Changing market dynamics: equities and commodities down and USD down as well

Interesting developments today. Staggering 5.6% loss in Chinese equities is weighting on commodities as oil slips back below the key $70 price level and gold has not been able to sustain last week's gains either. US equities are currently down about 1%. Over the past many months such price action would imply strength in the buck. Not today. USD is down across the board. Even USDCAD is barely changed despite the fall in oil. JPY is the broad winner today after democratic party won Japanese election for the first time in 50 years.

When it comes to trading signals I'd recommend buying USDCAD especially in light of today's worse than expected GDP number (0.1% vs 0.2% expected) and falling oil price. USDCAD just touched our 30 hour ema which warrants a long position with stop at swing low bellow 1.0955. Williams' %R pretty close to oversold levels confirms this setup.

Good trades.

Majors little changed after yesterday's massive reversal

Summer trading with it's thin liquidity at it's best... After yesterday's massive reversal majors are little changed compared to closing prices. Unemployment in Japan hit record high, UK economy shrank less than expected and US consumer spending was up slightly but less than expected.

Gold and oil exploded yesterday but there has been only a little follow through. US equities are in red and over the past few minutes risk aversion seems to be creeping back into the markets. Considering that it's Friday and market has not revealed where it wants to go the best thing to do is wait for the next setup.

Wow!!! The importance of stops!!!

Massive reversal happening now just confirms the importance of using stops. Completely unpredictable move that happened over the past few minutes took my stops out. Risk trades came back with vengeance - equities, oil, gold, high yielders all up. USDCHF broke down 140 points in matter of few minutes. Retrace is likely but considering the severity of the move additional USD weakness is likely. Changing strategy to sell USD on strength.

Good trades

Not much follow through despite oil below $70

Majors are little changed since yesterday. GBPUSD broke to a new low 6152 but retraced a bit. JPY crosses are slightly down but failed to create lower lows compared to yesterday. Surprisingly, even USDCAD has not moved much since yesterday despite oil plunging below psychologically important $70 figure.
US news brought preliminary GDP figures coming at -1% (still better than expected -1.4%). Important unemployment claims edged up higher to 570K from last week's 562K.

10, 20 and 30 ema's are nicely stacked for a bullish move in USDCHF. Place a buy stop above yesterday's high 1.0713. Should the market decide that higher prices are warranted the order will fill you in. Or you can buy a test of 20 hour ema around 0680 with stop below 1.0660

Similar strategy could be used for USDCAD. Buy a break above 1.10 - should this level give way 1.11 is next. However, take profit there as strong resistance from previous highs may stall the up move.

Good trades

USDCHF and USDCAD charts looking essentially the same

Bullish move in USD can be nicely seen on USDCHF and USDCAD charts. On both charts the price broke important trendlines that will now work as a support. Price has also broken 10, 50, 100 and 200 EMAs and unless we break back down (which is very unlikely now) the emas will stack up nicely in the correct bullish order. For today the move seems exhausted so you may want to close existing positions to realize profit and buy again on pullbacks to the 10 EMA. US equities are back in the red, risk aversion intensifies, high yielding currencies are sold in favor of USD. This move is not over yet. For now, stick to buying USD on pullbacks.

GBPUSD short, USDCAD and USDCHF long all positions positive

As predicted on Monday, GBPUSD broke down quite significantly and reached levels not seen since mid July. USDCAD formed a base and continues it's strong move up. Since yesterday it is up 100+ points. USDCHF long recommended on Sunday is looking great as well, currently up about 60 points as I bought twice on the way down.

USD is stronger across the board despite better than expected German IFO coming at 90.5. US new home sales surprised again and helped to push US equities up from previous negative territory. I expect further USD strength and weakness in equities. (despite the fact that equities have stubbornly stayed bid for longer time than I expected) Buy USDCAD and USDCHF on pullback, sell GBPUSD on strength.

EURGBP bullish move may stall around 8850 area

As expected (and mentioned in previous posts) EURGBP has experienced a large bullish move over the past few days caused by stagnant EURUSD and bearish GBPUSD. However, be aware of a major trendline resistance coming at around 8850. Williams %R as well as stochastics show significantly overbought levels. It is true that currencies, especially EURGBP, tend to stay overbought or oversold for many days but in this time around the price has been overbought for over a week. Pullback may therefore be due. Tomorrow we are getting German IFO numbers. If these numbers surprise to the upside it may propel EURGBP to the aforementioned 8850 level easily as IFO has always been a big EUR mover. I'd recommend keeping relatively tight stops to protect gains or placing limit orders at around the 8850 level as stalling/pullback is expected. Long term targets are much higher but for shorter/medium term trades, taking profit ahead of this major resistance point makes sense.

Good trades.

USDCAD base in place, bias shifts up. Buy on pullbacks

USDCAD is moving relentlessly upward due to oil dropping significantly. Base has been formed at 1.0720 and today's very bullish price action points to further gains. Trend line resistance has been broken, price came back to test the trendline this time working as a support and bounced back. Macd gave bullish crossover signal and macd line will soon move over the zero line as well. Unless we close below 1.08 than USDCAD formed a bullish engulfing pattern on the daily which is a very powerful buy signal. Currently we are trading around 1.0850.
Sometimes charts just look amazing! This is one of those times.

Good trades.

GBP shorts looking good

Not much change since last post. Exactly as predicted, GBPUSD reached 1.6440 and since then broke down so now the position is about +65 points. In case of EURGBP, the price is probing 8750 up about 50 points from yesterday.

US consumer confidence surprised to the upside at 54.1 (expected 48.1). However, that news did not help to push the price action from yesterday's range. Equities are up but lost much of earlier gains. In FX, majors are changed only marginally. Interesting price action formed in USDCAD which shot up from 1.0720 to 1.0815 in matter of minutes. USDCAD close around the 1.08 area would signal a base forming. From which bullish move could be expected.

Good trades

GBP looking very weak

Looking at 4h charts, GBP is looking very weak. Against the buck, Sterling is at the lower end of the recent trading range. 10, 20 and 30 EMAs are all nicely stacked with good angle and separation. Any rallies need to be sold as these EMAs will continue to provide resistance levels. Only close above 6680 would turn bias up. Test of previous low at 6270 is in play and will probably happen sooner rather than later. Sell preferably at a test of 10 ema around 6440.

EURGBP continues to move up as noted in previous posts. Again, EMAs are nicely stacked, sloping up, providing support. Buy on pullbacks to the 20 EMAs currently at around 8670.

QE by the BoE will continue to hurt the Sterling. Larger declines could be in play so trailing a stop as opposed to using a limit to close open positions makes sense.

Good trades.

No news announcements bring a slow session

No news announcements from EU or US are behind relatively slow trading session today with USD only marginally stronger against the majors. The only news we got in the morning was CAD retail sales that came out better than expected (+1%). Against the CAD, the USD broke down and reached a low of 1.0730. Second long USDCHF position recommended yesterday working out quite nicely with average price now around 1.0615. Equities were doing quite well in the morning, now those gains have disappeared as they entered a negative territory. EURUSD is currently breaking below 1.43 which is not only a psychological level but also a trendline support. Close below 1.4270 would be majorly negative for the EUR.

Good trades.

Sticking to long USDCHF in medium term

USDCHF broke down to test lows from May 2nd and August 3rd. Stop at 1.0490 still valid and for now relatively safe. I'd recommend adding to the long position at current levels targeting price around 1.08. Unless price breaks down significantly daily stochastics are about to cross giving a bulling cross over signal. Patience pays as stochastics are often oversold for many days in a row. As pointed in previous posts, oil is at very important level. If oil breaks back down to around 71-70 level, it could indicate a failure of risk taking trades suggesting prolong pullback in high yielding currencies and USD strength. We could see USD sell during Monday and then "turn around Tuesday" could bring new USD strength.

Gold chart shows a very bullish candle. However, there are numerous resistance levels. 958 first then trend line resistance at 967. Risk trades up on Monday, spectacular failure and "turn around Tuesday" is what I expect.

Good Trades.

USD sold across the board as data surprises to the upside

USD is sold across the board as German services PMI surprises with a number much better than anticipated. After many months of contraction we got 54.1 (number above 50 indicating expansion). US data surprised with existing home sales that were significantly better than expected. As a consequence risk appetite came back, equity markets jumped up and are currently up triple digits, oil and gold are up sending USD and JPY (safe haven currencies) down. However, in case of GBP the chart does not really look that good. Initial GBP buying was quickly followed by strong selling pressure indicating that GBP move was caused by USD weakness not GBP strength. In case of EURUSD and USDCHF moving averages are stacked nicely indicating further USD weakness. In case of GBP the moving averages started to indicate further USD stregth. GBP weakness can be nicely observed when looking at bullish EURGBP formation. Selling GBPUSD on strength continues to be the preferred strategy.

Good trades.

Medium term long USDCHF

USDCHF has been supported by 1.06-1.0650 area since beginning of May. 1.0650 coincide with 61.8% retracement of the huge bull run from 0.9637 to 1.2297. This level may therefore provide a very significant level of support even for long term players. Buying at current levels (1.0650) with 1.0490 stop (risking 160 points) and having a limit for half the position at 1.0850 and trailing the second half might be a good trade. If we trade around 1.0750 you may consider placing a stop at break even to protect your equity.

SNB would probably continue to intervene by selling the CHF should the CHF strengthen abruptly.

There are plenty of USD bears out there but today there is a rumor that Pualson investment company is long USD... good to know someone might believe in the greenback.

Good trades

EURUSD and others at critical point

EURUSD pulled back a bit off the highs allowing us to exit our short trade without a loss. The 1.4250-70 area is enormously important as a break of today's highs would indicate a very bullish signal. If oil breaks its recent highs around 74 it could explode higher sending USD down across the board. USD index is closing very weak but still holds the recent low around 78.20 area. Break of this level would send the buck to 77.50 lows.

EUR, oil, $USD index... regardless of the direction it is likely to be exciting session tomorrow.

Good trades

EURUSD well bid

EURUSD has been very well bid for quite some time so there is likely to be follow through. I advise to close the short trade at break even.

EURUSD stop at 1.4275 held

EURUSD reached 1.4266 high leaving our stop at 1.4275 intact. Let's hope the move is exhausted and EUR will head back lower. However, considering the strength of the move, it's likely that EURUSD will be rangebound for a few days. Rising US equities underpin EUR. Really conservative traders may want to get out at break even and reshort at a higher price.

Good trades

USDCAD retraced on oil data

USDCAD was punished after oil inventories showed much larger than expected decline. CAD jumped higher on the news dragging the USDCAD rate from 1.1113 high to a low of 1.0954. Period of consolidation is expected then USDCAD could resume it's uptrend. Trend line support above 1.09, and 38.2% retracement at 1.0934 should provide strong enough support. Currently price sits at 50 SMA on 4h chart. 100 SMA support close to a trend line.

Good trades

Sell zone for EURUSD hit

EURUSD sell zone that was first mentioned yesterday was hit. 50% retracement at 1.4247 provided sufficient resistance. Stop at 1.4275 recommended. Target 1 1.4170, target 2 1.4130. Williams %R in overbought territory has started to turn.
Crude oil inventories were much lower than expected which boosted the price of oil. If oil continues to creep up, recent high correlation between EUR and oil could support EUR.

Good trades.

attempt light GBPUSD shorts

After USD was sold across the board, majors started their retreat from the highs. All majors except for GBP broke below their 10 ema and are about to break below their 30 ema on 5m charts. GBP is still bid but considering how much it moved over the past couple of hours light shorts might be a good play as GBP will probably play a catch up.

EURUSD strong downtrend intact

Despite modest retreat in EURUSD prices which can be attributed to better than expected German ZEW sentiment index, EURUSD is still in a clear downtrend as indicated by bearish MACD momentum. I expect that rebound will find a stiff resistance at 1.4170 (yesterday high). In case this level is breached additional resistance lies at 1.4200 which is not only trendline resistance but also 38.2% retracement of the fall from 1.4447 to 1.4045. Selling into strength makes sense.

Good trades

USDJPY short working beautifully

So far USDJPY behaving as anticipated. High was 95.01. Currently position is 28 points in the money. Conservative short term traders may wish to place a stop at break even and/or take profit on half the position and trail the rest.
Tomorrow might be "turn around Tuesday" but in light of 2%+ losses in US equities and increasing risk aversion I doubt that we will see any improvements. I do not anticipate any positive surprises from tomorrows GBP CPI and EUR ZEW

Sell USDJPY on strength around 95.00

Wait for a retracement into 95.00 area and re-short.

Sell on strength.

Good trades

Further losses in USDJPY seen

Heavy losses in global equities markets dragged JPY crosses down today. USDJPY sits right at the 50% retracement of the run from 87.10 to 101.43. If this level gives way, which I anticipate, next level of support is 38.2% at 92.57. MACD bearish cross from 3 days ago also points to strong bearish momentum. USDJPY on a daily chart is below 10, 50, 100 and 200 SMA further pointing to additional weakness.

Good trades