Wednesday, August 31, 2011

Inflation Adjusted Gold Price


Gold Prices Daily chart Aug. 31, 2011
The "Hanging Man" Candlestick bar can
be seen on a weekly chart.
The technical configuration in Gold would favor speculative short sellers and hedge fund portfolio managers to manage variable risk and protect the downside risk after the weekly candlestick bar for the precious metal was formed. The weekly closing which apparently formed a 'hanging man'; where a sell-off occurred after registering a new high at USD1912.02/oz. and drove the prices lower to the USD1702.90. The price closed for the week ending the 26th of August closed at USD1827.26, which reflected some profit-taking and protective short-coverings during that period. 
An increase in short sellers towards exchange traded funds (ETF) and options to cover previous long positions and hedge players to insure their profitability until the prices settles down for the time being. Some position adjustments were made that led to the quick price recovery towards the closing by some institutional players taking advantage of the wide price swing. Currently, the prices have stabilize at the USD1830.29+/- and the near term resistance is the previous high of 1912.02. Our previous calculation for inflation adjusted gold prices compared with the Dow Jones at 10550 was at USD1550.00/oz for Gold as the prices have been re-adjusted accordingly with the Dow at the current levels are just about right. Although, prices would keep its pace with the DJIA continue to move higher after the previous drop as the same did with Gold prices. The only assurance and strategies that is being played out to day is an increase in hedging strategies utilizing the ETF for long term position buyers of Gold investments.
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Tuesday, August 30, 2011

Euro Inverse HS vs. EURGBP Cross Rising Wedge

The Euro Zone economic sentiment data on top of its negative confidence prompted the EURUSD to sustain a drop from its previous high of 1.4548 and currently at the 1.4395 as of this writing. This has provided the US dollar index a new lifeline at the start of the trading week and the end of the month. The key support range of the US dollar index from 73.40-73.85 has been quite resilient for the past weeks. However, on the upside the 74.40-75.10 is what needs to be watched, as this is the average trading range for the few past weeks.
As analyst and traders are waiting for some clues as to where the direction of the market would be from the FOMC, US Consumer confidence, the upcoming report from the NFP and the Euro Zone's Producer Price index within this week. These reports would probably be able to provide a firmer indicator that would break the market's trading range for most majors pairs. Although, volatility still remains high at present; as wider price fluctuations prevail before the actual directional trend would re-emerge at the closing of the week. Daily price changes can be confusing as it stalls after each move and changes direction within two to three days thereafter.

On the technical perspective, an initial price break on the upside for the Euro would normally meet a pullback as it builds volumes for fresh postions upon the entry of the new month. These would enable position adjustments towards the closing of each month. Other traders would  view it as a false signal / breakout but true to its form the overall techncial formation of an inverse head & shoulders formation is very much in place. A typical bull trap where sellers would emerge during the same reaction on a daily basis. Meanwhile, the GBPUSD maintains its form and a sustaining weekly volume exists as prices continue to accelerate in a much slower pace like the Euro. This supports the intermediate upside trend for the EURGBP cross rate within a Directional Trend lower as a rising wedge is being formed on a weekly basis. The price extensions for the cross to retain this formation should not be higher than the 0.8865/85 levels for the closing week. Once this occurs and moves lower; the GBPUSD would gain momentum to move higher contrary to a Euro being steady to lower on a day to day basis. However, the inverse H&S formation for the Euro would only be contradicted with a continuing lower prices towards the 1.4285 price levels. That means a move for the USDX higher above the 75.10/20 basis point; which may not occur for now.
  

Tuesday, August 23, 2011

USD Trend Continues

The US dollar lost its closing recovery steam after the closing Friday and continued its weakness in the European session heading for the North American trading. The US dollar index have lost ground and currently working at the 73.65 basis point. A breakout of its trading range would occur soon enough, although when the exact breaking point would be difficult to anticipate. The vulnerable 72.90 would be easily taken out as the corresponding European majors likewise continues to rally on. 
Meanwhile, the EURUSD and the GBPUSD also headed higher currently at the 1.4471 and 1.6560 respectively; gaining momentum towards the start of the week's trading. The average swing trading range on a daily basis within the past weeks have maintained at least between 100-150 easily. Where a struggle between bulls and bears can be seen in the price behavior. A break higher for the GBPUSD and EURUSD would not be surprising the way price behavior is moving at current pace. So far the European pairs are taking the lead targeting the previous registered highs from the past month of June at the 1.4650-90 levels and 1.6720 levels respectively. Momentum and volume build up would trigger this targets. 
Technical bull spreads between the Euro and Pound can be seen more during the closing movements of the past weeks; as the struggle between the institutional and speculative players have been mixed. A European or an American shake out would occur before the actual break of the trading range. A confirmation and follow through from the prices higher for the daily Euro would justify its complex daily inverted head and shoulders formation and a weekly bull chart still intact for this move. However, the likely scenario and market conditions is more towards the GBPUSD.
This has been keeping the EURGBP cross at bay and maintain a stronger psychological support price at the 0.8660 firm. With a low risk tolerance levels at current prices of 0.8721; an anticipated move lower still would not be discounted as the candlestick formations are not as convincing as the GBPUSD in itself. Although. the overall picture for the EURGBP cross is still bearish from its previous highs of 0.8880 resistance price. Earlier shorts at the 0.8990 high would may well prove to be the major resistance chart and price wise.   

Monday, August 15, 2011

Technical Perspective - SRO - Majors/Cross Rates

With the continued uncertainty of the directions in the financial markets; a technical perspective of the chart formation for the European currency pairs and the USD Index would be appropriate at this time. Setting aside the fundamentals for the time being; the USDX has moved lower back to the 73.80 levels and the bearish outlook on a day to day basis remains strong. These levels on a weekly Stochastics/RSI overlay proves to be vulnerable for a near term directional trend lower that would threaten the support levels. We, however would not be surprised whenever this happens prompting our trade team to take a speculative trade in anticipation of this market movement.
An inverse reflection is found also with the EURUSD chart formation. And the anticipated move shows the recovery of the Euro and the British Pound as heading North and may build momentum / volumes for the next few trading days ahead. currently at the 1.4439 and 1.6385 as of this writing. Although, the degree of difficulty has not change at all and the continued volatility would be seen ahead where a probable breakout would occur between the Euro, Pound and the US Dollar simultaneously. This market analysis would have to consider the Euro to react on the GDP numbers for the 2nd qtr.and the ECB as well.
The weekly MA-Long Divergence more the EURGBP Cross rate has indicated a positive tone for technical trades to be implemented prompting the influential movements for both the Euro and Cable to move higher. Although, we are inclined to believe that this has been a speculative curve for a probable weakness of the USD moving forward. No such confirmation however, it would be priced-in when the US dollar does move lower.
We would still prefer to cross trade the Pound, Euro with the cross rates at this time but would not disregard the Japanese Yen and Swiss Franc. Although, both currency pairs have to be treated as isolated cases since the fundamentals are entirely two different situations compared with the European and US market conditions. Meanwhile, the opening price gap of the USDCHF in the Asian sessions where technically sound and in line the previous candlestick formation encircled on the chart that already showed a signal of price reversal before hand.  With the market sentiments from the SNB contentions of taking similar action in the market whenever necessary shows its grip on the recent prices. With prices opening at the 0.7898/00 from a Friday closing price of 0.7767 should not be discounted. the market price movement is critical for the next couple of trading days. However, a retracement or pullback is expected and this would have been a technical adjustment from any oversold areas for the past few weeks of bearish price direction. 

Saturday, August 13, 2011

Access to Primary & Secondary Markets

Forex Trading Methodology2
Access to secondary markets are essential elements of a successful investment strategy. The degree of trading difficulty can be eased by having the accessibility to enable proper money management and hedging strategies that would lighten risk aversion and appetite in trading any financial markets. More particularly the Foreign exchange markets where volatility will always be ever present.
However, the ability to do so may be limited to other investors and traders alike if and when such information to meet the necessary requirements would not be suitable or readily available. As some investors do have to meet certain criteria in portfolio management by these financial institutions. These may certainly apply for some main street investors in the Foreign Exchange market where the level of sophistication in accessing secondary markets for that matter may or may not be to their liking. As it would entail costing more than what is already available and would still have no specific guarantees that a loss would be avoided. 
The distinct and number 1 advantage of the Spot Foreign Exchange market is the high liquidity that it really provides the market. There are distinct advantages of other markets such as the Financial futures, Options and Forward rates openly available but the 'how to' manage the combination of these instruments into a more reliable earning mechanism that prevents other to apply is the crucial part. Although, being able to apply these strategies as other interbank strategist do; only depends on how much one would improve and find time to do due diligence on their market knowledge and skills to the next level of sophistication in trading these exceptional conditions today.
When a combination of trade decisions are made for speculation or an investment strategy, either way some are based on a Political outcome or simply economic fundamentals. And some are on technical foundation seen in the market place. 
A complete article version is posted on our website at http://megatrade101.com/

Wednesday, August 10, 2011

Market Tight Squeeze - Forex Majors & Cross Rates

As speculative traders/ investors of European majors have been squeezed with the roller coaster ride between institutional participants. With the markets ability to find bull and bear spreads where the volatility index continuously increasing daily; the battle between bull and bear traders in Europe have tighten their grip with investors in the North American sessions even after the Fed willingness to stay its course for rates lower until 2013. 
Renewed Bond purchases have been the norm for the market investors contrary to the S&P's downgrade for the US; thus pushing the USDX to another rally after touching a 73.82 low and currently reaching a 74.75 lower high compared with the previous 3days high of 75.38. However, what is equally important is the ability of the USDX to stay above the 74.40-75.10 range for the week ending Aug.12 and the coming weeks ahead. These are the key levels to watch for the US Dollar Index; while the Gold prices is currently making a new high at the USD1797.87 as of this writing.
Apparently, with the Dow turning south from a positive tone earlier have been a contributory factor whereas investors shift funds as the continued uncertainty continues. Meanwhile, to top is all is the current concern on French banks as concerns on their huge debt and raised concern by the credit rating of the country which led to bank shares to plunge in double percentage figures.

The EURUSD and GBPUSD are currently headed lower the same manner where they came from a positive tone and is at 1.4195 and 1.6175 respective levels. Other than their technical outlook; as most have noted that the daily price movements have been a roller coaster with gains and loss attributed tot he continued volatility of the market. These conditions are not for those players with a minimal tolerance levels and scalping opportunities may well be left alone for the time being. Wide price swings may be attractive for others but as we always say...the market will always be there. These are exceptional trading times and to out class these market conditions takes a considerable due diligence and strategies in place.
However, maintaining our bias sentiment further confirms the Intermediate Trend for the European majors and cross rates is still bearish. Timing market entries and exits may take a higher degree of trading skills and experience as the wild price fluctuations will trigger most stop loss as easy as it would do with profit taking. 
Further gains for Yen and Swiss Franc in value is seen as it has been making from the start of the week. Even after the BoJ intervention needless to say. Would not be surprise to retest lower price levels for USDJPY rates as well. As the Swiss Franc already have done so. Lagging indicators on these market rates would not be as suitable with heavier fundamentals weigh in more than technicals. Of course, other wise risk appetite is bigger than playing a smart market well with these current conditions. Stay clear temporarilyy and wait for a good market timing on better conditions.   

Tuesday, August 9, 2011

Trading Exceptional Times

These are obviously exceptional times in trading the foreign exchange markets. As we all have heard the different yet negative bottom line scenarios from the Earthquake Disaster in Japan; how investors reacted to the price fluctuation of the USDJPY, the Sovereign debt crisis in Europe with Greece, Italy and Spain; with the ECB previous rate decisions to purchasing Government Bonds to ease the contagion effects on the EURUSD. And now with the S&P's downgrade for the US have left almost all financial markets from Stocks in the red. 
These are exceptional times particularly in trading the financial markets; where the volatility index have reached their highs and where investors loss of confidence is overwhelmingly felt worldwide which can be seen on the market's performances worldwide. How does one investor and trader prepare to trade during these times of uncertainty? That is just one of the many questions that needs to be address before making any trading decision. 
Focusing on the Foreign Exchange market takes more than simply buying/selling a currency pair. As the correlations and other factors affecting them are tied up to a lot of current global issues. Whenever such issues are 'Politically oriented and influenced' do expect an increase in volatility and a roller coaster ride from the three major markets. However, with these clouds of uncertainty hoovering in the air; the distinct advantage for those who has the conviction and the unbias outlook /analysis may well be in a better position to focus and sees a clearer perspective of the market trends. There will always be conflicting factors, thus making price swings erratically. Price behavior dictates price action as a response or a mere reflection of outside / fundamental factors. Market psychology does have an important role isolated from both technical and ffundamental analysis. And this can only be found on studying the price movements and behavioral patterns reflected by prices.        

Monday, August 8, 2011

Trend following the European Majors & Cross Rates

The initial reaction in Asian/ European markets have obviously been negative from the S&P's downgrade AA+ for the US. The continuing beneficiary is still the Gold market, as prices for the yellow metals have reached the USD1715.35/oz. high. While the soft opening for the USDX held at the important levels of 74.40 basis point with a short lived low at the 73.97. The trading range between 73.28 and 75.10 are critical points of its range where any particular break through the high above and maintaining a close at the 75.50 will build momentum to the next target levels. Of course, this is the speculative outlook for bullish USD players. As a rush to flight to quality USD Treasuries may be the catalyst to a bull USD market. However, this would be contrary to investor's current preference for Gold. As most central banks have done so by increasing demand for the precious metal. A slight inclination of a report for increase margin requirements for Gold may somehow spook the market at any given time. Nonetheless, these fundamentals and market trend may not go away that soon.
The EURUSD has been given a short lifeline from the ECB purchasing Italian and Spanish Bonds and lent support for the Euro for the time being. However, the overall sentiments remain uncertain for the market participants. Although, we still remain true to our bias sentiments for the EURUSD & EURGBP cross to move lower. Particularly the EURGBP were a retest of breaking 0.8660 for the 2nd time maybe attained. As the previous week's low did moved to 0.8642 low and met some liquidation, profit-taking for others.
GBPUSD would be steadier to lower as it paces with the EURUSD from hereunto. But the technical outlook for the GBPUSD on chart formations is still bullish. Thus providing support for the EURGBP cross to move lower in an orderly fashion. We have decided to stay the course for the EURO and cross rate as it has been our benefactor providing us with the additional equity built in through the past months.
Meanwhile, USDJPY has given its signal of a probable price reversal for the coming week as the MOF in Japan have continuously talking intervention even after their move last intervention in the market place. 76.28 again, is a pre-WWII levels which will be the basis of support from hereunto. Although, as we also mentioned these are exceptional times and where exceptional price action happen. In essence, we still would not be surprised if and whenever prices again make an attempt to gain Yen strength for a 2nd swing. We'll have an open mind for USDJPY and USDCHF for the current week and observe more closely price behavior for the European majors and USD movements. Any sudden changes may well be lurking in the market place even as of this writing.

Thursday, August 4, 2011

FX Prices Re-affirms Trend & Price Reversal

The BOJ's intervention re-affirmed a much needed boost for USD bullish institutional players in the foreign exchange market. The timing could never be better as the registered low for USDJPY at the 76.28 was pre-WWII levels, although the much anticipated intervention finally gave through in line with the SNB move the day before the intervention. Much to the surprise which normally would take the BOJ a weekend action, but the pressure from the inner circle of the ministry and corporate exporters have proven to add more to the market pressure with the price levels.
Asia market have proven to be a little more lenient as it waited for the North American Sessions to come forth and made its follow through price movement for the USDJPY reaching the 80.22 chart resistance levels before making it corrective move lower to its current price at 79.41 as of this writing. That prompted the directional trend for the GBPUSD, EURUSD to retreat back down to 1.6285 & 1.4151 low respectively. 
Such moves have spilled over the EURGBP cross rate as predicted to the 0.8671 ( real close from our objective at the 0.8660 dated Market view Analysis on Aug.02" Bear Sentiments for EURGBP Cross vs. USD". The probability of an attempt to the May 05 low of 0.8610 would be made. However, remember no such prices do move straight down or up without any play in between supports and resistances.
The highlight that we would like to emphasize is that no amount of technicals would be able to determine market factors currently overwhelmingly influencing the market place. Over-bought/sold areas, Oscillators, and other techn tools are mere guideline to use but would not a real determining factor for final decisions as most are aware that they are most lagging behind market prices. Due diligence on Market Behavior and price actions may well prove to be more useful without the bias charting analysis and positions on trades at times. 
Although, market forces play these price swings with no mercy to the underlying retail speculators when such occurrence happens a day before the end of the trading week. The force of the market price can best be gauge on the opening of the USDX today a the 74.41 from the previous day's closing price of 73.92 basis point. Of course, the closing prices were more taken by the negative reports on the US GDP and the overall sentiments of the market. 
And with this said; it still does not change the overall sentiments of the where the biggest economy is heading to. With the unemployment figures may provide some directions and clarity. Again, not a lot are expected for tomorrow's figures.
However, the price movements alone have been significant as they already re-affirms our outlook and analysis from the Price and Trend reversal call dated the 15th of June 2011. The degree of trading difficulty is ever increasing that adds fierce volatility in the market, as price swings wider every day.   

Monday, August 1, 2011

Bear Sentiments for EUR/GBP Cross vs. USD

The initial reaction from the Asian & European markets prior to the opening for the US North American session on the stocks were higher across the board; yet the USD have been pushing lower with position adjustment for the new month are being carried out in the forex market. This is in response to the positive news coming from Washington of a deal made and avoiding the first -probable default by the US government.
That initial market behavior could well be attributed to major players price adjustments with the continued corrective move of the Euro with extensions at the 1.4452 high along side the 0.8803 registered high of the EURGBP cross rate. With so much negative sentiments looming in the airwaves prior to the opening the excitement on the floor could not be helped and get noticed while a price turn around for the EURUSD after the opening bell was underway. The next best question would be for how long would this USD recovery last? 
Based on our previous market review dated the 30th of July; the USD Index below the 73.85 -74.40 range surely signifies a continuation of the bear patterns. However, maintaining our bias EURGBP short side of the market has kept our commitment to maintain the position and place corrective stops whenever prices do move higher. The initial break from the USDX range above the 75.10/20 basis point would provide a leg higher and a probable follow-through when volumes do pick-up. This could only happen whenever positive news would come from either the NFP and unemployment figures this Friday. Although, prior to this are the reports for the BoE & BoJ rate decisions and the earlier retail sales figures from the Euro zone that would be well anticipated. However, the earlier week's report on the US GDP would not be discounted overall and would weigh in if the figures would be negative for the week end. Which means that only a close for the weekending the 5th of Aug above the 74.45-75.10 basis point range would re-affirm bullish institutional players to build-up momentum in the successive weeks to follow. Unless, of course a negative report would prevail before then.
A complete report and analysis for the EURUSD and EURGBP can be found on our market view report on the website.