Mid-week Analysis on EURGBP Cross Rate

With the USD weakness still continuing as of this writing at the levels of 79.15bp; the next target to watch for would be the 78.10/20bp which would find some prices to bounce back for a slight correction same way from the opening of the week. This has supported the Euro to continue higher reaching 1.3545 while the cross rate EURGBP establishing a 0.8571 high which simply reinforces the strong market sentiments for the major players in the market. With the institutions adjusting prices prior to the closing of the month and futures expiration is weighing heavily between spot and futures financial prices. Not to mention, Gold's making a stronger comeback moving higher above the USD1300.00/oz which has kept the USD more on the defensive heading lower.

Meanwhile, the EURGBP cross rate is well extending its trend higher and the next levels would be towards the 0.8635-80 range just about the the week of May 23, 2010 trading range. The 61.8% price range would be at the 0.8765-80 levels and we still have a few days of trading data coming out of the market place. Certainly, a lot of these broker analyst that have been more on a pending Euro correction and adjusting their recommending prices higher without admitting their continued biased outlook which may hold detrimental to a trader's market analysis. There after would not even want to discuss and offer some other market outlook.

As long as the USDX shows no signs of a recovery this will spill-over an October month of uncertainty. The market behavior remains the same with increasing risk aversion from other smaller traders and retail investors which we suggest to stay sidelined from these market volatility. Catching market movements without the appropriate trade plan and investment funds may well be dangerous specially if the tolerance levels of the inventors and traders at that are simply limited.

With that said, the EURUSD, EURGBP, AUDUSD are the pace setters and the GBPUSD, NZDUSD lagging behind the leaders. Some expected intra-day corrections towards the closing may show but not necessarily true if and when continues volumes from fresh position adjustments can be found in the futures market by the next few days of trading activities.

Pls. refer to our market view report at our website: http://www.megatrade101.com/

The SSI Ratio which measures the sentiments and open positions showed in this chart has shown how most of the traders using this tool may be influenced with the majority of the positions. However, may we also state that the actual measure is totally different from when the data of these figures were gathered. However, the overall bias for most of the major pairs including the cross rates would now show totally the opposite of what the market has done.

Not that the Bank of Japan intervened in the market but rather where most investors and relative traders would normally make a few unnecessary mistakes. but the irony of the matter is that these indicators as they claim is a contrary method of the market sentiments. So Whenever the opposite occurs it is contrary to the fact, but the orientation of applying this tool is that whenever the actual market movements coincides with the SSI ratio then they can not claim that it is a contrary analysis.

In essence, the orientation of how to trade the Forex market has to be explained and clearly be represented true to its form. Ever since, 1986 when the cross rates were included together with the major currency pairs; trading the Forex Interbank market has been a little more complicated. Now with all these technical trading platforms the more it got complicated.

In addition, the recent decline of the CFTC leverage in FX trading it even be much more difficult for many retail investors and traders to make money. It was difficult for them to make it when the leverage was bigger ; what more if its smaller.

In summary, Trading with technical tools, sentiment value and leverage trading has to coincide with a trading philosophy and better understanding of how the forex trading could benefit the overall market place by providing a more straight forward analysis of the market. Whenever its wrong then its wrong. But when its right then try to apply and learn from how it took to win in the market.

USDX vs.EURO & GBP.avi

Forex Equilibrium Price Levels

The closing sentiments and price levels of the Fx majors and Cross rates in general has been a stronger indicator that the continuation from the Asian opening sessions have indeed been negative for the USD. With the gains made from the recent Chinese reports of growth have made investors shift confidence on the European currency particularly the Euro strength and bullish traders gain momentum and stayed on as of this writing.

The USDX lower start have prompted the Euro to move higher back to its 1.2880 important levels that may soon make a follow-through trend higher. Although, some persistent analyst have maintained a short on rally stance. the current 81.80 bp price coming from an 82.47 high have been more influential. Whatever economic indicator and news coming out this week would be adding the fuel for a continuation lower for the USDX nearing an important support level of 79.90-80.10 Meanwhile the GBPUSD has been on a consolidation and lower trend bias every time it touches it 1.5550 average price and is currently at the 1.5383 levels.

The cross EURGBP has indeed confirmed our market view outlook since September 02 and still maintain our positions and overall sentiments at this time. Please take note that we only do make such position adjustments whenever there maybe a speculative movement before it may happen. As the case of the long positions taken last September 02 where significant up and down swings were seen from a 0.8380 high and a low at 0.8200 major support price and is currently at the 0.8360 trend line resistance. This would be penetrated within the week supported with volumes and momentum build-up from institutional players and hedge fund investors.

Please visit our website for a complete market analysis looking forward this week of September 17, 2010

Forex Wider Price Volatility

On a thinly traded forex market, prices of the currency majors would easily be susceptible to a variety of price action from some institutional players outside of the US. The celebration of the Labor day holiday is a clear example of market action before and after holidays which has proven to be significant moves where traders would not least expect to happen. A spill-over effect of last weeks movement would be made while price market will fluctuate on both directions to cover the real market sentiments. since the short trading week for the US investors and traders would be limited European markets would simply take the lead pace of any continuation of the directional trend for the EURUSD in particular with cross rates more favored to trade with.

The quiet yet vulnerable market conditions in Asia would follow this lead and by the start of the North American session at the opening after the holiday the much anticipated US Dollar may have continued to move lower thereby leaving most other US investors to be behind the price action. As it have closed lower last Friday for the USDX at the 82.03 even on a technical perspective shows that the trend lower is inevitable. The probability is greater for the USDX to go back to the 80.00-20 bp levels and no significant fundamental is present to say otherwise.

It is only now that some traders are looking at the possibility of the EURUSD to continue higher without saying that the most recent upward move was a simple correction and would rather wait for a selling opportunity. While that maybe true in certain ways, by the time that they would be convinced these traders would turn bullish by taking long positions and then the market would turn around lower for its corrective move. These market conditions would normally occur the few trading days thereafter a market holiday. And this has been based on almost three (3) decades of market trading the foreign currenies, financial futures and the precious metals market. Although, there are no sure fire guarantee that it will always happen but the probabilities that the market behavior will surely be in this mode.

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FX Volatility on EURGBP Cross rate- LIVE.avi

Forex volatility Picks-up

With the recent UK PMI disappointing nine-month low prompted the GBPUSD to continue to move lower currently at the 1.5370 from a low at the 1.5330 which led other traders and investors to shift currency pairs to the EURUSD and back to the AUDUSD as an arbitrary hedge strategy against the weaker USD whereas the USD index is now at the 82.77 bp levels and a probable continuation lower would be made. With the EURO leading the majors as an alternate currency flight to quality whenever the USD heads lower with some alternative trades with the appreciating Gold prices now back nearing it s all time high USD 1265.05.

As the EURGBP cross rates has reacted higher whenever a contradictory movement is made between the two major pairs as it made it recent hourly high at 0.8315 at the start of the 1st trading day of the new month with accelerated volumes. Strength of the Euro vs the USD and the Pound will continue to the 0.8350-60 level of resistance on a day to day basis. However, continued strength will prevail whenever the Euro accelerates and the continuing USDX still heads lower.

Meanwhile, the USDCAD corrective move has been limited to the 1.0553-80 levels whjile maintaining its higher movement in a slower pace. do expect that this will also continue while making these slight corrective moves before it resumes its trend higher.

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