Seven Days Ahead - Free Market Updates

USD/CHF Slip Back Nearing First Supports

Fri, 03 Feb 2012 00:00:00 CET

3rd FEB - USD/CHF Slip Back Nearing First Supports

Fri, 03 Feb 2012 00:00:00 CET

WEEKLY CHART:
Recovery here breached channel top resistance, with focus turning to the 0.9674 Mar-08 low as next possible resistance, which has been effective.
Later on, the higher 0.9955 61.8% recovery level and higher rising return line are the next technical levels of note.

DAILY CHART:
The current slip back leaves our next Fibo projection at 0.9724 out of reach for now.
Current downside focus is on potential support from the 0.9000 23.6% pullback of the recovery from last Aug's low. Below this note support offered by the projected channel base at 0.8890 just now. Breaks of these would suggest a more prolonged corrective phase was underway, with next target being the 0.8635 38.2% retracement area.

2ND FEB - Dollar Euro is it a sell?

Fri, 03 Feb 2012 00:00:00 CET

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2ND FEB - Dollar Euro is it a sell?

Fri, 03 Feb 2012 00:00:00 CET

TECHNICALS:

WEEKLY CHART

The market has long-completed a large and powerful bear Head and Shoulders pattern that is trying to send the Euro a lot weaker – at least as far as 1.13 or so.

But the initial completion move has been reversed - sharply – and the market is retesting the resistance from the Prior low at 1.3149 and the Neckline of the H&S pattern is more powerful resistance still… around 1.33.

DAILY CHART

Here is the detail: the market has achieved an exact 38.2% retracement, and in addition felt both the bearishness of the 1.3149 horizontal and the influence of the neckline.

All three have combined to put a lid on the rally.

But there has been no pull-back yet. Bears are clearly nervous of selling.

A break of any of the levels on the downside at the Fib levels of 1.3006, 1.2930 – might be useful triggers for the bears to begin selling….

FUNDANENTALS:

Late last year, as the US economic recovery began to show signs of picking up speed and the Euro zone seemed to be sleep-walking to a disorderly collapse, the Dollar rallied hard against the Euro.

Despite repeated attempts to rescue Greece and other weak peripheral economies, the news feed pointed one way - the eventual break up of the single currency driven by:

1.The inability of the Euro zone leaders to agree a formulae capable of resolving the debt crisis,

2.The reluctance of Germany to listen to any plan that didn’t involve fiscal austerity,

3.Germany’s refusal to allow the issue of Euro zone bonds,

4.The ECB’s refusal to embark on quantum easing, and

5.A lack of a growth strategy to help Greece et al cut back debt, cut spending and raise taxes in a sustainable way, without needing yet another future bailout.

●

However, at a last-ditch summit that was meant to resolve the issue once and for all, Germany finally got her way, albeit without the support of the UK. A de facto fiscal Union is now the goal of 25 of the EU states. Budgetary controls enforceable by treaty are agreed and Greece continues to negotiate with her private creditors a deal designed to impose a 70% haircut on the Greek government debt, which is a default in all but name, but isn’t disorderly.

While there is no guarantee that yet more austerity will work, and that Greece will be able to agree a deal, the clock continues to tick towards a Greek default.

If Greece fails to get the agreement of her creditors, the Germans look set to block the next tranche of her rescue funds. Moreover Germany now wants Greece to cede budgetary control to a new EU budget commissioner which Greece says it will not accept.

Meanwhile traders have become optimistic that a deal to save the day is now more likely than not and the Euro has recovered a degree of lost ground against the Dollar.

But is this a reversal or a correction?

Lets examine the US side. The US economy has shown greater strength, but over the last few weeks data has cooled a little with Q4 GDP under-shooting consensus with the strongest component a worryingly larger-than-expected inventory build-up.

Last week’s FOMC meeting reiterated the Fed’s concerns about the outlook for US growth saying downside risks remain.

In fact, so concerned were US policy makers that they extended, by one year, the period they expect to hold rates at current lows and Bernanke said he has his finger on the trigger of a 3rd round of QE. All of this helped undermine the Dollar.

But we judge this to be mainly noise.

The US economy is recovering, just not as swiftly as policy makers would like and are used to. The Euro zone economy remains balanced on a knife edge and a Greek default which would likely start a domino effect within the Euro zone, cannot be ruled out and it looks questionable whether a policy of austerity without a growth plan will work.

On balance we judge a correction has occurred NOT A REVERSAL and the Dollar remains Bullish.

Carbon Emissions Enjoy Modest Recovery So Far

Thu, 02 Feb 2012 00:00:00 CET

02nd FEB - Carbon Emissions Enjoy Modest Recovery

Thu, 02 Feb 2012 00:00:00 CET

WEEKLY CHART - CONTINUATION
Last year's violation of the major 8.05 Feb-09 low turned focus on lower targets, such as the 5.60 equality target (May/Aug downleg extended off 13.55 31-Aug high).
But will this be reached...? See below.

DAILY CHART - Dec-12:
Our latest Fibo projection, at 6.40, has provided support so far. The relatively modest bounce off this is nearing a falling support/return line.
This is the start of an interesting resistance area that includes the 9.35 23.6% retracement and 9.80 04-Nov low. These earlier provided resistance in Dec.
A break through this area would be a positive signal, and initially target the 11.20 38.2% retracement level.

Cable remains delicately poised

Fri, 27 Jan 2012 00:00:00 CET

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27th JAN - Cable remains delicately poised

Fri, 27 Jan 2012 00:00:00 CET

TECHNICALS:

MONTHLY CHART

The market has ( for the moment ) retreated from the completion of a bear continuation triangle – formed at the important long-term rising diagonal from 1984.

That is the lower diagonal of a bear rising wedge – the completion of the Triangle would thus signal the completion of the bear wedge.

WEEKLY CHART

Here is the detail of the Triangle and the structures apparent within it.

Again we see a bear rising wedge.

But more importantly, note well the Head and Shoulders reversal - close to completion.

A completed H&S pattern would be a catalyst for the completion of the bear triangle.

76.4% Support in USD/JPY Prompts s/term Recovery

Thu, 26 Jan 2012 00:00:00 CET

76.4% Support in USD/JPY Prompts s/term Recovery

Thu, 26 Jan 2012 00:00:00 CET

WEEKLY CHART:
The downmove has so far held above bear channel base support. There is currently little else to suggest that the bears are tiring.

DAILY CHART:
Following the late Oct-10 spike high of 79.51, subsequent weakness has more than once been supported by the 76.4% pullback level.
A positive sign would be recovery through the Dec congestion highs in the 78.20s. However, a better bull signal would come from a push through the 38.2% level.

Crude Oil Holding Below Key Resistance

Thu, 26 Jan 2012 00:00:00 CET

Crude Oil Holding Below Key Resistance

Thu, 26 Jan 2012 00:00:00 CET

WEEKLY CHART - CONTINUATION
So far the correction has found support close to a 50% pullback level.
The relatively choppy price action since May-11 has kept the bears cautious.

DAILY CHART - Mar-12:
In the Commodity Specialist Guide we have maintained an overall bear stance but, following the early Jan violation of the falling resistance line, bears have been put on a cautious footing.
The recent slip back has tested support from the falling old resistance/return line. Below here note the rising support line at 105.60, which needs to be broken to restore bears' confidence, followed by a drop below the 101.86 19-Dec low.
Meanwhile the 116.00 76.4% retracement offers key resistance and a breach of this should change the technical picture and call for higher targets.

EUR/USD Bouncing Off 76.4% Support

Fri, 20 Jan 2012 00:00:00 CET

EUR/USD Bouncing Off 76.4% Support

Fri, 20 Jan 2012 00:00:00 CET

WEEKLY CHART:
The drop back from rising return line resistance has now tested close to the 1.2600 76.4% level. In the FX Specialist Guide we were on the lookout for temporary support here, and this has been seen.

DAILY CHART:
On the Daily chart we have been looking at potential support from a bear channel base projection - and this has proved effective.
The initial target for the (so far) modest recovery is the 23.6% retracement just above 1.3000. Beyond here the next barriers are offered by the 1.3144 Oct low ahead of the 1.3144 38.2% 38.2% level. These latter could be a struggle to get through shorter term.

Key Resistance Area in CRB Index

Thu, 19 Jan 2012 00:00:00 CET

Key Resistance Area in CRB Index

Thu, 19 Jan 2012 00:00:00 CET

WEEKLY CHART
See how good support has come from the area of the 293.75 Jan-10 high and 294.40 61.8% level.
This now offers an interesting base for a recovery but there are levels on the Daily chart that need breaching.

DAILY CHART
The Index again rebounded from near a Fibo projection, in Dec. So far the recovery has been modest, resisted by the falling resistance line.
Beyond here is the earlier 38.2% resistance area. Breaking both of these would strongly suggest that a recovery phase was underway, calling for higher targets.

EUR/GBP Violating Further Supports

Fri, 06 Jan 2012 00:00:00 CET

EUR/GBP Violating Further Supports

Fri, 06 Jan 2012 00:00:00 CET

WEEKLY CHART:
Latest weakness here has finally seen breach of earlier ‘support' from the old falling return line. Focus has now returned to the previous 0.8190 76.4% level, ahead of the 0.8065 2010 low.

DAILY CHART:
After breach of the medium term channel base our focus had turned to the projected bear channel base support . This has now been eroded , with s/term risk of an acceleration downward.
The next interesting downside target on this chart lies at 0.8010, a Fibo projection.
Any rallies at this stage could find good resistance from the area of the 0.8482 10-Nov low and old channel base just above.

Cotton Nears Long Term 76.4% Support

Fri, 06 Jan 2012 00:00:00 CET

Cotton Nears Long Term 76.4% Support

Fri, 06 Jan 2012 00:00:00 CET

WEEKLY CHART - CONTINUATION
Support from the 91.38 Mar-08 high area has been eroded, and we now await better reaction around the 81.60 76.4% retracement.
Currently, first interesting resistance on this long term chart comes in around 118.00.

DAILY CHART - Mar-12:
Weakness on the Daily chart has so far stopped short of the 81.20 Nov-10 low. Currently interest is as much in the long term chart and potential support from the 76.4% level.
Here, first resistance has been offered by the base of Oct/Nov congestion at 95.00. More key, though, is the area of the 103.55 38.2% recovery level and channel top projection at 105.90 - a breach of this would be a clear bull sign.

Just the beginning for the Dollar Euro

Fri, 16 Dec 2011 00:00:00 CET

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Just the beginning for the Dollar Euro

Fri, 16 Dec 2011 00:00:00 CET

TECHNICALS:

WEEKLY CHART

The market looks to have completed a Head and Shoulders reversal.

Bears have been further excited by the push down beneath the Prior Low at 1.3149 – which is additional resistance on any rallies.

Note the minimum move down to 1.15 or so.

The bears are in charge.

DAILY CHART

The day chart shows the sell-off throughout November - the initial reluctance to break down through the Prior Lows is clear too at the end of November.

Then the final breakdown….

We think the market will struggle to recover – now there’s such good resistance above the market to overcome.

FUNDAMENTALS:

Despite last week’s summit, meant to fix the Euro zone sovereign debt crisis, the Euro remains under pressure. Unable to agree EU-wide treaty changes due to a UK veto, Euro zone leaders settled for second best; agreement on an intergovernmental basis covering new fiscal rules, discipline and penalties.

The agreement, unlikely to be in place before next March at the earliest, relies almost exclusively on austerity as a means to fix the problem.

But cutting spending for many Euro zone countries to a level where their budgets move towards the level demanded by the new agreement, will almost certainly consign them to years of recession, since countries like Greece rely on public spending as a major economic motor, choking it off to reduce debt will turn the economic motor off economy-wide.

The Germans seem not to see this, they argue their economy is run on strict fiscal rules and thrives, and so it does but why?

The German economy has world class manufacturers that most can only dream about, but make no mistake, despite their excellence if Germany still had the D Mark those same exporters would struggle due to the much stronger domestic currency.

The Euro, even before the recent spell of weakness, was much weaker than the D Mark with interest rates also lower than they would likely have been if under the control of the Bundesbank.

T he reason for this is that the Euro is comprised of 17 economies, many of them weak and debt-ridden, so allowing Germany to benefit. If at German insistence, the Euro zone periphery were able to cut debt and suddenly grow vibrant private export-oriented industries, interest rates would rise and the Euro would be much stronger; German industry would lose its competitive export edge.

But clearly that isn’t going to happen.

The austerity plan will shrink debt, but it will reduce wealth-creation making it harder for those countries affected to service even reduced debts, we have seen that clearly with Greece. Despite an initial bailout and austerity program, she had to return with an even bigger begging bowl, but accept deeper cuts and so the downward spiral continues.

Now the cuts demanded and due to be implemented, if the 26/27 get their Parliaments to agree, will shrink the economies of more EU nations whether in or out of the Euro.

Germany may have to fund the rescue fund, or at least shoulder the biggest burden, but with the Euro weak and interest rates at all-time-lows her industry gains a big competitive advantage.

The plan agreed is designed to stop a crisis such as this happening again, but does not deal with the here and now. The ECB will keep interest rates low to try and support growth. Inflation will probably collapse. Economic growth will go into reverse and the reduced debt burden will seem as troublesome as before.

The result may yet be Euro zone deflation.

The Euro looks a clear-cut sell.

USD/CHF Breaking Through 76.4% Resistance

Thu, 15 Dec 2011 00:00:00 CET

USD/CHF Breaking Through 76.4% Resistance

Thu, 15 Dec 2011 00:00:00 CET

WEEKLY CHART:
The recovery has now breached a channel top resistance, with immediate focus now on the 0.9674 Mar-08 low as next interesting resistance.
Beyond here the 0.9955 61.8% recovery level and higher rising return line are the next technical levels of note.

DAILY CHART:
Following the relatively modest Oct pullback the bull move has continued, now violating the 76.4% level of the Dec-10/Aug downleg.
This initially turns focus on a Fibo projection at 0.9724. Interest is as much in the longer term charts at present.

Cocoa Drop Hits Long Term 76.4% Support

Thu, 15 Dec 2011 00:00:00 CET