Archive For "August, 2009"

8-31-09

4:47a GMT – EUR/USD was able to break through support (and last week’s signals) of 1.4300 but has not managed to do much since then, only getting down to around 1.4280. It has since zig-zagged in a tight range between 1.4280-1.4315. In the short, short term I expect this range to continue (might be good for some scalping) but my bias remains bullish and I will look for buying opportunities near support and on dips.

Trading Idea: Pair is right on (weak) support of 1.4280 right now, better support not seen until trend support just below 1.4250 where I will look for buying opportunities. Long targets back up to 1.4300, 1.4345 and 1.4395. If support is broken look for a re-challenge of 1.4200.

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8-28-09

3:26a GMT – It has been a fairly predictable week (knock on wood!) for the EUR/USD pair, with price action more or less mimicking signals. Yesterday we saw the major rise, as expected to a new high of 1.44050. Bears quickly stepped in at that point to temper the rally but not after the pair had gained nearly 200 pips in under 4 hours! The pair then retreated to 1.4338 – the 38.2% fibonacci retracement of the rally. Thanks to this new high I am freshly bullish, and I would prefer to buy on dips near support.

Trading Idea: We have good support to buy around above 1.4300, which is near the 50 and 61.8 fib retracement levels of the latest rally. From there long targets are at 1.4345, 1.4385 and 1.4445

(click to enlarge)

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8-27-09

4:38a GMT – Bears fought back today (on positive US data), driving down the EUR/USD almost 150 pips in just 6 hours. Pair did rise steadily for the first hours of the day but hit a wall of support at 1.4350 that sent exchange rates plummeting. There is currently disagreement among economists whether positive US economic data will help or hurt the US dollar (if you haven’t read my article here on risk aversion and confusion over fundamentals). Today it definitely helped the dollar. However, as long as the pair stays above 1.4170 I am net bullish so I will look for buying opportunities, and sell any bounce off of 1.4350.

Trading Idea: Look for buying opportunities between support zones at 1.4175-1.4200. Long targets at 1.4270 and 1.4345.

(click to enlarge)

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8-26-09

5:00a GMT – Good 100 pips off of yesterday’s signal as the pair bounced hard off of support just above 1.4250 and rallied for 100 pips to 1.4360. Momentum was not sustained however and the pair quickly fell back down to 1.4280 levels. Fundamentals are mixed (see my earlier post about how different investors are interpreting the news out of the US in different ways, causing volatility) and traders are looking for direction – which makes me think we will see some tight ranges and zig-zagging over the next couple of days and then possibly a big break either up or down, so keep stops relatively tight.

Trading Idea: Still looking to go long, preferably near trend support currently around 1.4275, though I will try to catch it on the way up or down around 1.4250. Long targets at 1.4345 and 1.4385.

(click to enlarge)

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8-25-09

18:12 GMT – Although my forex signals are 95% technically-based, like any good trader I also keep an eye on the underlying fundamentals as well. My philosophy is that the fundamentals will provide the trade direction while technical analysis will give you the specific entry and exit points. To that effect, I’ve talked a lot recently about some of the risk-aversion that is driving the market. Under normal market conditions investors want the highest return on their investment, and that means investing in a currency that has the higher interest rate or other, more risky investments such as stocks.

In the past few months, however, we’ve seen the dollar gain against currencies with higher interest rates, defying normal fundamental expectations. So what gives? The answer is Risk Aversion. Risk Aversion is when investors take money out of possibly riskier investments (e.g. stocks or developing countries) and put them into safer vehicles (such as the US Dollar). This is why recently we’ve seen the US Dollar do the opposite of US stocks – when stocks go up, the dollar went down; when stocks turn south  the dollar rallies.

But with fundamental news coming out that signals a semi-recovery of the US economy, why aren’t higher-yielding currencies a no-holds barred freight train against the low-yielding dollar?

Well, the dollar has lost some ground this week on news of better home sales, increased consumer confidence etc., but it certainly hasn’t plummeted.  I came across this excerpt this morning which pretty accurately explains the fundamental picture of the market right now:

“With trading volume light, analysts said differing views about how to trade strong U.S. economic data was causing the odd price action, with some seeing it as a signal to buy risky assets and others expecting it to lead to a U.S. recovery and higher interest rates, increasing the dollar’s appeal.

“This push and pull of two different viewpoints is why you’re seeing this ambivalence in the currency market,” said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston. “There are those who think the dollar just might be supported on the back of a U.S. recovery.”

So the short answer is their are two schools of thought on what is the safer/higher returning investment in the short and mid-term. And some people further aren’t convinced the news out of the US is all that great considering much of the recovery to date has been because the US government has printed money to help itself and that can’t last forever.

Expect more volatility in the months to come, which means range trading with an eye toward further USD losses.

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8-25-09

5:19a GMT – Yesterday’s buy signal at 1.4250 was never reached, though it came close when price action dipped to 1.4279 before jumping back up 60 pips. Today I am looking for more of the same with signals pointing towards a long between 1.4250-1.4275. It is really taking a lot of determination for me not to sell into one of these rallies as I think the fundamentals don’t support the latest Euro strength, but if I was going to sell it would be up around 1.4450. In the short-term I will continue to buy dips near support, as the up-trend appears to be intact. We do have the US consumer confidence report coming out at 14:00 GMT and though I don’t expect it to move the market much I will nonetheless sit out for the few hours hours around the event risk.

Trading Idea: Longs favored on dips near support above 1.4250. Tight stops, targets at 1.4300, 1.4345, 1.4380 and eventually 1.4445.

(click to enlarge)

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8-24-09

5:54a GMT – Pair bounced hard off our support from Friday’s signals just above 1.4200 and rallied over 100 pips to 1.4375. This latest forex rally signals that bulls are winning out against bears in the short term as another higher high is made. Next resistance is not until 1.4450 with good support found above 1.4250.

Trading Idea: Looking for opportunities to buy dips above support at 1.4250. Long targets preferred back up to 1.4300, 1.4345 and 1.4375.

(click to enlarge)

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8-21-09

5:54a GMT – No signal yesterday. EUR/USD has been volatile recently as traders and investors try and figure out which way the currencies are heading. With each fundamental piece of data that comes out jitters of risk-aversion go through the market (whether the news is positive or negative) with traders temporarily taking safe-haven in the relative saftey of the US dollar. More leading indicators have come out recently that the US economy is bottoming out, but investors can’t forget that a lot of the positive news has been stimulus driven (read: the US government printed money). When that stimulus money dries up and bad news comes out expect rampant profit-taking and a subsequent drop in the EUR/USD. Technically, we’ve had several higher highs and higher lows recently, meaning the pair is in a short-term uptrend, but the medium-term still remains bearish and that is the direction I am biased toward for now.

Trading Idea: The pair is currently approaching support at 1.4200 and I will look for opportunities to buy a bounce or sell a break of this level. Short targets down to 1.4160, 1.4105 and 1.4075. Long targets back up to 1.4250 and 1.4300.

(click to enlarge)

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8-19-09

5:06a GMT – First target was hit from yesterday’s signal but the pair quickly reversed as the stock market made up some its losses. Pair was able to rise to resistance at 1.41750 before dropping back down to sub 1.4150 levels. My bias is still lower below 1.4200, which is a good resistance level and also the 50% fibonacci retracement from 8/13-/817. RSI signals are mixed.

Trading Idea: Looking for selling opportunity below 1.4200 for a return to 1.4105, 1.4060 and 1.4015.

(click to enlarge)

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8-18-09

4:56a GMT – Pair came close but has not yet pierced major trend support (currently at 1.4015) though it did break intraday support at 1.4100. Daily RSI still has plenty of breathing room before it is in oversold territory while the hourlies have cooled off quite a bit – making a stab lower more likely. I am looking for a test of 1.4015 at the least.

Trading Idea: Looking to sell near resistance, currently around 1.4150 for a test of 1.4100 and 1.4015.

(click to enlarge)

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