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2010 January

January 30th, 2010 @ 11:04 am by The Geek

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Hello all,

welcome to the Koala’s EUR/USD Weekly Review.

This week was basically a bearish week and folks who went against the momentum probably had their accounts obliterated.

The technical similarly which i observed the other day turned out to be true and the bearish momentum brought us near 1.38.

We have came far from the heights of 1.5+. This current bearish party is probably a result of risk aversion. When China became more and more active in it’s efforts to curb speculative growth and bubbles, investors probably concluded that it is too early and are concerned about a stall or even reversal of the recovery. This is understandable as China is the world’s second largest economy and many investors are looking towards China to lead the global economy out of the stump.

Furthermore, the problems over at the Eurozone is far from being over. Greece remains in the troubled economy list and recent reports suggests that investors are losing confidence in the idea of Greece being able to fix it’s problem without a bailout. In fact there are early reports stating the Spain may be next. Investors never liked bailouts and troubled countries. Risk averse traders probably exit their high yield instruments and seek the safety of “safe harbors.”

Late this week, data from the US was mainly positive. While we did see an initial shift from the risk averse theme ( a trading pattern whereby poor economic releases cause demand of “safe” assets ) to a fundamental theme ( a trading pattern whereby good economic performance of a country strengthens its currency and equities ), by Friday’s closing, the S&P 500 turned bearish again suggesting that the current bearish correction is strong. Risk aversion became the flavor of the day again.

Looking at next week’s line up of releases, expect the unexpected! With the likes of the US ISM Manufacturing PMI, US Pending Home Sales and the EURO Minimum Bid Rate, you definitely need to plan your trades. The finale of the week will be the monthly margin call party the US Non-Farm Payroll. You can see how the EUR/USD reacted in last month’s NFP.

From a technical point of view, I drew a line to show the momentum of the currency pair for this few months and it seems like we may be due for a correction soon. Having said so, the fundamental conditions must be right too and hence we need to pay close attention. 1.3800 may be a potential support but do note that the current bearish momentum is strong.

We may be looking at an immediate range between 1.3800 and 1.4000. If 1.3800 fails, we may open up 1.3600.

Trade safely and do stay tuned to the EUR/USD Daily Reviews for a daily outlook.

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January 30th, 2010 @ 9:49 am by Matt "NewstraderFX" Carniol

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The big question going forward is whether January’s decline in the S&P 500 is a correction or the start of a new trend to the downside.

Short view: It’s a correction that will max-out at 10%, if it even goes that far.

First, there really is no such thing as the “January effect,” which is the idea that January leads the way for the overall year’s performance. There’s no statistical basis to support this and anyway, stocks gained about 34% in 2009 (and about 65% from the March 2009 lows) despite the 9.5% decline in January 2009.

Second, in normal up years, there is an average of three, 5% corrections and one, 10% correction.

Third, and most important, there’s no reason for stocks to be starting a new down trend other than on speculation that the withdrawal of fiscal and monetary stimulus will cause a second wave of economic decline in the second half of 2010.

The scorecard for corporations reporting profits during Q4 is that nearly 80% have beaten the estimates for earnings and that over 50% have beaten the top-line estimates for revenue growth.  Additionally, the first estimate of 4th quarter GDP, widely expected to get an enormous boost from inventory re-stocking, actually did better than expected on several fronts.

In real (inflation adjusted) terms, overall spending slowed to a  2% pace (from 2.8% the previous quarter) after the cash-for-clunkers plan expired but excluding autos, consumer spending increased at a 3% annualized rate, the most in three years. Significantly, the boost in spending ex-autos was supported by incomes rising at a 4% pace, the most since Q2 2008, and from the 2.2% growth in wages and salaries, the best performance in two years.

Allow me to go back to the idea that investors will discount future value based on the withdrawal of fiscal and monetary stimulus. The Obama administration is now focused on jobs (as well they should have been since day 1) and will concentrate their efforts in that direction, For example, they can re-start cash-for clunkers (actually, they can start cash-for-anything programs) and can always extend the tax credit for homebuyers. Second, the Federal Reserve will absolutely jump back in to support growth if necessary, which is what they’ve repeatedly promised to do in their recent statements.

In my opinion, stocks could be somewhat more than half-way through a correction that is likely to max-out at about 10%. Let me explain.

I’m using a Fibonacci sequence to measure the retracement of the decline in the S&P from the time that Lehman Bros. collapsed in Sept 2008 to the March 2009 lows. The last high was made nearly exactly at the 80.9 level, meaning that 80.9% of the collapse after Lehman Bros. had been made back before the latest correction began.

Now, here’s the best part:

A 10% correction from the 80.9 fib level would put the S&P at about 1036, nearly exactly at the 61.8 retrace level, which is where the market last found a major level of support back in November!

I will say this however:

Stocks could just very well turn around from here, especially if the numerous Purchasing Manager Indexes from all over the world (including China) turn out better than expected next week (as I believe they will).  And all of that will be further supported if the NFP, scheduled for release next Friday, turns out better than expected (which is hard to estimate in advance).

On the other hand, we’re seeing stocks decline even though many economic and corporate earnings reports have beaten expectations, so it wouldn’t be surprising to see price move towards that 61.8 retracement level. But unless these reports turn out to be very disappointing, which I do not expect to see happen, the present correction is likely to max-out at 10%.

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January 30th, 2010 @ 3:33 am by Setyo Wibowo

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The EURUSD had a significant bearish movement this week, fell below 1.4000 key support level and bottomed at 1.3862. On daily chart below we have a nice bearish channel indicating valid bearish trend which has started since December 2009. I am expecting bearish continuation next week. Initial support is seen around 1.3800 – 1.3750 area (50% Fibo retracement of 1.2457 – 1.5144). Break below that area should trigger further bearish momentum targeting 1.3490 area (61.8% Fibo retracement of 1.2457 – 1.5144). On the upside, immediate resistance at 1.4000/30 followed by 1.4126/50 area.

Have a great weekend and see you guys next week!

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January 29th, 2010 @ 5:15 pm by The Geek

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Helllllllo Friday and Koalas!

It is time for the close of the week and the month.

Have you closed your positions for the beer money?

The EUR/USD brushes off the trendline and arrives at the support of 1.3880 like clockwork!

This calls for a ILIWMCW. ( Regular koalas will know what am i saying :) i know you love it )

The S&P 500 obtains some relief for now, springing back into the 1080/1100 range.

Oil remains around $72, indicating that the global economy probably isn’t going to crush soon 😛

Gold on the other hand regains it’s title as the biggest winner turned loser. Pressure from the strengthening USD probably sparked a sell off. Current it values at $1075+

***

With the Fed Chairman Nomination Vote out of the way and the US Advance GDP coming in much better than expected, a short rush of positive sentiments surrounds us. Looking at the S&P 500 going green and the US dollar having a party, today is probably a traditional day. IE. Fundamental concept whereby a good economy release benefits the country’s currency and equities.

With oil hanging above $70 for now, the global economy is probably not in a state of a financial crisis again. Oil is an universal commodity and can be a clue to the global economy health.

Do note that we are having the World Economic Forum annual meetings this weekend and hence leaving trades open over the weekend may bring exposure to unusual volatility. Do have proper money management.

Bullish pressure may bring us to 1.3940 while bearish momentum may continue on to 1.3800.

***

I had a flu jab yesterday! Regular koalas will know that i am a rather sickly koala and i hope this jab helps. Stay tuned for my EUR/USD Weekly Review and some surprises over the weekend :)

Read more Forex Articles and Views by The Koala at www.thegeekknows.com

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January 29th, 2010 @ 6:58 am by Johan Kriek

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by Johan Kriek (jkriek@fxinstructor.com)

Probabilities:

Direction of  Highest Probability: BEARISH
60 minute trend resistance: 1.4000
Bullish Probability above: 1.4000
Significant resistance: 1.4220
Significant support:1.3750

Direction of  Highest Probability: BEARISH
60 minute trend resistance: 1.6220
Bullish Probability above: 1.6220
Significant resistance: 1.6350
Significant support:1.5915

Direction of  Highest Probability: BEARISH
60 minute trend resistance: 0.8986
Bullish Probability above: 0.8986
Significant resistance: 0.9060
Significant support:0.8813

Direction of  Highest Probability: BULLISH
60 minute trend support: 89.68
Bearish Probability below: 89.68
Significant support: 84.80
Significant resistance:90.40

___________________________________
This analysis has been based on the Probability Study Technique which is derived from the Dow Theory

Also note that a “trading condition” does not constitute a trading signal, but rather a context to execute your own trading system within.

For more about the Probability Study Technique, please visit forums.fxinstructor.com or register yourself a seat at
http://www.fxinstructor.com/eng/courses/probability.php to learn this technique or to book a free Level 1 class

Enjoy and good luck!

Johan

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January 29th, 2010 @ 3:34 am by Setyo Wibowo

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EURUSD Forecast:
The EURUSD had a moderate bearish movement yesterday, closed below 1.4000 and keep moving lower around 1.3922 at the time I wrote this comment. This fact should open the door for further bearish scenario targeting 1.3750 area. The bias is bearish in nearest term. Immediate resistance at 1.4000/30 area. Break above that area should lead us into no trading zone as direction would become unclear.

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January 29th, 2010 @ 3:26 am by Setyo Wibowo

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EURJPY Forecast
The EURJPY attempted to push higher yesterday, slipped above 126.89, topped at 127.07 but whipsawed to the downside and closed lower at 125.60. This fact should keep the bearish scenario intact and I will stay with sell on rallies strategy. Only a consistent move above 126.89 area could be seen as potential threat to the bearish outlook. On the downside, nearest target remains around 124.50. Break below that area should continue the bearish momentum towards 122.10.

GBPJPY Forecast
The GBPJPY attempted to push higher yesterday, topped at 147.21 but whipsawed to the downside and closed lower at 145.07. On daily chart below we can see that price is not able to make a clear direction and still struggling around the lower line of the triangle. However, actually overall the pressure is more to the downside. The bias is neutral in nearest term and I will stay away from this pair until we have a clearer direction. Immediate support at 143.63. Break below that area should be seen as bearish confirmation targeting 141.50 even 139.29 area. Initial resistance at 146.00 followed by 147.20 area.

AUDUSD Forecast
The AUDUSD attempted to push higher yesterday, topped at 0.9046 but whipsawed to the downside and closed lower at 0.8944. This fact should keep the bearish scenario intact targeting 0.8810 area. Immediate resistance at 0.8980. Break above that area should lead us into no trading zone but I still prefer a bearish scenario with sell on rallies strategy.

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January 29th, 2010 @ 3:19 am by Setyo Wibowo

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GBPUSD Forecast:
The GBPUSD attempted to push higher yesterday, topped at 1.6274 but once again, the trendline resistance provided a good technical resistance preventing further upside pressure as price closed lower at 1.6136 after touched the trendline. On daily chart below we can see that price is now struggling around the trendline support. We know that this pair has been moving in no clear direction in last several days, trapped between 1.6270 – 1.6070 area. I prefer a bearish scenario but we need a clear break below 1.6040 area to continue further bearish momentum targeting 1.5800. On the upside, the trendline resistance and 1.6270 area should be a good resistance at this phase.

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