EUR/USD Continues...

The European-shared currency, as highlighted yesterday, was finally the victim of a corrective appreciation disguised in bear's clothing. After a promising upside day on Wednesday, risk appetite was nowhere to be found in the last US session, leading to solid bids in the US Dollar, as US equities suffered a major turnaround into negative territory. Part of the reason some commentators are blaming the strong USD performance across the board is due to the Senate's decision to not approving the last attempt to agree on spending cuts, resulting in the automatic spending cuts, also known as 'sequestration' to kick in today March 1st, which may shave over $85 billion worth of spending cuts in the current fiscal year. Kathy Lien, co-founder at BK Asset Management, notes: "We've been down this road before with the debt ceiling and survived." But as Kathy adds, here comes the kicker: "The Obama Administration has another 30 days to come up with a deal to cancel and avoid the cuts. The more important deadline is March 27th, when the government runs out of money and will be forced to shutdown if no additional measures are taken." Investors are holding out hope for a last minute deal, Kathy says. While market participants are holding out hope in the United States, on the other side of the pond the ability to patiently await for political news out of Italy is also the main focus. For now, and despite the Euro depreciation on Thursday, peripheral bond and equity markets also showed a good effort of calmness, with mixed low volatile activity, but nothing even close to break loose... The key is now wait for a possible grand coalition government or schedule second elections. Negotiations in Italy to form a coalition government are expected to be held in the week ahead, and according to Bank of Tokyo-Mitsubishi London office, "will leave the euro vulnerable for longer to the downside" although the bank says that "fresh elections are unlikely to be called in the week ahead", suggesting that talks may drag for quite some time. Investors will need to be prepared to be extra-alerted to all the possible risk headlines. The bottom line, according to Kathy, is that "the outcome will most likely be a weak government that is unable to deliver meaningful reform or austerity." Technically, as noted in a previous article, there is an ongoing bearish pattern in the EUR/USD, best noticed from the H4 chart, in which price has developed a sequence of predictable behaviours in each correction before the subsequent sell-offs. The dynamics of this pattern seems to suggest that the selling pressure is set to continue. As Valeria Bednarik, chief analyst at FXstreet.com, notes: "The hourly chart shows 20 SMA gaining bearish slope above current price while indicators head south in negative territory, supporting further slides. In the 4 hours chart technical readings also support the downside, with recent lows around 1.3010 as key level to break, targeting then the 1.2880 price zone."

Market Wrap

Market wrap Global market sentiment: There were mixed performances across major asset classes last night. European equities and bonds did well as prospects for a functioning Italian coalition appeared to have improved and ECB’s Draghi earlier affirmed policy would remain stimulatory. The Eurostoxx 50 closed up 0.8%, the Shanghai Composite earlier closing up 2.3%. The S&P500, currently up 0.3%, was restrained by a mixed bag of economic data, Q4 GDP disappointingly revised from -0.1% to only +0.1% but Chicago PMI exceeding expectations. Interest rates: US 10yr treasury yields were directionless, fluctuating between 1.87% and 1.90%. Eurozone peripheral bond yields fell, Italy’s 10yr -8bp, Spain -14bp and Portugal -14bp. Australian 3yr bond yields ground slightly higher from 2.74% to 2.77%. Currencies: The US dollar index (DXY) is around 0.5% higher. EUR fell from 1.3157 to 1.3058, influenced by an advisory report saying the ECB will probably discuss interest rates at next week’s meeting. USD/JPY ranged around the day’s high between 92.00 and 92.60. AUD followed EUR’s lead, falling from 1.0290 to 1.0228. NZD similarly fell from 0.8323 to 0.8266. AUD/NZD bounced off 1.2325 to 1.2380. Economic wrap US Q4 GDP growth revised from –0.1% to 0.1% annualised, from a marginal contraction to a marginal rise. The most significant drivers of the revision were net exports, a turnaround of 0.5 ppts, partially offset by a further 0.3 ppts drag from inventories. US regional business surveys: two up, one down in Feb. The Chicago PMI rose from 55.6 to 56.8 in Feb, its highest in almost a year, with production and orders both slightly above 60 but jobs easing from 58.0 to 55.7. The neighbouring Milwaukee-NAPM rose from 51.3 to 56.5, its highest since June. However the Kansas City Fed factory index slumped from –2 to –10 in Feb, its fifth straight sub-zero reading and its weakest in four years. US initial jobless claims fell 22k to 344k in the week ended 23/2 but that result may have been distorted by the Presidents’ Day holiday. Canadian current account deficit narrowed slightly from C$18bn to C$17.3bn in Q4. Meanwhile industrial product prices were flat again in Jan indeed they have been flat or falling since May last year, apart from posting just one monthly gain of 0.5% in Sep. Eurozone core CPI falls from 1.5% yr to 1.3% yr in Jan, its lowest since mid 2011. Meanwhile the headline CPI was unrevised from the flash estimate of 2.0% yr in Jan. In Germany, inflation eased from 1.7% yr to 1.5% yr in the preliminary Feb report. German unemployment fell 3k in Feb for a steady 6.9% jobless rate, revised up from 6.8% to 6.9% in Jan. With the German rate no longer falling the Euroland jobless rate is sure to rise further towards 12% (Jan figures due March 1). UK consumer confidence steady at –26 in Feb according to GfK. Outlooks Event risk today: NZ has Q4 terms of trade, Westpac expecting a sub-consensus flat result reflecting lower commodity prices last year. Australian data is minor – PMI, house prices and a commodity index. Eurozone unemployment and US inflation (core PCE deflator is the Fed’s preferred measure) plus US consumer sentiment will be watched tonight. NZD/USD 1 day: Likely to be restrained between 0.8225 and 0.8325 today. NZD/USD 1-3 month: The positive trend since May has been broken and we now targets around 0.8100 during the month ahead. Our view of a fresh high later in 2013 remains intact though. NZ 2yr swap yield 1 day: Opening today up 1bp at 2.98%. NZ 2yr swap yield 1-3 month: Following this correction, which could yet extend to the 2.80%-2.90% area, a rise above 3.20% should ensue. AUD/USD 1 day: A corrective bounce towards 1.0290 is expected today. AUD/USD 1-3 month: Remains inside an 18-month consolidation triangle, which should see it reach 1.0150 before an eventual break above 1.0600.

USD/CHF...Fights Resistance

USD/CHF potential sell likely.. Notice the red line, this is the long term trend resistance, price bounced off this. Some resistance to get through as you can see, notice the uptrend channel, which could be tricky. Yellow Star on the chart at the top.. CCI divergence confirms a likely sell off here.. SEE my recommended books HERE

USD/CAD confirms....

USD/CAD Confirms a sell on 4 hour chart, at major resistance.. In this example, we can see the red line which is major resistance, Long term... The price is finding it difficult to go higher. A WHITE STAR, the most powerful reversal signal Diverence on the CCI Trigger NOW CONFIRMED ON THE EXPLOSION..

EUR/AUD

EUR/AUD confirms a BUY on the 4 hour chart Notice the Yellow Star and excellent level of support, also notice the red line, which is also support from the previous long term trend. I hsall be doing a video on support and resistance on You Tube "philtheforex" shortly. CCI confirms divergence, and the EXPOLOSION indicator also Triggers A BUY Discover more here :

EUR/AUD is coming back..

EUR/AUD is coming back into the trend, notice the blue line above the red.. A yellow star, diveregence with the Trend... You could convert your chart to a trend chart to confirm the entry price...

GBP/CHF goes Long

GBP/CHF confirms a break of the downtrend ....

This is Day chart, showing the White Star

Notice the divergence on the CCI 

Highly likely to see a sharp move higher in the coming days/weeks...