Wednesday, October 28, 2009

EUR/USD Trend moves & Ranges

An incisive analytical work in the last 30 years of EUR/USD trends and ranges clearly shows and interesting relationship between Time & Price. I have been poking in W.D. GANN works and the Up & Down cycles in Fibonacci numbers 3, 5, 8 are an interesting coincidence.

I can't claim infallibility of the cycle indication I have developed in this chart but the trend moves are quite clear and the rhythm of movement is obviously in accordance to the observations mentioned in Gann's Time& Price relationship.

Tuesday, October 27, 2009

GBP/USD - 5-months of Balanced Range

Following last weeks call of Breakout in the Pound Sterling I must admit the technical picture has altered. The channel breakout after re-drawing seems to fit quite nice in the grand scheme of the intermediate trend which still points down.

The other quite interesting fact that I have already pointed before is the balanced range within which the Pounds is confined . The chart clearly shows that the last 5 months GBP/USD rate has been trading inside a Lower trading band 1.60-61 and Higher trading band 1.66 -1.6740.

There have been a few overshoots lower to 1.57-58 and higher to 1.70, however the control of the range balance is quite amazing..

Focusing on the short term the fast rally: 1.5706 -- 1.6696 has ended with a Hanging Man candle followed by a massive Key Reversal on Friday taking out the lows of the previous 3 days.

Interesting facts are that price stopped and the Doji candle yesterday is right at the Support of the 55-DMA (1.6285 now) which also held the Lows today. Lastly the 50% fib retracement of the 1.5706 - 1.6696 is at 1.6199. That simply means we are trading inside he Key Reversal range until one side doesn't hold.

Short term I'd watch for a break of either 1.6474 on the upside or 1.6239 - 58 on the downside.

EUR/USD - Key Reversal or just Shake-out

Yesterday EUR/USD had a Key Reversal day taking out 4-day lows and stopped at 1.4844 - right at the Resistance now turned Support derived from the Oct 22-23 Highs(1.4841/43).

The primary Trend channel remains intact and I'm focused on the short term inside channel (Blue lines) that is confining the intermediate trend. Last 3 days reversed just shy of the Resistance price projection around 1.5080.

The question now is if the Key Reversal signals trend change or is just a shakeout of the weak hands. Focus should be first on Support at the 1.4840 level and then on the trend support at the 21-DMA (now at 1.4812).

Next comes the 50% fib of the 1.4479 - 1.5062 move - located at 1.4702. Vigilance and swift reaction are key.

Wednesday, October 21, 2009

GBP/USD Breakout on higher timeframes

Weekly and Daily charts show a clear Breakout in Sterling.

Daily Channel has been probed yesterday and I am watching for a higher close today to confirm the breakout. This move is also supported by the steep drop in EUR/GBP which is targeting the psychological 0.90 level and below that is the 55-DMA at 0.8913.

On Weekly chart the Pound is targeting the 89-Week MA at 1.7007.

For more precision I have marked the previous Highs on Daily chart as they will act as primary Resistance levels on the way up:
-> First level - 1.6739
-> Second level - 1.7041

Tuesday, October 20, 2009

Shanghai Composite at a critical juncture - 3060/80 level

Shanghai Composite is roaring ahead fueling global demand for commodities and acting as guidance for the 'Decoupling theory' adepts.

The critical Resistance marked by the August Gap and September High is located around the 3060-80 area. RSI is supporting the slow grind and Wilder's DMI (typical trend-follower tool) is close to give a buy signal.

Sunday, October 18, 2009

US Dollar Index (DX) - Priary Trend is Down but do you see also a Falling Wedge?

Weekly chart: well we have this clear trend inside the grand trend channel /red lines/.
Even Paul Krugman in NYT is defending the Fed policy of zero interest rate and weak US Dollar as means to boost the US economy through export expansion and thus balancing the trade account. One can see the nice gradual depreciation of the US currency on the chart.

Just technically the picture is clear: RSI is neatly pointing down into breaching the oversold territory and the Slow Stochastics have been coiling on the bottom for the length of the slow grind - the descending range trading channel we can see from June this year.

I can mark the 74 level as line in the sand right now since once breached it goes in to this last cluster of Support 74-72 and beyond that is the abyss.
However since the USD bearish sentiment is at extreme levels and hardly I can pick a contrarian view anywhere in the media or the web I just keep an eye on the alternative scenario.

I marked in Green Lines a pattern resembling a Falling Wedge - while short term we might have a squeeze of weak Dollar bears up to 77 - we need a decisive close above 77.50 to take a serious bet on the USD. Risk here lies on a close below 75.

Crude Oil - Breakout

Weekly chart in accord with the overall CRB trend shows a clear Breakout - more importantly over the 200-Week MA at 75.44.

Higher there is a resistance cluster of previous range trading between 85 and 100. And risk is on a close below 65 lows which as I wrote in the current liquidity led monetary expansion seems quite unrealistic. Here is a little piece of 'fundamental' info from Dow Jones:

DJ:Libya OPEC Head: Speculation Driving High Oil Prices:
Libya's OPEC governor Ahmed Elghaber said Sunday the latest crude price rally to levels above $78 a barrel Friday was driven by speculation, not fundamentals, and OPEC members are unlikely to raise production in response to the latest price hike."There's a lot of optimism and the prices are responding to that, not to fundamentals," Elghaber told Zawya Dow Jones in a telephone interview. "I hope this price euphoria does not take us to a bubble that will burst.""This market will correct itself, there's speculation going on but there's not much consumption so there's no point in a production increase," Elghaber said, adding that oil demand will only pick up significantly in the second half next year.

Reuters/Jefferies CRB Index Breakout

Weekly Chart shows a clear Breakout off the Ascending Triangle pattern which implies continuation of the bull run.

While the primary target is set at the 200-Week MA /317.90/ the move will first have to deal with the 2007 Lows resistance levels marked at 285 and 298.

Certainly I should mention risk control measure for catching this Breakout to be set around 260 - below the last week's low and then trailed with the 21-Week MA. However it seems to me with Fed not having any evidence oh change in unemployment figures at hand will not likely even hint at rising rates which in turn will continue to pump liquidity into commodities.