great work!

  3. Hi Pandu
    EURUSD loves round numbers, that's the only reason for the 130 target. A lot of FX options are traded as hedges in EURUSD and they have round number strike prices.

  4. The swing low of last April also has 1.30 as weekly close prices. Weekly close prices act as SR levels too.