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2010 January

January 20th, 2010 @ 3:52 pm by The Geek

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It is WEDNESDAY !!!

This means it is mid week. This also means the weekend is coming soon. Yay!

The EUR/USD held it’s own mid week party. After slicing through the strong support of 1.4260, it arrives at 1.4117, planning it’s next move.

The S&P 500 continues to range as it drops right down to the bottom of it’s current range. If it goes below and beyond, we may be in for some serious breakdown of sentiments.

Oil continues it’s slide and is currently at $75+.

Gold likewise drops and is currently at $1113+.

***

So who let the bears out WHOO WHOO WHOO?

Risk aversion.

For starters, more and more reports are streaming out with regards of China’s moves to curb speculative growth and inflation. Investors probably do not see this as a promising sign to ever lasting growth!

On the US side, IBM’s and Morgan Stanley’s reports leaves more to be desired and seem to be taking a toil on sentiments.

The EURO zone continues to be weighted down by it’s member country Greece’s deficit problems and investors may wish for a speedy resolution instead.

Any bullish comeback may have the pair attempt to overcome 1.4150.

Further bearish momentum may bring us to 1.4080.

Do be cautious and not attempt to fight against a trend. One of the top causes of a margin call is the attempt to find tops and pick bottoms. Practice proper money management.

We have a number of releases due tomorrow including the US Unemployment claims. Therefore be careful of spikes.

***

I clocked 12 hours of work today and i have an early day tomorrow. No chance for me to practice Left 4 Dead 2! I love versus and being boomer 🙂 I feel great when i see the zombies chase after the player i vomited on. Woah! Ok. Pardon me. Trade safely!!!!

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January 20th, 2010 @ 6:56 am by Matt "NewstraderFX" Carniol

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Due in part to the expected future path of Fed monetary policy, the old correlations between the S&P and currency valuations do not appear to be working as before.

The old correlations we had become accustomed to over the last few years were based on investor’s appetite for risk and on the currency side, this was expressed in carry trades. When the market was moving into risky investments (stocks), the dollar generally weakened against the higher-yielding acquisition currencies (euro, pound, A$ and K$) as it gained on the yen while at the same time, the higher-yielding acquisition currencies also gained on the yen. The reason for this was because the yen, with its LIBOR rates consistently far below those of other currencies, was the main funding currency- meaning that traders borrowed in yen in order to buy higher-yielding currencies elsewhere.

The biggest profit potential in a carry trade actually lies with the appreciation of the acquisition currency against the funding currency upon repatriation, which may explain why the dollar depreciated against the higher-yielders when the market was buying risk last year.

For example, the price of EUR/JPY is equal to the price of EUR/USD multiplied by the price of USD/JPY (EUR/JPY = EUR/USD x USD/JPY). In this case, investors in a EUR/JPY carry trade would be highly motivated to also buy the euro against the dollar in order to greatly accelerate the appreciation of EUR/JPY. The same situation existed with GBP/JPY, AUD/JPY etc.

Naturally, this all reversed rapidly after the collapse of Lehman Bros. in September 2008. But once the S&P began its steep ascent last March, we didn’t see the correlation hold.

The reason for this can be explained when you look at dollar and yen LIBOR rates over the period. One month dollar LIBOR actually fell below that of 1 month yen LIBOR-a situation that remained in place until about mid-November. In other words, for most of the S&P’s appreciation, it was the dollar that became the main funding currency in carry trades, and it was the dollar that depreciated against all currencies.

Currently, 1 month dollar LIBOR is about 25 basis points (bps) higher than yen LIBOR. So what we likely are to see now is the dollar trend higher against the yen as stocks continue to appreciate (which is what I’m anticipating this quarter).

What we’re unlikely to see is a big move into the higher-yielders vs. the yen, mainly because volatility on those pairs figures to remain high (meaning that price will not move in a smooth upward trend). The reason for this is because of the currently expected path of the Fed’s monetary policy in the second half of the year (somewhat tighter). In other words, it will be much harder to appreciate an acquisition currency like the euro against the yen because there likely will be downward pressure on EUR/USD as long as expectations for a rate increase (or a liquidity tightening by raising the interest rate paid on reserves) by the Fed remains in play.

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January 20th, 2010 @ 2:45 am by Setyo Wibowo

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The EURUSD had a significant bearish momentum yesterday, break below the triangle formation, as you can see on my daily chart below, indicating potential bearish scenario. Earlier today in Asian session we have another important move as price already break below 1.4250 key support level. This fact should be seen as bearish scenario confirmation targeting 1.4000 this week. However, watch out for a “hidden” support level around 1.4180 area. Another movement above 1.4250 area should lead us into no trading zone in nearest term but as long as price stay below 1.4450 I prefer a bearish scenario at this phase with short on rallies strategy.

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January 20th, 2010 @ 2:38 am by Setyo Wibowo

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EURJPY Forecast
The EURJPY had a limited bearish momentum yesterday. Price attempted to push lower, bottomed at 129.63 but closed higher at 130.19. On h4 chart below we have a minor bearish channel indicating the pressure is still on the downside in nearest term but we need a consistent move below 130.00 area to continue the bearish scenario targeting 129.00 area. Immediate resistance at 130.50/70 area. Break above that area should lead us to no trading zone but I still prefer a bearish scenario at this phase.

GBPJPY Forecast
The GBPJPY had a bullish momentum yesterday, but as you can see on my daily chart below prices still trapped in triangle area. I think we are still in no trading zone and need a break from the triangle to see clearer direction. Breakout from the triangle should trigger further bullish scenario towards 153.22 while a breakdown below the triangle should trigger further bearish pressure towards 145.50 area.

AUDUSD Forecast
The AUDUSD didn’t make a significant move yesterday. It seems like price is consolidating but I prefer a bearish scenario at this phase as we seem to have a top around 0.9325 area. Bullish channel violation confirmed the bullish failure which potentially produce bearish scenario. Expected range at 0.9278 – 0.9170. Break below 0.9170 should trigger further bearish momentum targeting 0.9090 area.

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January 20th, 2010 @ 2:30 am by Setyo Wibowo

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GBPUSD Forecast:
The GBPUSD failed to continue its bullish momentum yesterday. Price attempted to push higher, topped at 1.6456 but whipsawed to the downside and closed lower at 1.6358. This fact potentially produce a false breakout scenario which could trigger significant bearish momentum especially if price move back below the trendline, at least testing 1.6250 area before aim for 1.6040. Immediate resistance at 1.6400 area. Break above that area should keep the bullish scenario towards 1.6700 intact.

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January 20th, 2010 @ 2:25 am by Setyo Wibowo

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USDJPY Forecast:
The USDJPY attempted to push lower yesterday, bottomed at 90.32 but closed significantly higher at 91.12. It looks like we have a good support area around 90.15/30 area at this phase. The bias is bullish in nearest term but the bearish scenario can only be canceled by a movement above 91.85 area targeting 93.75 area. Expected range at 91.85 – 90.15/30 area at this phase so I think the best strategy is to long around 90.15/30 area or to short around 91.85 with tight stop loss.

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January 20th, 2010 @ 2:19 am by Setyo Wibowo

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USDCHF Forecast
The USDCHF had a significant bullish momentum yesterday. On h4 chart below we can see that the bearish channel has been violated to the upside indicating bearish failure and potential bullish outlook targeting 1.0430 even 1.0507 area this week. Immediate support at 1.0280. Break below that area should lead us into no trading zone as direction would become unclear for me.

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January 19th, 2010 @ 3:54 pm by The Geek

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Good day.

I know you hate it. But are you ready?

I LOVE IT WHEN MY CHART WORKS !

The EUR/USD received a major blow today when the German ZEW Economic Sentiment came out worst than expected.

All of this has all happened before, and it will all happen again. ( My favorite phrase from Battlestar Galactica )

I nagged, warned, spoke, grumbled and just about anything about spikes from unexpected results and here comes the madness. The pair dropped to touch 1.4260 right on the dot, giving me the opportunity to shamelessly boast!

The S&P 500 fared better though, currently green for the day. Looking at the chart, what do we see? The price goes up and down, up and down. YES. Hesitation.

After the bullish rally that brought us to the current level, the market seems to feel that the level now is just about that. Unsure about further bullish ascend and careful about a bearish drop. If the correlation of the equities and the US Dollar stays true, watch out for a similar hesitation for the currency pair.

Oil seems to be affected by the stronger US Dollar and is currently down to $76+.

Gold surprisingly holds steady at around $1132+. This may indicate demand and perhaps suggests that some risk aversion is taking place in the market. Gold is known to be a timeless currency, even when times are bad!

***

With the bankruptcy of JAL and the potential potholes it brings, the market may be in a heightened state. The better than expected US TIC Long-Term Purchases probably added to the strength of the US Dollar too. Tomorrow brings us more important releases such as the US Building Permits and hence do fasten your seat belts.

Bullish reinforcement may attempt to push the pair up to 1.4325/62.

A bearish assault may have us testing 1.4260/00.

***

A few koalas wrote in to give me suggestions for the blog and i thank you for it. While i do not have the means to implement every suggestion, rest assure that my first priority here is always you the koalas. Otherwise why will i be concerned about your feedback? Nothing comes close to you 🙂

Trade safely please.

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