US Government Vs. Economy

The New administration of President Obama has painstakingly been trying to address the priorities of the overall economy. From the various stimulus packages that they have implemented without going into the detail; have somehow worked. The overall percentage still could not be determined as issues always manage to come up.

With the "Real Estate" market as one of the economic barometers that measures how our overall market conditions and economic measures has been dragged down with the newest report of a $5.4B housing project that was endorsed to the bank creditors that financed the project in Manhattan's town and Cooper Village. Others that been before this event have contributed to the negative outlook for the overall market sentiments that still overshadows the financial markets.

In essence, these negative reports in general would be coming from the economic indicators and reports while the US administration relentless efforts to build back the economic reforms to sustain the recovery of the economy by talking and taking necessary steps and whatever it takes to help lift the status of the United States as the global economic and technology leader. That's why the Obama administration has been pushing real well on renewed energy and new technology that would bring it back to where they belong.

However, we would like to give our own version of what is currently happening in the markets price behavior in the Foreign currency market. Although, we may not be able to cover all grounds but we would like to site a short summary of our sentiments and analysis. Some may agree and disagree that trading the FX market is more on technical analysis rather base it on fundamental reports. But we would like to have a balance on all possible angles. Somehow, the most basic explanation may already be the best in our constructive conclusions.

Recognizing the in spite of these overall negative economic numbers and reports from the August of 2009 to the current news has been almost , always been a negative ill-effect for the US Dollar. However, there were real and valid signals both in price numbers and how the market has been reacting since then. Key numbers for Gold was registered at $1,226.38 high, with a corresponding low USDX at 74.21bp low. As the price range is recognized the USDX recent top at 78.81 as of last week already showed it has achieved it inital target objective. It's ladder-like formation moving forward to the North of our charts will be done exactly the way it had moved lower. As most strategist have said " in an orderly fashion ".

The contrary price movements of the USD/JPY and the USD/CHF will continue for sometime making most traders / FX investors more confused as to where the directional movement of each major pair would go to. However, these are unusual times where we would see the strength of the US Dollar will be in line more often with the strength of the Japanese Yen. As major market participants are cross trading their positions in larger amounts for the start of the year. As the cautionary measures are being discussed by the so called " Volcker's Policy " in restraining major banks to take more leverage risks in the financial markets as a whole. While indirectly having a similar effect with the CFTC's proposal of restricting leverage trading for the Forex market.

So these market behaviors are actually occurring as of this writing, which led us to share our outlook of the market conditions. Try to see and observe the price behavior of the the currency pairs made mention and judge for yourself.

Good Luck and Happy trading.

Market Outlook for the Week

With the market holiday, recognizing Dr. Martin Luther King Jr. day has always been a welcome treat for the US market traders. However, the mix economic reports driving the US Dollar lower is still consistent to our outlook from the closing of the year 2009. Where we have mentioned that the gradual upward rise of the US dollar as measured by the trade weighted average of the USDX trading range from i'st low price level of 76.60 last week from a low of 74.31 registered in December is to move higher. This has made the initial leg of the US dollar to be intact in spite of it being within a major down trend from last year's overwhelming bearishness. The true range is 78.80 probable high and the 74.31 sets its initial support price.

With that said, the USD/CHF low of .9969 also registered in December is now considered to be its major support and gradually worked its way back up to the current working price of 1.0254 from an initial high of 1.0507 which happens to be the mid-range price from its HI/LO prices.
The first key price signal for another upward assault is breaking the 1.0380. The significance of which is only the steadier USD/CHF vs. the USD/JPY is more defined amongst the major pairs contrary to the EUR/USD movement against the GBP/USD.

The cross rate of the EUR/GBP has had a squeeze as reflected on this weekly chart with a wide trading range both up and down for the past few weeks prompting it to move lower for this week. There is no significant price reversal only a corrective movement on a day to day basis.
So the directional expectation for the EUR/USD and the EUR/GBP is to head lower than it low price of 0.8850 last registered in December. This may be considered a probable trade to look into. However, risk in trading the cross without the majors to hedge it with may seem to be risky but otherwise watch for the breaks on the lower side of the EUR/GBP cross.

The continuation for the Gold prices to move higher is still there as the initial target of Gold is at the $1158.00 - 1160.50 within the next weeks or earlier. If no dramatic news or economic reports that may influence it otherwise then expect Gold to move back up in spite of other considerations.

Meanwhile the Aussie and New Zealand Dollars are on its way higher as the AUD/USD is currently working at .9262 and .7380 respectively. A probable selling pressure may occur only due to profit-taking and position liquidation from previous trades made last week. The high breakouts may take place within this week as long as the volumes do increase in the financial futures which is where we measure the VOI taking place on aweek to week basis.

Good Luck and Happy trading!

USD's Directional Trade

Tight Squeeze!

Witht the conflicting news reports from the manufacturing figures, non-farm payrolls and now the disappointing umeployment figures have squeezed the US Dollars movement to move lower. This normally happens in between trades as traders, fund managers, sophisticated investors and the retail speculative trades made makes it more difficult to trade the foreign exchange specially at the beginning of the year. With barely a couple of weeks into the trading, the resiliency of the market to react to these fundamental reports can be seen on the charts themselves.

As most trades are made indirectly away from a dollar based trading to a simple foreign currency base trading. More often than not, the cross rates serves relatively a contrary hedge not only for the US dollar but amongst the other major currencies involved. The applications can only be made more ideal since trading directly with the major pairs at this time may well be susceptible to wild price swings in the market.

A typical example of a tight squeeze could be seen in the chart of the EUR/GBP cross rate that clearly indicates that the past couple of weeks were simply bargain hunting and position adjustments before and after the holiday trading sessions. However, the directional trade of the Euro and the British Pound is contrary to the US Dollar's downward movement as of this writing.EUR/USD working at the 1.4520 and the GBP/USD at 1.6137 reacting to the negative US jobs report.

Meanwhile, the obvious gold prices is still working at $1,156.00 higher which has its own relative strength regardless of the US Dollar movement at this time. More likely scenario t move back an attempt its previous high of last year is seen to be more of a strong sentiment. How fast it can get there is the next big question mark.

Both major such as the USD/CHF and the USD/JPY may find some difficulty as both try to react to a spread hedge and straddle scenario where the USD/JPY moves higher/ slower and the strength of the Swiss Francs or rather the USD/CHF moving the opposiite direction. USD/CHF at 1.0169 and the USD/JPY is at 92.32 from a 93.77 high. A technically influenced USD/CHF on a day to day basis shows an obvious selling divergence that weighs heavily on the US dollar rather than the Japanese Yen as trades are made during the Asian markets.

Try to avoid to get caught in between these trades as a tight squeeze would continue to occur specially when the major players decide to build and continue to adjust their positions from the previous moths and the start of this year.

Good Luck and Happy Trading !