Yen in the Limelight

The USD/JPY has gained considerably well as influenced by the victory of the Democratic Party after the 54 years of the current government. This has led the Yen to appreciate in the opening of the Asian sessions. As the USDX weak recovery does not justify fresh positions and no incentives to buy the green buck even as a flight to quality investment. It would not take considerable amount as the pressure for the US Dollar to weaken further unless the forth coming reports would give some considerable support for the dollar.

There may be some probability that we may see a breakout on the USDX heading lower as the critical price level of 78.20 is again being tested as of this writing. However, if and when the reports prove to be positive support for the dollar , watch the 78.50 and 78.80 levels to move higher. So we anticipate that Gold and the Australian Dollar may eventually break to the downside if it does. And for the prices to continue the next leg up of the wave formation may take a little longer.

Currently, stay clear of the crosses like the GBP/JPY and the EUR/JPY as the more influential Yen may try to take the lead currency on value strength than the other majors. As majority of the institutional and major FX players are using the strength of the European currencies to drag the appreciation of the GBP/USD on the next rise. But be very careful if some unexpected numbers provide good news then watch the USDX to gain strength. When markets are thinly traded it does the total opposite from the previous trend.

However, volumes on the Foreign Exchange Market has also decreased in size meaning that most speculative investors are shying away from any further risk appetite on the currencies until they see some actual recovery from the recession numbers.

This is also reflected on the stocks as open interest decreases and since most of the traders are shifting positions as the end of the month approached on top of the remaining trades in between the end and opening week of September.

Specific numbers and prices to call are quite difficult at current levels. Although, we still stand firm in our commitment that the next leg upwards for the European currencies may now take longer as a lot of traders are expecting a corrective movement which may happen due to the readjustment of positions for the new month and the reports coming out this coming days. This will happen at the time when nobody would least expect. Stay clear and watch how the market behaves.

Just like the fox who waits for his prey rabbit to make its move!

No wonder they the fox ' cunning '.

Good Luck and Happy Trading!

GBP/USD consolidates in PREP!

As the opening of the price in the GBP/USD in the Asian session at the price level of 1.6509 it has drifted lower to 1.6403 as of this writing. The consolidation or sideways formation heading south is very convincing for the sellers in the market as it is co-related tot he US dollar recent upturn due to the reports which were positive, not to mention Fed Chairman Ben Bernanke's remarks that the US is at the verge of an economic recovery plus the positive figures reported by the National Association of Realtors on housing resales which was also the highest levels in 10 years.

These reports were very timely at the time the US Dollar index was dropping at its lowest levels of 77.80 shy of the 77.33 registered on the 1st week of August 2009. However, in spite of these good figures and that this 3rd quarter should have been the catalyst for the US dollar to make its cyclical upturn from the first 2 quarters of the down movement it is not enough as our research team is not convinced of the very timely report and statement made by the chairman. As a matter of policy, the US government has to perk up the dollar at those times when it is needed the most. However, these conditions of over spending, a widening budget deficit, a huge national debt of 8% to 13% of the Gross Domestic product can only mean that the US economy is still trying to recover. But for just one quarter would not cut it!

As the remarks alone by Warren Buffet made just recently in the New York Times last week was clear that the US Dollar will eventually weaken as the government's over spending is out of control as he mentioned in his comments.

On a technical note, the right shoulder formation on the GBP/USD is taking shape that is why the corrective move as we mentioned may take some time to finish on a day to day basis. However, in the longer perspective the Elliot wave formation on the GBP/USD and the EUR/USD is quite extra-ordinary as it is still intact in spite of the price going lower. But take a clear note that the percentage levels of strength and weakness has already adjusted. As the prices on the Pound or Cable as interbank traders call it is resting just on top of the 38.2% Fibonacci retracement levels.

We would not be surprise if and when the prices may just suddenly perk up during times when it would not be expected. As Gold has also made its correction levels from the high of USD 956.62 to the current low of USD 946.62 as of this writing. The market is not only choppy but the wider swings are quite active as volatility index has increased. When this happens it is obvious that we will see some wilder swings which most short term traders do not want to be in.

For the time being, take a careful watch as prices may show some rapid actions as we are just getting started for the week close to the end of the month. Remember what we have mentioned before that actions take rapid pace before and just right after the end of each month as traders start shifting their positions and adjust their turnover dealings and portfolio investments.

Good Luck and Happy Trading!

US Dollar Sustaining its levels

with the help of . . . " GOLD "

The US Dollar Index is sustaining its price levels above the important key price of 78.50 mid-range support as it opened with a gap at 79.00 from the closing price of 78.88 last 14th of August 2009. Although, it may not be too significant opening the momentum for the dollar gained as Gold prices went to a Low of USD 929.10/ troy oz. as of this week ending the 21th of August 2009.

The Gold prices are experiencing some hedge liquidation as inventors are considering taking some of the average profits what's left of the previous quarter's and weeks trading that saw the prices went to as high as 971.55 registered two weeks ago dated the 6 th of August 2009. Which most analyst have predicted to breach the USS 1,000.00 levels as the US dollar continued to deteriorate to the low price of 77.30 US Dollar index.

In spite of the lower than expected consumer confidence report the US Dollar has been resilient of the negative report as it is within the 3rd quarter of the year corrective movement from its low price of 77.30 and the corresponding price for the Japanese Yen at the 91.50 low price levels.

As the stock market moved lower in most of the major stock exchanges due to the trend following sentiments that the recovery may not sustain due to consumers not totally convinced and are unwilling to spend at this time. This sentiment had spilled over to corporate earnings which may dampen growth in moving forward.

However, in Asia the Japanese Yen has been experiencing some " Carry Trades " which has subsequently increased the past few weeks as most investors have started increasing their carry trades as they have been expecting some steadier interest increase from hereunto the end of the year. Although, there really is no real support at this time. It is more a speculative move than anything else.

As the GBP/USD and the EUR/USD have shown their continued correction as both majors are trying to find a significant bottom to consolidate making prices stable for the next turn. The recent report on the GDP on Germany and France have left the Euro more favorable for the fundamental reports. However, volumes and open interest have not shown any improvement at this time. The overall bias on the bull side of the European currencies have significantly died down for the time being as traders are reluctant to take new long positions with a diminishing volume and open interest. And this also goes the same with the Aussie and the Kiwi as the pairs has had their days numbered from liquidation and profit taking from their recent rally.

For now consider watching the market's behavior for any unexpected movements that may trigger sudden changes in the price direction. As we have mentioned before that this Elliot Wave formation may take a longer period as most short term traders would not want to see.

Try looking at the GOLD prices and figure out whether the continuation of the down turn still has room to move even lower than the 925.50 levels. It all depends on the strength of the US Dollar if increase in VOI will prove to be a pressure for the precious metal.

Good Luck and Happy Trading!

GBP/USD loses momentum . . .

As the dark clouds have been fornming above the high levels for the GBP/USD as we have mentioned before the corrective move is in the making. As most investors switched positions while maintaining long EUR/USD and GBP/USD prior to the recent NFP and the unemployment figures reports; this led them to arbitrary hedge those positions in the USD/JPY which led the surge for the USD/JPY at the 97.50 levels.

This movement for some traders say that it was overdone. But the movement created an increase in volumes that also led the increase in volatility for the prices. As many analyst sees that there is still a matter of recovery that the real estate market needs to prove before actually declaring that the recession is finally over. That remains to be seen in the near future. Plus the widening trade deficit also puts a plug in the dollars upward momentum which may result for traders to simply unload any profitable trades.

For now, the selling divergence has occured at the high levels of 1.7014 for he GBP/USD and the respective high set by the EUR/USD at the price level of 1.4446. So the corrective move will be sustained for the time being. How far down is the 65K dollar question. The current prices are within the 50% and above Fibonacci retracement levels and going back to the 38.2% will likely be made. However, this may be a brief pause until fresh news will prevail over the market again.

The bullish configuration of the weekly and monthly charts on a technical basis is very much intact. This is supported with the Trend -following Theory that the next leg up would be higher than any previous highs that the European majors had established at the end of the 7th trading day of August 2009. A technical support also is the Elliot's Wave formation that still has to run its full course before the GBP and the Euro would really die down. Expect the trend to continue!

Just remember, there is no straight ups or downs in this volatile market. So consider the risks involved when trading the Forex market.

Good Luck and Happy Trading!

Spill-Over Strength ...

The strength of the GBP/USD & the EUR/USD continued through the Asian and European sessions as the price on both currency opened with a gap from the previous closing price last week. This only means that the gap would only be filled-in after the opening price in Asia and the continued assault on the North has been fueled by the market sentiments. Although, it is within the 50% and above Fibonacci levels of retracement; the over-powering and persistent bias of the major market participants weighs heavier than the technical and fundamental economic reports which has been discounted by the market. The initial target for the Pound which is the in the target range of 1.7510 +/- strikes within the 61.8%; if and when the market reinforces itself this will be achieved. For now expect a pause where the flight of capital cash flow may switch over to another currency which we will also metion below. However, do not expect a straight shoot up because the recent comments made by Allan Greenspan and Ben Bernanke was made to tame the US Dollar into a stronger stance by saying that the economy has found new grounds from the recent financial crisis and its on it's way to recovery at the end of the year.

The major trend is obviously bullish and it is quite difficult to anticipate a reversal at this point of time. Never jump the gun unless there are real fresh factors that may say otherwise. Any price lower would put the percentage rate lower on a technical basis to realign the prices and from its over-bought areas. It has proven that the opening gap was a run away prompting fresh new buyers to try to catch a little more than their previous positions.

Watch for the open interest levels where it is becoming very crucial for the major players to simply cash-in their older trades which have made quite a good run. Once this happens a major corrective movement could be a welcoming surprise for the newer open trades which was done today. As mentioned before the 1st week after the end of last month may prove to be more volatile than ever.

• *For the time being, watch the USD/JPY as the alternative pair to trade! That is with an exclamation point. As the monthly chart for this pair indicates an upturn for the US Dollar as a arbritrary hedge against the strengthening of the Euro and the Pound. Although, the PMI ( manufacturing report ) were good for the dollar the movements were not justified, but favored the European pair instead. The next flow of capital investment would the USD/JPY as most investors have cashed-in their gains from the recent rally.

• *The monthly technical would indicate that the next upturn would be made within a couple of weeks from this writing. Any price closest to the 94.66 level is a bargain to buy the US dollar against the Japanses Yen. A leveling off would be at and above the 95.20 level as mid-range support. Any sustainable price above these levels maybe the key price positions that you may want to time in the trade whenever possible.

This is not a recommendation to trade but only a matter of information. There are inherent risk in trading the FX market and investors may consider their financial conditions before trading this volatile market. There will always be a possibililty of loosing your inital investment in part or in whole depending on the market conditions.

• *A clearer explanation and additional charts are posted on our website

:

• http://www.megatrade101.com/ > Market View > Analysis tab

• Good Luck and Happy Trading!