Dubai Debt Crisis Ripples Markets

The Dubai financial crisis news coming from the Middle East on a thanksgiving holiday weekend indeed was a treat to most of the investors celebrating their holiday schedule where a sensitive thin market place could easily been made a slaughter house from both sides of the trade.

And this has been the scenario in parallel with the closing of the month, opening of the new trading month of December on top of the position adjustments towards the end of the year; will make this market what it is - ' a dangerous volatile market swings '.

With that said, Gold have topped-out at the $1,195.18 and made a huge drop of almost $66.00 towards the last trading day of last week. Wherein the obvious long wick down on the gold chart have indicated market capitulation of long positions that covered the whole trading low of that week as traders and investors hurried to exit hoping to cash in whatever is left on their gains. But the daily chart shows more of a day to day down swing because of the technically motivated bar of a hammer / umbrella candlestick bar that indicates a down ward direction. The Gold market is isolated at this time due to the last Fridays movement making investors reluctant to take fresh positions. We have termed this as ' the mover & shaker '.

That news on the middle east was the trigger point to relieve the US dollar and provide some much needed lifeline to recover as market participants caught flat-footed made cash flow shift back to US dollar instruments. This rippled in the most major pairs as shown on the chart comparisons from the EUR/USD, GBP/USD, USD/CHF,USD/JPY and a couple more cross rates that made their dramatic move on both directions up and down.

Without going further to details as it is what it is; now to avoid being caught in such a volatile market is to either stay out or if the positions are already in the market, placing a cross hedge on whatever positions the traders / investors has it is advisable to arbitrary hedge regardless of the market condition. This way it will absorb any wild fluctuation regardless of direction and simply analyze the overall net effect on all trades.

Percentage trading has always been proven to be the best case scenario on such occasions. Considering point value, amount exposure, net coverage, net exposure and amount will relieve the trader of any such market pressure. If the net amount of all trades are positive a simple liquidation or settlement will make do. If not, the trader and strategist can calculate the tolerance levels and would have the time of waiting it out for the market to get its proper footing.

Be caustious as it can only get more volatile towards the end of this month.

Good Luck and Happy trading !

Gold a Hedge vs. USD / Inflation

As the Thanksgiving holiday approaches, the financial market will undoubtedly be susceptible to irregular market price swings. In the absence of major participants market movements will now be based on the upcoming reports on the Existing homes sales figures, Consumer confidence survey, 3rd qtr. GDP report and the minutes from the recent FOMC meeting on policies.

Although, other two major markets will be open, we would expect that the continuation of the trend on the US Dollar to move lower probably lower than most analyst expected. There are fresh signals from the Gold market topping the $1,177.60 price levels as fresh new capital still flows into the yellow metal as open interest have shown a steady course in line with the volumes.

Any minor corrections have been limited to profit-taking positions as the end of the month approaches. This bias sentiment will remain both on the Gold commodity as well as the US Dollar versus the other foreign currency majors.

As indicated with the price movements on the GBP/USD and the EUR/USD tracking back upwards. We may finally see a fresh new attempt for the EUR/USD to try to break the 1.5080 levels in the absence of other players in the market. European traders and investors are expected to take the lead and may probably focus on the USD/JPY and USD/CHF since they both have been lagging behind in the market.

Just bare in mind that there are indeed major corrections in a major trend. And that may also provide signals as to the directional movement of the lead currency or commodity. Be cautious of the false signals on different time frames based on the chart parameters as it will also indicate opposite sentiments. Stick with the trend and be flexible in hedging strategies as this will bring more positive percentage trading as you trade a volatile market.

Have a good Thanksgiving holiday !

Good Luck and Happy Trading !

USD Too Big to fail but not to fall

The continued bias of market sentiments for the US dollar has continued to fall despite of the efforts made in the APEC summit for emerging economies by the US government as represented by Treasury Secretary Timothy Geithner's remarks on the US policy of a stronger dollar.

The USDX has fallen to as low as 74.75 although, Fed Chairman Ben Bernanke's remarks that the Central Bank is monitoring the market's reaction towards the US Dollar movement. This led the GBP/USD and the EURO to continue its upward momentum at 1.6875 and 1.4968 respectively. The only concern is that the majors are showing some day to day selling divergences as the prices goes higher. The relative depreciating movements of the US Dollar is slowing down and cautiously waiting for some fresh incentives from the next reports.

Although, the most beneficial commodity was the GOLD prices leading to the USD1,143.29 high as volume and open interest increases as it goes higher. The well defined and reinforced trend of the US Dollar and Gold has been stable as long as price movements are firm and steady as they move on a day to day basis.

The GBP/CHF was a very good choice to trade from our previous market view report 25 and blog taking a long term position on the 1.6730/50 -1.6800 price range and the current working price as of this writing is 1.6980 with a high at 1.7011. Although, the trend potential has not been achieve yet but this may hold true for the rest of the week unless anything significant happens in the news.

Good Luck and Happy Trading !

Spill-Over Reaction

The US Jobless Report last Friday had a limited trading session which prompted speculation that its aftermath will spill-over on the Asian and European Session on the opening for this week. We have seen the USDX go to the 75.13 low levels with the GBP/USD touching its 1.6841 high and the EUR/USD at 1.5010 respectively.

It is a clear bias sentiment that any slight correction on the USDX or dollar vlue only gives an additional momentum to go lower although in a slow and orderly manner as most analyst say in the process.

With the Federal Bank' s so called Dovish outlook for the deteriorating dollar as an indication that low interest rates will remain for the longer period of time. However, the ill effects of the US dollar with other trading partners like China, who happens to have a huge chunk of Foreign US dollar Reserves are also looking at other investment opportunities outside of the US area.

Meanwhile, the USD/CHF holds its value at the 1.0031 and no such signs of any interventions from the SNB which have been quiet for sometime now. And the USD/JPY is at 89.90 as of this writing. No other news related to the current market is expected as the overwhelming negative sentiments of the US dollar prevails in the market until such time some stronger economic reports would say otherwise.

However, we find more favorable on the cross-rates with the GBP/CHF still intact on a long position closest to its price level of 1.6785-1.6800 but not lower on these support prices. Expect some corrective moves again on a daily basis as the GBP/USD holds firm on its prices and increase volatility as we move forward for the second week of November.

Good Luck and Happy Trading !

Likely Scenario

With the Reserve Bank of Australia (RBA) raising the rates 0.25 basis points as expected to raise it higher to a 4.0% sooner than most may expect. but that is not the likely scenario. As most central banks are really eyeing their focus on the diminishing US Dollar after this corrective movement which gave some temporary relief with good numbers from the GDP yet a disappointing figure with Consumer confidence.

With that said, a carry trade increase with the US Dollar & Aussie will likely prevail with the discrepancy on interest as most investors now obviously would like to do as well. Attracting more US Dollar to exchange with the Aussie may also spark some fresh demand for the Greenbuck prompting some US Dollar speculative move for cash capital investments.

As we have seen a rapid trading range for the USDX between the 75.08 low to a recent high of 76.90 basis point prompting the GBP/USD to move to a low of 1.6217 and 1.4643 for the EUR/USD respectively on the European and towards the US trading sessions of Nov. 03, 2009.

This volatility added to the wider trading range of the Majors more than that of the USD/JPY which held most of its price while the rest was apparently moving dramatically in the sessions.

The first attempt of the USDX towards its resistance of 76.90 draw a pull back which is very normal in such market conditions. A second assault may likely come towards the end of the week or the week after where most other traders would continue to shift and adjust trade positions before the end of November. Still, we tend to speculate more for a corrective movement of the US Dollar higher before the end of the year simply base on it s supposedly cyclical pattern of price adjustments.

Watch for this wild swings were it may be quite vulnerable for the retail investors as stop loss may easily be triggered during volatile periods.

Good Luck and Happy Trading!

Corrective Moves Expected

The USDX will naturally experience some corrective movements on a daily basis since the consolidation for the past few days shows how the USDX have moved due to the GDP economic numbers which were better than expected of 3.5. However, the anticipated upward movement was made ahead of the market report which led the US dollar to correct after the the release.

It was obvious that the dollar's upward direction has been much awaited as we have reported the past week. Although, the corrections on the GBP/USD and the EUR/USD have been slightly over due. As the corrective moves on most majors goes hand in hand with the cyclical pattern of price adjustments towards the closing and opening of each month as we have seen this month.

However, on the opening of the month of November, the dollar's decline on a daily basis will be made as the consolidation between the 76.80 - 74.90 ranges will be the trading range from now till the end of the this month. Although, we do expect that if any favorable numbers on the economy will show more proof of the recovery ; we would see the USDX move back higher. As the US Dollar has been the key element in market trend directions against the other majors, we would be closely monitoring the Dollar's movement more tha the other.

The USD/JPY may also provide some direction of the market. Although, its influence may be quite limited at this time since the most investors have shifted their cash capital investments into Gold commodity. The Euro may still continue to hold its ground versus the British Pound but the EUR/GBP cross rate may still head lower as the GBP/USD consolidates on a day to day basis.

Good Luck and Happy Trading !