Quote of the day: All the gold which is under or upon the earth is not enough to give in exchange for virtue. - Plato


Trading strategy: standing aside

The mid 1.27 area where the euro was trading in late Friday's session before gapping up over the weekend has been a though barrier in the last two days, providing a reversal point on yesterday's attempt to recover. Looking at both daily and intra-day charts, it is very clear that any euro rallies are aggressively sold, hence short-lived and for each hundred points up - there's a two hundred points decline to follow. More downside remains on the radar - key levels being seen at 1.2500/20 - YTD low; 1.2455 - last year's low; 1.2330 - 2008's bottom; 1.2130 - 50% retracement of long term's .8225 to 1.6035 bull market. According to the COT data (chart below), the net short euro contracts doubled since a month ago when the euro was orbiting around 1.35. According to the poll I posted yesterday, 60% of you - fellow readers, are expecting the decline to continue and only 10% are expecting the euro to recover. We shall see what next days will bring and how the currency market will digest the officials' attempts to stabilize the financial markets and stop the free fall, restoring optimism... or what's left of it after last (Black) Thursday meltdown, when the Dow Jones collapsed 1000 points in a matter of minutes, thanks to the HFT robots. On intra-day basis, selling pressure to emerge in case of short covering rallies remains in the cards - potential short entries on retracement levels of last down leg from 1.3095 to 1.2605, unless a daily close above the 1.2850-1.2900 region will occur, but even then - fresh floors will remain fragile. Current exchange rate is 1.2645 @05:20 GMT

Support: 1.2600, 1.2500/25 and 1.2400 Resistance: 1.2700, 1.2750, 1.2800, 1.2900 and 1.3050 Market sentiment: long term - bullish, medium term - bearish, short term - bearish, intra-day - bearish

EURUSD daily COT data 5-13-2010
EURUSD 4hrs chart 5-13-2010


Consolidation above the 1.48 handle continues but rallies are facing a strong resistance around 1.5040 - 61.8% of last week's move from 1.5390 to 1.4475. Despite recovering from last dip to 1.4475, cable is facing bearish pressure and trades far below the monthly open at 1.5340, as well below last month's bottom into the 1.5150 zone - level which is expected to provide resistance in the coming days. Intra-day volatility remains very high - averaging 300 points on the last 5 days - yesterday's range being 280 points, therefore larger stops are required nowadays to avoid getting out due to a 15-30 minutes pullback against the initial position.

GBPUSD 4hrs chart 5-13-2010


Constantly surging higher to record highs, gold remains one of the few markets which are obviously going into one direction. Fears of a second and higher crisis wave along with other logical reasons are confirming that gold is a safe-haven asset nowadays and more upside is likely. Should gold face any pullback from current top side, then 1190-1200 will probably act as a solid bottom before resuming uptrend towards the next key level, at 1300.

XAUUSD daily chart 5-13-2010

Have a good day!