Markets Tuesday turned out to be a frustrating range play despite several news and events that could be seen as an excuse for further risk aversion. From the US we had ratings agencies warning for a further downgrade unless politicians get their acts together on the deficit and stop thinking of 2012 while data showed preliminary figures for Q3 GDP falling well short of the consensus at 2.0% vis-a-vis the 2.4% that market was looking for. In Europe we have growing concern over developments in Spain as the debt contagion has seen borrowing costs double from the previous month though a big sell-off in the Euro was again averted as the ECB stepped in once more this despite growing protestations that it is not a lender of last resort. Analysts have also been busy pointing out that France a AAA country was paying at AA- levels for its debt. Still a suggestion of possible reversal or technical bounce by the daily charts has quickly been offset by Asian price action as the passing of the mining tax in Australian saw the Aussy selling off and the correlation trades set-in to drag the other currency pairs lower.
Following monday’s sell-off we ended up with a high wave doji for Tuesday suggesting a possible turnaround in the bear trend for Aussy from last week. Daily indicators has stochastic oversold while macd is dropping, a bearish bias. In the lower time frames we have a bottoming macd with stochastic also crossing higher in the 4H level with prices showing a double bottom. From the hourly charts we also see a confluence of buys stochastic just crossing higher with macd’s bullish as we push for the congestion resistances. For now we are waiting to see Chinese Flash Manufacturing PMI figures, with an above 51 read a catalyst for triggering the double bootom pattern. Note a sub 50 read will be used as an excuse to break lower instead.
Tuesday turnedout to be indecision with the daily candles a high wave spinning top suggesting we risk a pullback to the rally that we have been seeing since monday last week. From indicators we have stochastic overbought while macd is rising, the gap between EMA lines and price has widened suggesting a possible mean reversion. From the 4H level we have mixed signals stochastic just crossing higher while macd is at risk of a bear cross. Hourly indicators has macd bottoming out with a new bullish crossover along with stochastic, the latter also pushing back to overbought levels. For now we are looking for a close above 1.0413 to trigger a further push up possibly to 1.0493, ideal entry however will be coming from just above the 1.0365 congestion floor.
We continued the bear market from monday last week with new lows and a black body for yesterday’s candle though in the end we saw a high wave spinning top to suggest a possible pick up. Indicator wise we have stochastic oversold in the daily level while macd is also dropping. Note the huge gap between prices and the EMA lines opens the risk for mean reversion, a pullback. Intraday we are seeing opposing directions from different time frames with 4H macd and stochastic rising while hourly stochastic has crossed lower with macd topping off. Look for a close under 0.7467 to suggest a move lower. Prefered entry however remains to be a recjection from 0.7506.
Following our break of 1.5681 a strong support level monday, we ended up with high wave spinning top with attempts to push back up above 1.5681 repeatedly failing throughout tuesday’s trade. In the lower time frames we have 4H stochastic crossing lower while macd is flat though technically under the signal line with the latest candle suggesting a bearish engulfing. Hourly indicators for their part has stochastic just crossing lower and macd beginning to turn heading down. For now we are looking for a close under 1.5613 to confirm the resumption of our bear market targets at 1.5542 though ultimately we are looking for the next strong support at 1.5460.
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