After all the false start for bears the past week we are no longer surprised by markets turn higher Wednesday though Cables rally managed raise our eye brows as we’ve often seen GBPUSD with more limited ranges compared with its continental counter part. Following the surprisingly strong UK CIPS Manufacturing Index 52.1 from 49.7 the previous months we have actually seen a break of the key resistance in GBPUSD at 1.5774 paving the way for a run to the 200D SMA and putting us in a position to push into the range play for October/November 2011 period. At this point we once again have our major currency pairs just under key resistances with 1.3244 in EURUSD, 1.0755 in AUDUSD and GBPUSD at 1.5890. Ahead in the day we are looking at a mostly bare calendar for Europe while the effects of the surpsingly strong Trada Balance in Australia at A$1.71 billion against 1.22 billion consensus has already been felt. We do have the Fed Chairman Ben Bernanke testifying later on in the US session and NFP figures tomorrow, making for a good excuse for position squaring. We will look for shorts across the board once past the pressure to rally up at the open of European markets later.
Following Tuesday’s border line of the 0.8243 strong price area, we saw a confirmation with yesterday’s Kiwi rally. Daily indicators now show stochastic reentering overbought levels while macd is bullish. In 4H charts we have stochastic overbought while macd is on a rally, hourly indicators has macd flat and stochastic pushing for overbought areas. At the moment we seem to be poised at what could be the second high of a possible double top pattern, however with immediate risk calling for an upside breakout we will give equal weight to both possibilities. An hourly close below 0.8316 will have us looking for a bear market with double tops triggered while an hourly close above 0.8358 will suggest we push on until the next key resistance level.
After seeing a breakout yesterday we have Aussy quickly testing the next strong resistances at 1.0755 following better than expected trade figures at the open. Daily indicators now has stochastic break the previous bearish divergence while macd is pointing higher. Note we see a huge gap between prices and the EMA lines suggesting we risk some mean reversion. In intraday charts we have 4H stochastic in overbought territory while macd is rising. Hourly indicators also has stochastic heading up with macd opening higher. Immediate risk is for a test of the 1.0755 price point, given proximity we do not suggest sell limits. Look for a false break out and take sell-side when prices push back inside.
Along with the rest of the dollar pairs EURUSD saw a turnaround in validating a head-and-shoulder pattern from the 4H picture to once again be poised for a run at 1.3244 the key resistance level. From indicators we appear to have bounce off the golden cross between 21D & 34D EMA while macd continues to point up and stochastic is now poised to cross higher. In the lower time frames we are seeing mixed signals from the 4H picture with stochastic now coming off overbought levels while macd has crossed up. Hourly indicators sees a confluence of buys. For now immediate is for a run on the key resistance level given proximity we do not suggest sell limits rather look for a false break and short when prices push back under 1.3244. Alternative see a congestion below 1.3244 first and then take the sell side.
Cable saw a big rally Wednesday with GBPUSD hitting its 200D SMA and leading the risk appetite play. Daily indicators now has stochastic crawling in overbought levels while macd is heading up. In 4H charts we have stochastic coming off overbought levels while macd is rising, hourly charts for their part has stochastic just pushing into overbought levels while macd is flat above the signal. Note we were surprise by the strength of UK data as the CIPS Manufacturing Index rose to plus levels at 52.1 from 49.7. At the moment immediate risk calls for further gains though buys may be established only on a close above 1.5874(82) or coming off a good support just above 1.5815 if not the key support area at 1.5774.
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