Reconcile: DXY vs. DX-FXCM

As a matter of due diligence, we have decided to reconcile the DX-FXCM price chart and its significance in market analysis which we have identified has distinct markings of trend price signals that may be quite useful. Especially for those who trades the US dollar Index on the FXCM platform with relative comparison in our most recent article on the USDx- traded in the Inter-Continental Exchange and the New York Board of Trade respectively.

Spot and Futures do have a direct & indirect relationship when trading the currency market. However, at this point we would like to show the relative distinction simply based on the current chart below; where we find the similar trading pattern of the USD opening higher from their previous daily closing prices that likewise have directed the price trend of its directional move higher. Please review candlestick bar chart paying attention to the daily opening prices which have been extended higher. Although, the current opening in the European market have been quite cautiously making some daily corrective moves lower.

The previous daily formation

Market Behavior ...

vs. Price Action
The ability to weigh trading analysis between economic reports and technical perspective has drawn a significant mark on price behavior in between the 3 major trading sessions. The upcoming reports on the European Consumer Price index would come earlier than the FOMC minutes that would provide a signal directly effecting the USD direction. Although, as the mid-week reports follows when the US Consumer Price Index would be compared with the German GDP report which would weigh more with the direction of the EURUSD.

Ahead of the market mid-week price action has given the USDx a daily signal of a probable pause as against a breakaway gap against all odds. Nevertheless, this should not discounted on a daily pullback and a retest of the continued strength towards the end of the week's trading will take place. Either way, Wednesday through Thursday sessions would provide a clearer picture. A Tug of War again appears to be in place

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...

Technical Perspective: GBPCHF

GBPCHF CROSS as of June 26, 2012

As a matter of due diligence; it would be good to check what the USDx levels were when the EURUSD was at the 1.2380 and compare it with the GBPUSD & the USDCHF. As a contrary strategy to the EURUSD position above is to be able to sustain this position by using the GBPCHF cross rate as the chosen pair which is in line with the USD continued recovery from its previous correction. Likewise, such a strategy would absorb any adverse price fluctuation in both directions as a cautionary position while maximizing the market potential for a USD rally in the medium term time frame.

Although, the technical outlook remains bearish due to the daily double top formation, not to mention a triple top high at the 1.4968 which serves as the 1st resistance price levels for the sessiion to session trading. While the relative support at 1.4920/25 should be well intact as the USDx moves higher and USDCHF may remain at its current levels but not lower than the support at the 0.9575.

The higher lows ascending to a steeper trend defines its bullish mid-term rally inspite of the technical resistance. Extensions to the high would be viewed at the 1st level of 1.5035/50 within the mid-week. Meanwhile, R2 would be at the range of 1.5150 - 1.5200 once volume builds for a continued USD rally. Session to session pullback reactions would also be expected as corrective moves no lower than the 1.4920 would be ideal for a medium term trade plan.And this would also serve as a position hedge versus any USD decline which would influence and delay the Euro's eventual downtrend.

Pessimism Persist - EUR & GBP vs. DXY

The uncertainty for the European / Soverign Debt crisis, Moody's bank downgrades and the backdrop of Spain & Italy's problems have weigh much longer in the market; while the focus on the coming June 28 summit are making investors more weary of any real resolutions. 

George Soros comments for a workable resolution are well being discussed as a political, fiscal and bank union would place some stability in the financial markets. Although, Germany's Angela Merkel's continued resistance of the EFSF (European Financial Stability Fund) to immediately take over the ECB's holdings of Greek bonds and would not be able to help relieve Spain and Italy from the jump in their borrowing costs.

These would add more volatility in the market meanwhile volume transactions would persist to move lower until a clearer direction would be seen and felt in the market place. Meanwhile, the major reports for the week are seen as a possible catalyst as to where the actual market direction for the USD and the Euro would take. US Consumer confidence, Durable Goods, Home sales and the GDP figures on top of the University of Michigan Confidence makes up the list for the US side; while the succeeding German unemployment figures, and the UK Gross Domestic Product will take the lead for the European market.

EURUSD DAILY AS OF 6.25

Now with that said, let us take a look and analize how the technical charts coincides with the fundamentals. The behavioral market patterns of prices have been induced by traders and mainstreet investors to the direction as perceived by how the market has been reacting to the European debt crisis. The single currency of the Euro has taken the lead as prices continue to move lower and currently at the 1.2480 as of this writing. In our June 18 market view that prices were still within the rising channel but the prices have moved outside of that channel; thus the market heading south to the 1.2380 is now in the making. Likewise, the confirmation of Cable breaking the 1.5580 price support has signaled a longer term bear market that may turn market participants into hysteria mode. This has placed the US Dollar in a better footing still retaining its crown as the World's Reserve Currency. And remains to have enough room for the next leg higher as the 80.05 - 80.89 basis point range has held from the previous trading actions from its correction. As a matter of due diligence; it would be good to check what the USDx levels were when the EURUSD was at the 1.2380 and compare it with the GBPUSD. It is equally important to watch the closing price levels of these three major pairs and relatively compare it to the closing of the USDx at the end of this 2nd quarter and the opening price levels on the first trading day of the 3rd quarter where the outcome of the June 28 summit meeting would result-into. Unless a market spook would occur before or after the EU summit over the weekend as it is ripe to turn itself into an extreme hysteria market.

Market Analysis for week 1.23

The highlights would weigh more on investors risk appetite and market sentiments on the US Dollar that would likewise be based on the coming 4th qtr. GDP report or even a mere hint of the Federal Reserve QE3 may really be a game changer for the Forex market.

EURUSD 01.23

The recent relief rally of the EURUSD last week from an impending debt crisis has dissipated for now until such time a more definitive answer for a solution is made. And this may find some pressure for the USD to continue its trend higher for the time being as evidence from its corrective downtrend. The higher opening price has provided room for the correction to continue in the European session.

However, after registering an 81.78bp high, the USDX has drifted lower to 80.00 and is confined to its lower support at 80.31 as of this writing. The critical price to watch for would be the 78.85-80.05 trading range and the shift in market sentiments are the key considerations moving forward.

Meanwhile, the Euro has enjoyed for now the decline of the USD in lieu of the dissiminating reports from the Euro zone. It is currently at the 1.2931 in the European opening showing signs of relief alongside the EURGBP cross rate still above its pivotal price at 0.8329 that a 2nd attempt is being set-up. Do expect a wider swing at the start of the trading week with some daily pullbacks from the daily highs. The earlier signs of this corrective move higher were ever present even before when the opening price gap occurred for the second time on January 15, 2012. Again, two considerations could be interpreted as an exhaustion gap or a second attempt for a run away which obviously didn't occur the following couple of trading days.
Please take note that the price behavior would never show when exactly such a price reversal would occur but can provide the insights only for those who has the due diligence of carefully studying the market from a series of events taking place and not merely on a per set-up basis. That is also why MegaTrade101 form of market analysis presentation is based on a continuing market condition as they occur quite different from others.

The complete report including AUDUSD & CHFJPY CROSS analysis at http://www.megatrade101.com/

US Dollar Index Market Analysis

For the past decade, with more e-trading developments and accessibility to the markets have made it easier to monitor market behavior during market holidays. The up-coming trading period before the Thanksgiving holiday would prove to be one of those times where a handful of institutional and majors players would again be in place. Although with an expected mix bag of market directional movements and the general trend developments into a bullish advance through the year end from thereon as a comparison as far back in 2008 that should not be discounted unless otherwise proven not to follow the cyclical pattern hereunto.



US Dollar Index Weekly Candlestick Chart



However,as for the US Dollar unexpected downward distortion after touching the 79.83 by dropping back down in October for a re-test of the 74.72 low was the appropriate corrective move in preparing for the 2nd leg higher where the market conditions are presently at. The backlash of news reports from both continents have been dragging this lagging recovery which should be respected from the market behavior. As price movements by market numbers doesn't lie. And the only way that we can stay unbias of any market analysis is to always trade with a level playing field in any given position(s) while in the market. For the Technical description & Analysis, please refer to our website at http://www.megatrade101.com/

The coming holiday trading conditions will certainly be a complicating factor for trading the US dollar. For the time-being, focusing our attention on the backdrop for financial strains; with the European market’s are particularly stressed; with both the EU and other major US Financial bank's exposure to the EU debt crisis have been a huge part of this global recovery. Money market funds have significantly reduced exposure to EU banks, though the ill-effects have nevertheless found their way into funding costs in the US system.

These are the underlying issues that we should consider to be critical rather than the ineffective event of risk aversion and appetite in the market place. The coming crucial reports this week; including the 2nd reading of the third (3Q) quarter GDP on TUES NOV. 22, the Fed minutes, the UK BOE MINUTES on WED. NOV. 23; US durable goods,the University of Michigan Consumer Confidence Nov.numbers and personal spending and on the EURO ZONE side would be Germany and the UK's Nov. 24 GDP figures.

All this reports would occur towards before and after the end of the trading week of the Thanksgiving holiday which would provide the market with an ever increasing volatility from lack of liquidity in a thinly traded market to position adjustments and liquidation for the rest of the month of November towards the end of the trading year. However, pay close attention to market behavior as these are the ripe times to consider.

Just a side precautionary note where we would like to quote the words of Gordon Gekko from the movie Wall Street - Money never sleeps..."bulls make money, bears make money...but pigs get slaughtered".

Only the best for your trades!

Highlights & Analysis

With the State of the Union Address on Tuesday, the President would surely emphasize on the administration's accomplishment for both the economy and jobs creation looking forward with the agenda agreed during the meeting with Hu Jintao of China. Deals made and with a new economic team that strives for improve competitiveness in the global market in exports and jobs creation will highlight a positive tone for the US Dollar. Although, the troubles in Ireland have placed some slight pressure on the Euro as of this trading session at the levels of 1.3572 corrective move.

However, the reports for the week would play a significant part as UK GDP expected to be at 2.6 vs. 2.7 would weigh on the GBPUSD with some influence between the cross rate of the EURGBP to be steadier from the previous week working at 0.8514; whereas the 0.8550-80 levels may find some resistance for the next corrective move thereafter.

On the other hand, the USDX would rely more from the coming FOMC meeting, Durable goods orders, Consumer Confidence from the University of Michigan and the Friday's US Gross Domestic Product. These reports would be dictating the directional trend for the USDX in spite of its technically motivated bearish chart formation both on a daily and weekly basis. With an opening week of 78.30bp would provide a week of wider fluctuations on both directions but would maintain a bearish tone as it has indeed been bid-off to the lows below the 78.65/80 levels. And its initial target of 78.05 would be re-tested but will find some bouncing support and fresh longs on these levels. Most of the bullish positions has been settled from smaller speculators found mostly from retail trades.

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