Daily Review 09/08/2010

Today’s Forex Trading review:

USD Dollar (USD) – The Dollar tumbled against 15 of its 16 major counterparts after disappointing NFP data which came out -131k twice worse than expected -65k showing that U.S economy remains weak and adding concerns about economic recovery. The Unemployment Rate came out 9.5% better than expected 9.6%. The Stock Markets in U.S reacted negatively to the data with Dow Jones losing -0.2% and the NASDAQ sliding by -0.2%. Crude Oil fell by 1.6% closing at 80.82$ a barrel. Gold (XAU) breached the 1200$ level and closed at 1205.1$ an ounce. No economic data is expected today.

EURO (EUR) – The Euro appreciated against the dollar after a bad jobs report in the U.S and the pair reached fresh high level since May at 1.3333 but closed below the 1.3 zone. The German Industrial Production came out -0.6% worse than expected 0.9%. Holding above the support level of 1.3130 keeps the momentum positive for the pair. Overall, EUR/USD traded with a low of 1.3156 and with a high of 1.3333. Today, the German Trade Balance is expected at 12.4B vs. 10.6B previously.

EUR/USD – Last: 1.3280

British Pound (GBP) – The Pound gained against the dollar after a negative jobs report in the U.S and the pair reached fresh 6 month high level at 1.5995. The Manufacturing Production came out 0.3% worse than expected 0.5%. The PPI Input came out -1% worse than expected -0.4%. Holding above the support level of 1.5880 keeps the momentum positive for the pair. Overall, GBP/USD traded with a low of 1.5838 and with a high of 1.5995. Today, the RICS House Price Balance is expected at 5% vs. 9% previously.

GBP/USD – Last: 1.5975

Japanese Yen (JPY) – The dollar traded near 8 month low against the yen reaching the 85.02 level on a speculation the FED will take steps for providing more stimulus after the worse than expected NFP data. Holding above the support level of 85.30 might rebound the pair back to 86 zone. Overall, USD/JPY traded with a low of 85.02 and with a high of 86.17. No major economic data is expected today.

USD/JPY-Last: 85.39

Canadian dollar (CAD) – The Canada’s dollar was the only currency which weakened against the US dollar after the NFP data. The Crude Oil, Canada’s biggest export product fell and pressured the currency down. The Employment Change came out -9.3% worse than expected 10.3%. The Unemployment Rate came out 8% worse than expected 7.9%. The Ivey PMI came out 54 worse than expected 56.3. Overall, USD/CAD traded with a low of 1.0146 and with a high of 1.0305. No economic data is expected today.

USD/CAD – Last: 1.0272

USD Dollar (USD) – The Dollar weakened against most major currencies after few data that released during the session like the Pending Home Sales which came much lower from the forecast (-2.6% vs. 0.5% forecast) and Personal Spending that a bit weakened from the expectation (0.0% vs. 0.1%), succeeded to support weakly Dollar. NASDAQ and Dow Jones weakened by 0.52% and 0.36% respectively, crude oil rose by 1.5% closing at 82.55$ a barrel, Gold (XAU) strengthened by 0.2% closing at 1187.5$ an ounce. Today, ADP Non-Farm Employment Change is expected to rise from 13K to 38K, ISM Non-Manufacturing PMI is expected at 53.2 vs.53.8.

EURO (EUR) – The Euro strengthened to a three month high versus the Dollar after industry data showed that U.S. pending home sales fell less than expected in June, led the investors to prefer the euro instead of the Dollar. The pair has been trading upwards since July and succeeded to break all the resistances levels that it had, therefore the momentum is strongly bullish, the next resistance on the four hours chart is located at 1.3380 level. Overall, EUR/USD traded with a low of 1.3147 and with a high of 1.3262. Today, Retail Sales are expected to be 0.0% vs. 0.1% previously.

EUR/USD – Last: 1.3226

British Pound (GBP) – The Pound continued to advance versus the Dollar and has reached to the strongest level since Feb as former Bank of England Deputy Governor John Gieve said policy makers shouldn’t loosen monetary policy further or purchase bonds, given the economy is showing signs of strengthening . The GBP/USD on an clearly upwards trend, the RSI showing that it continues to rise and probably will cross the 1.60 level, the next support on the one hour chart is 1.5850. Overall, GBP/USD traded with a low of 1.5861 and with a high of 1.5968. Today, Halifax HPI is expected at -0.4% vs. -0.6% prior, Services PMI is expected at 54.5 vs. 54.4.

GBP/USD – Last: 1.5935

Japanese Yen (JPY) –The Yen strengthened to an eight month high against the Dollar as concern that the U.S. may require additional stimulus measures to boost its economic recovery damped investor appetite for the Dollar. as long the USD\JPY is trading below 87.0 level a short position is preferred and the momentum is clearly bearish, the next support is located at 85.60, the 10 moving average support a downwards trend as well. Overall, USD/JPY traded with a low of 85.66 and with a high of 86.60. No economic data expected today.

USD/JPY-Last: 85.51

Canadian dollar (CAD) – The Canadian Dollar depreciated for the first time in four days as signs of weakening growth in the U.S. the nation’s largest source of trade point to diminished economic prospects. As long the USD/CAD below 1.0400 levels the momentum is bearish, the next support on the daily chart is located at 1.0140 and the next resistance is located at 1.0300 levels. Overall, USD/CAD traded with a low of 1.0219 and with a high of 1.0274. No economic data expected today.

USD/CAD – Last: 1.0236

Forex Trading: Limit order 16/07/2010. Sell GBP/CHF @ 1.5970 , SL @ 1.6145 , TP1 @ 1.5875 TP2 @ 1.5810 TP3 @ 1.5740

The pair has been  trending downwards and has made a small retracement upwards.

We want to enter the main trend which is still downwards but first wait for a confirmation the trend continues.

The entrance point is located below the last bottom the pair has made on the 4 hour chart.

More aggressive traders could try and short the pair from its current location but they should be advised the retracement upwards might continue higher and a SL of above 1.6170 is recommended for such traders.

 The RSI is near 50 in neutral territory.

SL is located above the last top the pair has made yesterday and above the 100 period moving average which is likely to act as a resistance for the pair.

TP’s are located  slightly above the support levels the pair has.

All analysis is based on the 4 hours chart.

Current rate: 1.6075

USD/CAD:

We have noted several times a formation we refer to as a Step pattern.  More commonly this is identified by Lower Lows and Lower Highs and vice versa.  We picked up on this pattern emerging on a 4 hours chart.  We identified the possible start of this pattern shortly after the BOC  publicly declared it’s sentiment for a “weak Canadian Dollar”.  We assured you that there would still be time to catch this move even if you could not trade the actual news.

We suggested that you wait for the Step to appear and buy on the dip which was a confirmation of our pattern formation. On the graph that it is depicted near the 3 and a yellow circle. The exit for taking PNL we had at 1.0660 a prior support resistance point.

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EUR/USD:

The Squeeze Play.  We talked about this move where we are seemingly forced into a breakout.  In one of our earlier pieces we mentioned that our experience told us not to bet on the Squeeze Play, meaning trade against the direction of the existing trend.  I must admit we got carried away by the hoopla of crossing 1.50.

So the question you all should pose” is why in this case do you bet against the trend when one of the number one rules of technicians is never bet against the trend”.  The answer is based on the number two rule of technicians and that is; trade for the outcome that has the highest statistical probability of occurring.  To explain this further lets pose a question.  Why didn’t the market make this move a while ago similar to the recent strong moves in CHF  & AUD?

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The answer is the Strength of the move was deteriorating in advance of 1.50.  Every trader had their   eye on  1.50, but obviously no one was a real buyer (for now) otherwise at 1.4830 when momentum started to stall we would have had traders continuing to bid up the EUR.  Lastly, when price action was negligible on the big cross of 1.50 that should have been another tip that there were no big orders lined up to continue buying north of 1.50.

We added  a MACD to indicate when the momentum started to wane. There are number of overbought tools on your platforms that you can use, from Stochastics and Oscillators to something as simple as the RSI.
Analysis by http://www.golearnforex.net