Reference: FX Trends & Market Opportunities

Assessing and Identifying Trends

To be able to assess an anticipated major trend, it must be recognizable that such speculative transactions such as the volume / open interest increases during the life of a self reinforcing trend in the market. The prevailing market bias is a trend following market which means that the longer the trend persist; the stronger the sentiment becomes the breath of the market.

It becomes an established trend that has to run its full course of path until such time that the market becomes self-reinforcing. When such process has achieved its objective , the opposite direction may well take place after the full leg has taken place. The cross over points would have been achieved and a possible exhaustion can take place. A similar action has taken place like the price comparison and the current major trend of the US Dollar collapsing on the last weeks' closing of the month of July 2009 as a much clearer example.

Where the opening price levels

Forex Fact-Check & Market Technicals

OVERVIEW: Volumes & Volatility Index have declined more towards the last quarter of the year contrary to the slow growth of the US economy. The forex and equities market have been swinging in both directions between the Federal Monetary Easing, European Debt Crisis, Political & Government Fiscal Policies and the current Fiscal Cliff. The choppy market behavior have been more susceptible towards every bit of information and data affecting price fluctuations that has not been much help for the traders and investors. Liquidity, trade volumes and participants have held back towards this 4th quarter.

With that said, the Major Cross-currency pairs have managed to outperform the majors since September until to date. And we have mentioned this from our previous article in comparison with the EURUSD, GBPUSD, USDJPY versus the EURGBP, EURJPY and the GBPJPY cross rates respectively. Although, it would be wise to make a final assessment at the end of the year's trading as to the currency pair that best performed for the current year ending 2012. And we shall get back to you on this by then.

TECHNICALS:

Technical Perspective: USDCHF

Daily

The USDCHFdirectional trend higher has been aligned with the USDx recovery from its recent low equivalent to the 80.05/10 basis point compared with the 0.9250/55 for the Swiss Franc. The USDx is the pivotal price point where the breakout from the previous consolidation took-off and the probability for a rebound is extremely probable and likewise the lower risk is well worth the trade. The almost perfect timing from the latest positive US Consumer Confidence and rise in Home prices have provided the lift for the USD to continue its rally today 11.28.

The 0.9255 was resting just on the technical support; where a speculative risk position to go long the USDCHF was initiated due to the low risk factor that accompanies with the position. The initial objective in the near term is @0.9435 after touching a recent price level at 0.9333 as of this writing. Although, this temporary near term trend higher will have to gain some strength before an actual bull trend would be re-establish. Daily pullbacks can be expected with this short-term rebound, a good day-trade scalping opportunity.

Weekly

The bearish trend channel as shown in the weekly USDCHF has been established from the previous months was accompanied with a two and half months of consolidation. The trading range low @0.9215 and a 0.9510 high whereas the current price @0.9330 is within the 50% FIB retracement from the previous decline. Although, the good news from the market has provided the technical support for the USDCHF moving forward in a near term trend higher.

The weekly chart formation compared with the monthly may prove to be a morning cloud configuration not unless a contrary fundamental would oppose the major trend. Any negative surprises that would break below the 0.9210/20 would be equally bearish for the USDCHF. For now, the market sentiments prevailing still holds while the USDx trails the trend higher.

Market Analysis SRO 11.27

The recent rise on home prices outweighed the earlier report on the finance ministers reaching a contingent deal on Greece aid package in the earlier trading sessions. And the positive tone set up by the Consumer Confidence have provided the USD lift.

However, this had provided a USD price recovery from its pivotal price take-off point at the 80.05/10 basis point. And currently working at the 80.33 levels as it continues to move higher in the session. The technical perspective of the USD Index have found some support higher that influenced the EURUSD to move slightly lower with a spill-over effect on the EURGBP cross rate moving south currently at the 0.8060 levels. This has been the norm of price action relative to thier correlation with the USD directly and inderectly; where traders mix reaction from the push and pull on the European debt crisis have provided the forex market the degree of trading difficulty between both continents.

With that said, the resiliency...

In Focus: GBPJPY Cross T-Perspective

The GBPJPY cross rate have been aligned with the USDJPY resilient higher trend and the steadier acceleration of Cable against the USD. On the technical side the recent correlated double top of GBPJPY also weighed heavy leaving the GBPJPY cross to declined at the 125.66 levels.

This was a temporary market squeeze ending the week of November 09 towards the first few days of the following week. This market squeeze is usually termed as a bull-trap; where prices declines and a sudden price reversal would engulf the previous bear prices. A follow-through of this trend is in the making especially when a Price Reversal was established for the USDJPY dated week ending October 19 followed with the Japanese Parliament dissolution last November 16, 2012!

Although, this serves as the first line of support; the critical and psychological price that may attract fresh longs would be still the 125.50/80 range. Which it did as reflected on the succeeding weekly engulfing (bullish signal)candle-bar chart ending the week of November 16.

The significance ...

Video Support: Confirms our Market Highlight & Analysis 11.20

Market Highlight & Analysis 11.20

USD Index, EURUSD, USDJPY & Cross rates
The polarizing effects between the Fiscal Cliff and the Finance Ministers meeting over the European Debt crisis have managed the market to react with mixed sentiments along side with the overall market conditions and price behavior of the commodity market such as the oil and precious metals.

In addition to France loosing it triple A rating have dampened investors sentiments in the Euro and the European stock markets in spite of the US stocks recovery from the past week. To top it all, the escalating conflict in Gaza and Israel have made oil prices recover from its lows; placing a constructive yet temporary barrier for the USD to continue its recovery despite of a better housing data and increase expectation in possibly avoiding a fallout from the Fiscal cliff.

On the contrary, except for the USDJPY re-taking its lead from the Bank of Japan while it takes a breather at the November monetary policy meeting which have led to its current weakness vs. the USD @81.25 to this writing to continue. However, some analyst have attributed this market movement to finally materialize since establishing its third (3rd) higher low @79.05 making a rising support channel quite supportive on its way up.

And with the Euro's steady-tight price action

Weighing market sentiments

And Price Action: Addressing the market issues between the Fiscal Cliff and the European Debt Crisis the foreign exchange market has been in a stale mate of consolidating prices. And to top the present market conditions of the depressing prices; the collective strikes in Spain, Portugal, Italy and Greece would add to the economic instability facing them today.

Although, the Euro has already reaffirmed its bearish trend on its technical basis after declining below the 1.2880 levels and finally reaching its first counter-trend support price levels at 1.2660. Which is only 80 pips away from the all important psychological and pivotal price of 1.2580; where a counter-trend would have appeared stronger. Currently, the euro is in a corrective mode @1.2745 & subsequently in line with its Cable counterpart working below the 1.5880 levels have kept its pace alongside with the USDx correction still @81.10 basis point as of this writing. A temporary daily exhaustion bar has occurred that prompted the US dollar to initially correct before any subsequent higher move can be made.  

Meanwhile, the USDJPY have reacted more to

Technical Perspective: USDx

The US Dollar Index chart as shown on this figure have clearly came from a HI/LO trading range between the 78.60 low and the 80.27 High spread over the September to the first week of November. Although, there were signals of a probable break then, it was only confirmed when the unexpected high numbers from the Non-Farm Payrolls provided the rally for the USD.  Breaking the technical brarrier of the first resistance @80.05/10 and maintaining its price above the 80.55 basis point closing, have provided justification for the technical and fundamental rally. 

As of the week ending Nov 09 2012; the USDx registered a new high at the 81.08 after breaking the 80.05 - 80.27 resistance range. Thus, establishing three (3) higher lows serving as a good support level with probable extensions beyond the 81.15 preliminary resistance. The next technical tool to be applied would be the Elliot Wave to determine the next leg higher and similar daily drawbacks for the USDx as it moves forward. This is a real classic example where the Donchian Channel breakout after a consolidation have been applied. And likewise using the financial futures of the USDx as a secondary market to arbitrage between the Spot Forex market with Euro and the Japanese Yen.  

US Dollar Index & EURJPY CROSS LIVE - 11.09

Technical Perspective: GBPUSD

Although, the GBPUSD had all the positive sentiments of a bull market continuation, the strength of the USD from the Non Farm payrolls have thus limited its advance with the parallel decline along side with Euro. However, it maybe the technicals have been justified with the double-top chart formation as reflected in the chart.

This also came from a price consolidation and HI/LO trading range from the 1.5945 low and the 1.6030 high where a gradual price pattern of up and down swings have been established before last Friday's decline. A bearish tone with probable extension back to its original starting price of 1.5880 dated May 2012. A gradual decline would be in order unless a build-up of interest from a flight to quality USD purchases would continue with enough momentum to push prices in a rapid fashion.

This will bear fruit if and whenever the rising channel on the support price would be penetrated that can likewise meet some profit-taking causing a temporary pullback or corrective move from liquidation. It would be real nice to be slightly ahead of the market price action as when timing is off then we do have some time to change and make certain amends for our strategy.

Click here for a Market Snap-shot!

Alternative Analysis SRO

With a short-list of reports prior to the US presidential election; the tendency of most market participants would be fixated on the last legs of the campaign strategy & the end-results of the elections. Without going further towards it, the market highlight for the week would be from the RBA rate decision, the ISM non-manufacturing composite figures and the Producers Price Index in the EU zone which would provide the volatility of price action prior to the election proper. 

However, the main concerns would be the actual market sentiments moving ahead from the previous week US Dollar reaction supported by the Non-Farms Payrolls figures. Whether the USD rally would sustain while concurrently being supported with the declining prices in both the commodity markets of the precious metal and oil. Not withstanding, the loss of steam in the S&P500 from the declining closing prices from last Friday's move. All these put together, seems to be felt among investors building & shifting investment flows from the Euro and heading towards the US Dollar base-economic recovery by the end of the last quarter of the year. No such confirmation can be set as speculative investments are formed after USD short-covering and market shift can likewise be evidenced with actual price movement in favor of the US Dollar.

The likes of a market follow-through

UPDATE as of 11.02: NFP confirms Market Outlook 10.29 - USDx currently @80.51

The Non-Farm-Payrolls (NFP) numbers of 171,000 reported jobs added from the Labor department on top of the revised 85,000 government jobs created for the months of August and September. Although, the unemployment number inched a tenth of a point to 7.9% the USDx currently working at the 80.51 as of this writing have manged to gather enough volumes and momentum to finally break away from the channel - sideways consolidation as described in our Market view outlook dated the 29th of October below. Please refer to the analysis for a complete report.

Watch for the suceeding follow through for the coming trading week as more open interest would increase and this expected spill=over may well be the catalyst for the market direction and its confirmation. Spread trading between Spot and Futures utilizing the ICE USD Index as a secondary market opportunity versus the spot would eventually pay-off. Of course, it can only be favorable along side with the market expectation of a favorable report for the USD as we have indicated including the good consumer confidence  & manufacturing figures that already signaled this prior to todays's release.