What we thought would be a quiet trading day turned out to be a volatile session as division among European leaders and the a dissappointing day in the earnings season combined to form a generally risk averse whippy market. In the end we had spinnting tops and doji’s pnce more for the risk currencies though Loonie and Yen had their own special seasoning to the brew. From Canada we had the BoC sounding more dovish than usual losing faith on the US recovery story and dropping a line that suggested curtailing monetary stimulus, i.e. no more rate hikes. This saw USDCAD in one of its strongest days the past two months. Yen for its part saw a new historical low at 75.73 as losses in the equity markets mounted though for all their noise of late we have seen little of the MoF’s money. The biggest surprise came out of Europe where the single currency sold off sharply on the initial report about a cancellation of the EcoFin meeting before the leaders summnit. Apparently the issues on hand were so contentious with far reaching political implactions at home that the finance ministers decided to kick things up to the leaders. Note Angela Merkel does not want to resolve today’s crisis by planting seeds of a potentially even bigger crisis in the future. She wants a line in the draft calling for the ECB to buy more govenment bonds from big troubled countries AKA Italy. Governments need to behave and adopt more fiscal responsibility and raise taxes otherwise borrow money commercially at their own risk.
With the dramatics happening before the EU summit release we find EURUSD in a high wave spinning top as the EcoFin Meeting before the leaders summit gets cancelled ahead of what is likely to be a heated debate between Angela Merkel and the rest of the EU leaders. At the moment we find prices just above the 1.3892 breakout point from Friday with daily indicators remaining bullish stochastic overbought and macd pointing up. In intraday charts we have a mixed view from the 4H level as stochastic crosses up and macd has just seen a bear cross. Hourly indicators for their part are seeing a confluence of buys. For now we prefer remaining sidelined until after the results of the leaders summit where a win for Germany should lead to a more viable program to resolve the EU debt crisis.
For the last two weeks we have had NZDUSD oscillating around the previous weekly SHS neckline, unable to sell-off below 0.7864 or rally past 0.8100. At the moment we find Kiwi in the middle of these two extremes. Among indicators, daily signals has stochastic crossing lower while macd is flat technically bullish staying above the signal line. From the 4H level we have had indecision candles with spinning tops and doji’s while stochastic is oversold and macd dropping. Hourly indicators are also mixed with stochastic poised for a new bear cross while macd is poised for a bullish crossover. For now we prefer not to take action though given the range play we see we prefer buys from just above the 0.7864 area or shorts from under 0.8120. A break of the immediate support and resistances may be traded provided there is a catalyst.
Once more the Bank of Canada has surprised the markets with its more dovish than anticipated statement previously a similar changed in policy lead to the spike up above parity in late September to early October. Tuesday saw USDCAD again changing course with the brief break nelow parity quickly getting reversed for a big white candle with daily stochastic coming out of oversold areas and macd bottoming out. From the 4H picture we continue to see a confluence of buys between macd and stochastic hourly charts are mixed with stochastic coming off overbought levels. For now we are looking for a buy on dips with the ideal entry at 1.0075, an hourly congestion resistance before and 61.8 Fib of yesterdays rally.
After a retreat in commodity markets in the US we are seeing AUDUSD just above string support area, 1.0365 the previous weeks congestion high following weaker than expected trimmed mean CPI numbers at 0.3% against a 0.7% consensus. Looking at indicators we have daily stochastic coming off overbought levels though macd is still rising. In intraday charts we have stochastic just pushing to oversold levels in both hourly and 4H charts while macd is also dropping. For now we are looking for a close under 1.0365 to spark a further downleg putting to close the idea of a follow through rally to 1.0570 for the symmetric triangle breakout in 4H charts Friday.
©2011 FX Instructor Forex Blog - For Traders, By Traders. All Rights Reserved.