fbpx

Posts

Posted on

Double Whammy

The CAD has enjoyed considerable strength as the Canadian economy strengthens on the back of its robust trading partner, the United States. As a result, we have seen a huge move lower in the $GBPCAD as sellers enjoy the double whammy of a strong CAD and a weak GBP.

GBPCAD monthly chart

As $GBPCAD moves lower, we see that there is a significant support zone ahead that dates back to 2009. Price found support at the top of the zone at 1.7580 back in September so this is the level to watch. Until we get to the previous low at 1.7580, the $GBPCAD can continue to benefit from the double whammy. However, watch price action in this support zone. Profit-taking is sure to take place given the move lower. However, it remains to be seen if a corrective rally on profit-taking turn into a reversal higher or if the $GBPCAD can break this long-term support zone and continue even lower.

Posted on

The Setup of the Year?

Though I don’t trade commodities, I have to agree with CEO Technician here. Oil does look very interesting here. Then I think about the implications of a bounce in oil on the forex market. Everyone is bearish oil. The decline broke key support levels with price going for this long-term, big-time support level around $75. While the USD had its own strong reasons to rally, the weakness in oil did serve as a nice tailwind.  Now as price heads into a huge support zone, can oil continue to weaken?

All eyes on crude.

Posted on

Euro Looks Higher

So far, the $EURGBP remains stuck in its huge wedge formation. Price has found resistance all trading session at the 0.7860 level. However, swing traders are looking to the 38.2% Fibonacci level at 0.7880 and 0.7920-70 for an indication of supply and demand. That’s the upside potential.

Since publishing the above at the start of October, the $EURGBP did go higher to 0.8050-70 only to fall back again and put in a higher low. In fact, there are several factors at play currently that may suggest that price could actually rally a little higher still:

  • Euro sentiment is a extremely bearish levels. The premise goes that when sentiment for asset classes are at extreme levels it is usually a signal in the opposite direction. Thanks to J.C. for sharing his EUR sentiment chart at Stocktoberfest.
  • GBP weakness fundamentally continues to show through in the economic data. Data releases are still a mixed bag but a year ago we had much stronger data released month-over-month than we having been getting now in recent months.
  • Today’s break of resistance is supported by a break higher in the RSI which has supported a move higher since price put in the higher low last week.
  • Bonus: For all you trendline followers, today’s price action has moved the $EURGBP comfortably above the trendline resistance coinciding nicely with the 7860 resistance level was capping price all week .

EURGBP four hour chart

On the bigger timeframes, the $EURGBP still favors bears long-term. However, it is hard to ignore the price developments of the past 24 hours that point to higher price levels. Expect swing sellers to set up at the higher levels. But if price rallies through the 0.8050 resistance levels, expect the EUR to look for higher still.

Posted on

Another Bailout

Kuroda said the BoJ’s easing was unrelated to portfolio allocations by the Government Pension Investment Fund (GPIF), but the effect of the day’s two major decisions means that the central bank steps up its buying of Japanese government bonds, offsetting the giant pension fund’s increased sales of them.

Source: International Financing Review

 

Disguised as monetary policy decision to increase quantitative and qualitative easing, the BoJ basically bailed out the pension this morning. With Japan’s population aging, pension payments are coming due. Japanese equities have basically gone nowhere in the last 15 years. So pension has probably been loosing money once you consider fees paid on those assets. The Federal Reserve has basically proven to the world that QE works. We can debate the inequality of its distribution, but needless to say, the US economy is buzzing at 3.5% GDP. That’s right where we need and like to be. So the financial engineering looks to be sound and Japan has no problem using the instrument to increase wealth for its citizens too. QE today promises that the GPIF can meet its obligatory payments to policy holders AND increases the value of the GPIF’s asset holdings. Very win-win. The market likes it.

Japanese equites long term chart GBPJPY DAILY CHART

Read also:

 

Posted on

That Crazy-Oct-2014 Candle

Stocktoberfest fever is hitting the streams and it has every reason to. Howard Lindzon and the team have built an incredible buzz around the conference over the years. The buzz is beating louder as we all get ready to head down to Coronado Island to open the last week of October trading. While I watch the equity markets, I (almost) never write about them. But this candle on the $SPX is as crazy as I’ve seen on this large a timeframe.

SPX monthly chart

After a such a sharp dip last week, price action in US equities did look good this week. The $SPX staged a very impressive rally that crushed resistance and Fibonacci levels. Now all eyes remain on the looming 50-day moving average. Next week, bulls and bears will duke it out right into the end of the month. Sentiment is riding hard on each.

S&P 500 index monthly chart
Who wins?
Posted on

Divergence Sets The Opportunity

The $GBPUSD has finally breached the 1.6000 level even closing last week below the big psychological level. It is a level that marked the 50% Fibonacci level of the 2013 rally in cable. Since Friday’s break, however, cable has managed to stage a small, corrective rally back above 1.6000 as high as 1.6130. And despite the pullback from those 1.6130 highs, there is still potential for $GBPUSD to see higher levels on this bounce.

GBPUSD DAILY CHART

This RSI divergence here on these new lows suggest that this bounce should continue higher into the Fibonacci levels. The 1.6250 level is historically a huge resistance level. Price could also get a boost higher with the release of the FOMC meeting minutes today and the Bank of England monetary policy decision tomorrow. If so, any rally higher becomes as an opportunity to set up for further weakness in cable. The RSI and data releases may give swing traders opportunity to set up at higher, more attractive levels before another push below 1.6000. Bears should be patient and bulls should not get too giddy. Trade what you see.

 

Posted on

Euro Finds Its Feet

The EUR has taken new ECB policy very hard. In 2014, the currency has lost over 600 pips against the pound sterling and 1,500 pips versus the US dollar. Those are substantial moves. You have to ask yourself if the short euro trade is not already crowded. Couldn’t it stand to reason that the currency rally into the end of the year? If not, for a couple of weeks? For now 1.2500 $EURUSD has managed to stymie the weakness there. $EURGBP is also bouncing off its multi-year support at 0.7750. Now that the ECB has pulled the trigger on negative interest rates and bond buying, the markets are breathing a sigh of relief and covering positions. It’s a new quarter after all. This 1st full week of trading could see the euro stage a corrective, relief rally.

EURGBP 4 hour chart

So far, the $EURGBP remains stuck in its huge wedge formation. Price has found resistance all trading session at the 0.7960 level. However, swing traders are looking to the 38.2% Fibonacci level at 0.7880 and 0.7920-70 for an indication of supply and demand. That’s the upside potential.

EURGBP MONTHLY CHART

However, the downside has serious potential. A break below 0.7750 has huge implications with support not likely until 0.7500/7400.  For as long as the ECB is accommodative in the face of tightening out of the BoE, the long-term potential is certainly in the bears favor.

 

Posted on

Majors Meltdown

Ivaylo Ivanov of SocialLeverage50 tweeted this sweet currency chart this morning before the US open. With 1 more day until it ends, it pretty much sums up the entire 3rd quarter of 2014.

stocktwits chart posted by ivanhoff
Everything at their chart extreme except for pound

Which surprised you the most? Sterling has been pretty resilient to the USD strength as it found favor in the face of a majors meltdown. The currencies of the G10 all melted this quarter and all to pretty significant support levels. Except for the pound sterling. Even the mega rally in the USD is at a significant resistance level. Is GBP a laggard? Or the exception? A signal of future strength in the currency? Or future weakness?

Source: Image credit

Posted on

The Aftermath of NO Vote

So the United Kingdom has avoided divorce and remains united after all as the Scots voted against independence last Thursday. The market has responded with massive sterling strength across the board. In fact, we have breakouts in the $GBPJPY, the $EURGBP, and the $GBPNZD as the weakness in the cross currency serves to exacerbate these rallies.

The $GBPUSD, however, may not rally like its cross pairs. This relief rally in cable is still a corrective rally and will likely meet resistance at the 1.6750 resistance level. Furthermore, there is confluence at this major level as the 61.8% Fibonacci level of the entire decline also falls at this level.

GBPUSD DAILY CHART

Before the 1.6750, I’d expect offers to come in at 1.6500 and 1.6620, the 50% Fibonacci level. But it is the 1.6750 level where bulls will ultimately have to prove themselves.

Trade what you see.

Proudly powered by WordPress