EURCAD wAVE 4!

Market Update 2nd April 2014

EUR USD, “Euro vs US Dollar”

Euro is still forming ascending wave with target at level of 1.3820. Later, in our opinion, instrument may fall down to return to level of 1.3765 and then start new ascending wave towards level of 1.3990.

GBP USD, “Great Britain Pound vs US Dollar”

Pound continues forming descending structure, which may be considered as the fifth wave wit target at level of 1.6430. We think, today price may form the first descending structure of this wave with local target at level of 1.6560.

USD CHF, “US Dollar vs Swiss Franc”

Franc is still forming descending structure. We think, today price may continue moving towards level of 0.8760 and then return to level of 0.8830.

USD JPY, “US Dollar vs Japanese Yen”

Yen continues forming ascending structure; which may be considered as the fifth wave of current correction with target at 103.90 or even 104.20. Later, in our opinion, instrument may consolidate for a while, form reversal pattern, and continue falling down to reach level of 100.00.

AUD USD, “Australian Dollar vs US Dollar”

Australian Dollar is still forming descending impulse. We think, today price may complete this descending structure at level of 0.9200 and then return to level of 0.9250. Later, in our opinion, instrument may continue forming the first descending wave with main at level of 0.8400.

USD RUB, “US Dollar vs Russian Ruble”

Ruble is consolidating near level of 35.34. We think, today price may return to level of 35.34 to test it from below and then continue falling down towards level of 33.81.

XAU USD, “Gold vs US Dollar”

Gold continues forming consolidation channel near its minimums; market formed upside down double top pattern. We think, today price may leave this consolidation channel upwards and start forming the fifth ascending wave with target at level of 1435.

Brent Crude looks vulnerable on the weekly charts...

Both the major crude oil contracts are trading higher today despite the lack of any significant data from Asia or Europe, and the stronger dollar. Today’s gains therefore appear to be almost entirely driven by supply factors after Libya’s el-Feel oilfield was shut yesterday, resulting in a drop of 150 thousand barrels of crude output. Most of the country’s oil ports, including El Sharara, which has an output capacity of about 340,000 bpd, have been shut due to the on-going protests from the rebels. As well as Libya, there are concerns about future demand for Russian oil as their involvement in Ukraine has led to retaliatory response from the EU which along with Ukraine have agreed to reduce their energy dependence from the former Soviet Union. Meanwhile the rallying copper prices in response to the diminishing Chinese demand concerns, is also helping boost the sentiment.

Last week, Brent managed to hold above a long-term bullish trend line which came in just below the $105.50 mark. As a result, financial speculators may have abandoned some of their bearish positions in the London-based contract. However the upside has so far been fairly limited, in part due to the sheer number of resistance levels seen ahead which may have discouraged some of the bullish speculators from entering the market for now. The $107.50 level, for example, has already been tested unsuccessfully twice in as many days. Even if $107.50 is broken, more resistance is seen around the 50 and 200 day moving averages of approx. $108.00 and $108.50, respectively. Some traders may therefore be waiting on the side-lines until either some or all of these resistance levels are broken before joining the bulls, or the join bears if the key $105.40 support is taken out.

Yesterday saw WTI crude oil manage to hold its own above the 50-day moving average support of $99.30 after initially running into resistance at $100.25 – a level which was formerly support. The US oil contract is again pushing towards that high today, with a potential test of the 200-day average at $100.40 also looking increasingly likely. However, even if it breaks above the 200-day average, the upside could potentially be capped by the $100.70-$101.00 resistance range, which was previously support.  Meanwhile if WTI starts to head lower once again and potentially close the session below the 50-day moving average ($99.25), then we could well see another leg lower in the price of US oil over the coming days.

Legal disclaimer and risk disclosure

The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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EURCAD Momentum trade

Aus/Nzd perfect Swing set up

A ‘text book’ perfect swing trade occurred on the audnzd daily chart at the close of last weeks trading. A old support level acting as new resistance, lining up nicely with the mean value created the perfect hot spot for shorting. The rejection candle setup seen prices weaken quite aggressively into a critical monthly support level.
This is a good area for sellers to consider liquidating their short positions as the market is now testing monthly lows. These prices have been respected as the market floor for the last decade. Right now we’re watching for strong bullish price action signals to manifest themselves here to confirm buying pressure and confirmation of a potential long setup.
Be cautious of bearish traps if the market does dive below the level, it could very well be classic price trap

Is China losing control?

The concerns surrounding China at present are double-pronged.

The issue of the build-up of mis-directed and excessive lending over recent years had never been far from the headlines. But there is also the real economy issue, namely to what degree the economy is slowing and how manageable this slowdown is for the authorities. The data releases overnight have brought more concerns on the second front, with industrial productions and retail sales both falling short of expectations. There was a notable impact on FX, with the yen proving to be the main beneficiary and allowing USDJPY to move lower for a third consecutive session.

The dollar weakness was also helped by stronger than expected labour market data in Australia, powering the Aussie back above the 0.90 level. For China, the question is whether the authorities are in control of the slowdown, or if it starts controlling them.

As the consequences of excess lending start to feed through, the risks of the latter scenario increase. The Chinese Premier was sounding more flexible on the 7.5% growth target overnight, stressing that it is ‘about’ 7.5%. Such comments have increased the perception that the authorities are more concerned and preparing the ground for growth to fall short of expectations.

The other standout in overnight trade had been the single currency. Yesterday’s move above the 1.39 level initially came after comments from German finance minister Schaeuble, but found further support in overnight developments. As we mentioned earlier this week, there are relatively solid signs that China is diversifying currency reserves away from dollars and the single currency is benefitting from this. The 1.40 level is now looking within sights.

USD/JPY Market technicals

USD/JPY Technical Analysis

USD/JPY started the week at 102.51, just above support at 102.50 . The pair touched a high of 102.70 and then lost strength, dropping to a low of 101.51. USD/JPY closed the week at 101.78.

Technical lines from top to bottom

We start with resistance at 108.38. This line has remained intact since September 2008. At that time, USD/JPY was in a downward spiral which saw it drop below the 0.90 level.

106.66 has held firm since November 2008.  This is followed by resistance at 105.70 which continues to provide strong resistance.

104.65 saw a lot of action in December and January when the yen was trading at higher levels.

The round number of 104 follows. This was a key line back in May 2008 and is providing strong resistance.

102.50 continues to see activity. It is not a strong line and could face pressure early in the week.

101.44 was the post-crisis high seen in April 2009, and is the first line of support.

100.85 saw activity in July as the dollar showed strength against the yen. It is protecting the key level of 100.

The round number of 100 is a key psychological level. It is providing USD/JPY with steady support.

98.80 has remained firm since early November, when the dollar began a rally which saw it climb above the 105 line.

The final support level for now is 97.75. This line marked the start of a dollar rally in October, which saw the pair break above the 105 line.

I am neutral on USD/JPY

Japanese economic numbers have been steady and inflation continues to rise, albeit slowly. A strong GDP number early in the week could give a boost to the yen. In the US, employment numbers remain a concern, but the markets are content with the general direction of the US economy.