Monday’s gaps following the failure of EcoFin to come up with concrete measures for the Eurozone debt crisis has turned out to be continuations with the Euro taking a hammering and looking set to take out the 1.3500 level in the coming days. In New York trade we saw markets tanking ahead of Pres. Obama’s speech on taxation which the republicans are calling class warfare, note we are hearing reports of growing redemption’s in many US mutual funds ahead of changed in US taxation which should mean further unwinding of equities for us and a strong dollar. From the open in Asia early releases saw the September RBA minutes coming out though the text was more mixed than anticipated with the bank failing to rule out further tightening. Initial response of the market was to see Aussy firmer, note we are currently shorts from 1.0190 and 1.2031 a further read of the details indicate that the bank is more concerned about global conditions and weak domestic growth than inflation risks. They just want to keep their options open rather than completely closing the door to their tightening policy.
Monday saw a follow through for the rejection from the 38.6 Fib retracement level at 1.3900 with markets gaping lower and seeing a continuation of the decline. Indicators show a bearish macd while stochastic is also heading lower poised to go under the 20 level. From the lower time frames we are seeing mixed signals at this point with stochastic coming off oversold levels and macd dropping, this as candles are also mixed though with a bearish bias in the 4H charts. Hourly charts for now see a confluence of buys. Note we just saw a credit ratings downgrade for Italy with news coming out of Europe remaining disappointing. As such we prefer using the bullish hourly charts to get better pricing consider shorts from just under yesterdays highs with tight stops at 1.3735.
As with most of the majors Cable ended up weaker against the dollar following EcoFin last Saturday though our sell-off appears to be limited, we broke lower of the previous weeks congestion but ended up with mostly a spinning top. Daily indicators show stochastic pushing back to oversold levels while macd is dropping. Note we also saw a test of the strong support at 1.5644 bouncing off the said price area twice. Intraday we are currently seeing mixed signals, stochastic is pointing higher while macd is heading down. In the hourly level we currently have a bullish macd while stochastic has just crossed higher as well. For now immediate risk is for a push on the upside though given the overall bias we are looking to short from the NY session highs at around 1.5725 with stops just above the 1.5756 price point. Note we actually appear to have an inverted SHS pattern though for now we will use it to get better pricing for shorts.
At the close we saw Aussy staying just above 1.0177 though a look at intraday charts indicates the break and pullback occurred in Wellington trade a likely result of the Italian credit downgrade and low volume levels. Still we had a big black body with daily indicators pointing lower stochastic heading for oversold territory while macd is dropping. In the 4H picture we have bearish signals with stochastic just crossing lower while macd drops. Hourly indicators see a flat macd and stochastic bearish while we also have a piercing pattern though coming out of a congestion we put little significance to the pattern. Note we have the minutes of the latest RBA meeting at 0130GMT, we expect a dovish statement, i.e. a focus on Europe and the lack of domestic inflation concerns to spark further declines. Consider sells from just under 1.0223 or on a close under 1.0106 a move to parity.
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