Sunday analysis

The futures are all red tonight and its a pretty ugly start to the week for risk.

EURUSD has smashed through the 08 support levels and 123 level and Sterling has broken major support and the flash crash lows and AUD is closing in on them fast.  
This article in the Sunday Times about the Euro going to parity has not helped and overseas all the asian indices have opened much lower.
There is a traders old wives tale apparently that when Asia makes these big moves it us usually the end of a run, so we shall see.  The commodity currencies look all set to take over from the continental currencies as the weakest plays vs the dollar.

Bearish sentiment in the Euro is worryingly extreme which could mean some nasty volatility or short squeezes. The CFTC data shows a net short position in EURUSD of 18bln and last weeks rallies reportedly only due to short sellers buying upside option protection and "Le Tarp" trillion dollar bailout buying only the briefest of rallies.  Likewise Gold bullish sentiment is at 98% (a record) and means that Gold is vulnerable to a sharp correction before continuing higher.  The big break down in risk appetite has hit crude hardest with those shaken out of the market showing no inclination as yet to jump back in and no bounce whatsoever in crude which has now collapsed 17% in two weeks and fallen out of a rising channel it has been in for the past year indicating a bigger trend could be forming.

The biggest event risk this week for the dollar is the CPI figure.  So far is has held above target even though the Fed says it sees no inflation pressure.  If it keeps putting in higher numbers expectations of a rate hike will rise and it may force their hand.

Indices:

S+P futures: 

The S&P has rolled over just short of the 61.8 retracement of the big drop from the credit crunch and this week retraced to the 78.2 fib of last weeks big fall and then fell off again.  This and the close back below the trendline from the March 09 lows is bearish and suggests a continuation to 1090.  We have a clear trading range now with last weeks high and the low of two weeks ago.  I prefer to sell rallies and I have a 1120 then 1075 target, BUT the drop of Thursday/Friday could just be a pull-back in the big rally off the lows and we could continue higher from here.

FTSE futures

After the dramatic fall of two weeks ago putting the FTSE below the daily trendline from the March lows the trendline has been retested from the underside and rejected.  Below this line I would sell rallies with a target of  4850 and I would be looking for price action around 5320 to short.  Like the S+P this move down could also be a shallow correction from the rally off the crash lows and we could power higher from here.  For me the trend is down and below the trendline I would sell rallies until last weeks high is taken out.

GOLD 

Strong up trend, Gold made new highs last week before correcting but finds support at the previous high 1226 level.  This rise is so steep gold could correct all the way back to 1100 without breaking the trendline from the March 09 lows.  Gold is at significant fibonacci resistance here and when it makes new highs and that does not bring in significant new buyers then I would expect a pull back here to the 1170 or 1145 area and look for price action to buy again.  If Gold continues to rally here then next stop 1275 then 1337.

SILVER  

is in a strong uptrend but for the reasons I outlined last week I am counter-trend short looking for a pullback to 18.75 and then 18.00 (61.8fib retracement).

CRUDE 

Bearish weekly and daily with no bounce.  Crude has fallen out of a long term channel and this has implications for a longer term trend change. 

I would sell a retest of the trend line from the underside.  Crude is in steep contango again and the last day of trading the June contract is Thursday 20th so if you are trading the front month expect a rally into Thursday followed by a sell off and lots of volatility (usual pattern). 

Currencies

DOLLAR INDEX 

A sharp rally in the US dollar has broken it up out of a rising channel and this weekly chart shows it has also broken out through 8 year trendline resistance.  This is an extremely bullish breakout and I would expect any retraces to be held on a retest of that trendline in the 84.50 area.  In the short term there is nothing much in the way of resistance before 88.00

AUDUSD
Weekly inside bar, daily bearish reversal at the 61.8fib of the previous weeks big drop.  AUDUSD has dropped a dramatic 130 pips on the Asian open tonight and broken support at 0.8800.  Drop is halted at the 78.2fib retracement which is a favourite reversal level for AUDUSD.  AUDUSD needs to break below 0.87 to confirm the lower high and set up the February lows at 0.8580, which is a key level.  If this is broken the objective becomes 0.7700

NZDUSD
Technically NZDUSD is in a rising channel which looks to have been broken tonight along with the 200sma which has been long time support.  As this has just happened in the last two hours in the Asian session I am waiting for a pull back and retest before I entertain a short.

USDCAD
The weekly inside bar broke long in the Asian session tonight and is now held down by the daily 200sma.  It has been more than a year since USDCAD has traded above this moving average and a close above would be significant.  USDCAD has broken out above the resistance line from early 2009 and succesfully retested it and I am bullish this pair, buy on dips.

EURUSD - monthly chart
EURUSD has broken major support tonight at 1.2320 and the 2008 lows.  This level also represents fibonacci extension levels and the bottom of channel/trendline support.  I am wondering if the moves that broke this support in the Asian session are an exhaustion move and we may see some sort of correction here where we can sell again.  After such a big move down and the market so extremely positioned it is hard to enter short here and I am looking for consolidation or possibly a bounce.  I am looking to sell the next rally below 1.25 and the next objective is 1.18 and the 161 fib extension, 127 fib extension and trendline support from the 2000 lows .

GBPUSD
Bearish.  I had 1.44 as my target for this swing (1.618fib) which has been exceeded and in the Asian session tonight when cable broke the "flash crash" lows.  I am looking for a bounce here to retest the break at 1.45 initially to sell again and my next target is 1.4120

USDCHF
Strong uptrend.  My target for this swing based on Fib extensions was 1.14 and again it has been hit in the Asian session tonight.  I expect some consolidation here and possibly a pullback to buy again.  The correlation with EURUSD and the bearish extreme sentiment makes this a tempting short with the right price action.

USDJPY
USDJPY looks like a range trade to me at the moment within the huge candle of two weeks ago and price has stalled tonight at 91.80 resistance level.  We could rally from here but if we dip then I am looking at the 90.80 or 89.50 levels for price action to buy.

EURJPY
Bearish extreme! A close below 112 support sets up a test of the spike low and 109.94 (1.618 extension). and a break below that targets 103.00.  We have tested 112  tonight and I am watching to see if it holds.  The market is very heavily short EUR and this pair is very volatile and we could have a couple of weeks of consolidation within the big weekly candle of two weeks ago.

GBPJPY
After a solid rejection at the 61,8 retracement of the spike low GBPJPY is all set to retest that low after dropping 275 pips in the Asian session tonight.  A break of the spike lows gives a fib extension target of 120 but after such bog moves I would not be surprised to see some consolidation in the spike range before that happened.

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I am taking a bit of a break this week and so will not be posting daily trades.  I will be checking the charts though and if I see anything that looks good I will post it.
Hope everyone has a great week.