After rallying early in Europe currency markets saw broad based pullback in New York trade to end the day mostly with spinning tops and doji’s for the majors and their crosses. Once again pre-summit jitters saw the Euro strengthen on expected good news only to end up disappointing the markets as officials came up with a bare minimum to prevent a panic but well short of their stated objectives. In the end we have no treaty changes for the EU with only an agreement to draft a new one for deeper integration and bilateral arrangements which are easier to violate without any central authority to impose greater fiscal discipline. Of further technical interest the weekly charts are also showing spinning tops and doji’s across the board one more indication of how indecisive the market has become. Going forward we have very little data to watch out for, the earlier Australian Home Loans and Trade Balance figures, which turned out mixed at 0.7% vs 0.1% consensus for the former and A$1.60 Billion against a A$2.03 Billion median, about the only releases for the day that are market moving.
After following through thursday’s sell-off early on, Aussy eventually managed a 180 turn going to the open of European markets to close the day with a hammer and backinside its previous flag pattern range and above the daily EMA lines. Among indicators we now find a new bullish cross in daily stochastic joining an already bullish macd with the EMA lines acting as a strong support level. In the lower time frames we have mixed signals in 4H charts stochastic overbought and macd bottoming out. Hourly indicators has stochastic pushing to oversold levels while macd is beginning to top off. At the moment we have Aussy seeing weakness following the mixed releases, with Trade balance short of consensus at A$1.60 billion against 2.03 billion median. Given the mixed signals and bullish Asian equity markets we prefer going for a buy on dips to the strong support at 1.0150.
Following a roller coaster ride that saw USDCAD testing the 1.0262 resistance twice, Friday saw us with bearish close though unable to generate a reversal signal closing well above the midpoint of Thursday’s body. From indicators we have daily macd under its signal line though flat while the latter is dropping. Daily stochastic has seen a new bear cross while the EMA’s are flat with the 21D and 34D lines around 1.0213. Intraday we are seeing a confluence of buys from the 4H charts with stochastic coming out of oversold levels and macd up following a spinning top in the Wellighton market. Hourly indicators has macd bottoming out while stochastic is poised to push to overbought levels. Risk for the moment is for a push to the strong resistance at 1.0262, we prefer a buy on dips approach though a close above 1.0214 would be a sufficient entry signal.
Kiwi also saw the rollor coaster ride that other commodity currencies had, ending the day with a positive tone , a hammer with a very long tail. Daily indicators are also showing a bullish stochastic and macd’s above their signal line though prices are currently within the daily EMA’s and we failed to push back above the congestion floor from earlier in the week at 0.7758, now a strong resistance. From the lower time frames we are seeingh mixed signals with 4H stochastic overbought while macd is flat under the signal line. In hourly charts we have macd topping off while stochastic is heading for oversold levels. Given the strong immeidate resistance level we prefer looking for shorts from just under 0.7758 with tight stops above it.
Despite the big rally in European morning trade, the EU summit actually failed to come up with a full treaty leaving us instead with 23 bilateral arrangements to implement stricter fiscal policy and raise the rescue fund once more. In the end though we saw a white canlde we still have a pattern of lower highs and lower lows in the daily and intraday picture. Indicators has daily macd and stochastic pushing up through EMA lines continue to add another level of resistance. In 4H charts we are currently seeing a new bear cross from stochastic while macd appear poised to generate a new one. At the hourly level we have had a bearish engulfing candle from the open of Japan while stochastic is oversold sold and macd seeing a new bear cross. Currently Euro is a sell at market, now at 1.3350, though the prefered entry will be from just below 1.3389 for a test of 1.3326 then on to new lows below Friday’s 1.3282.
As with the rest of the majors, Cable saw a big whipsaw Friday with the daily candle turning into a spinning top with long shadows. Note it appears that we still have a valid double top in the daily charts with 1.5560 as its breakout point. From indicators we have daily macd heaidng up while stochastic is dropping for whats likely to be another mixed trade. This as daily EMA lines also act as resistances beginning from 1.5665. In the lower time frames we are seeing mixed signals , 4H macd and stochastic are heading lower while hourly macd and stochastic are heading up. Given the lack of impetus consider playing a range game with buys from just above 1.5594 and sells from just under the 1.5722 region. It would take a daily close below 1.5560 for us to argue shorts on a double top breakout.
©2011 FX Instructor Forex Blog - For Traders, By Traders. All Rights Reserved.