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Barrage Of Risk Events On Schedule

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Dec 3, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD finds itself at the lower realms of its value against the EUR and GBP after Wednesday’s trading. The ADP Non Farm Employment Change report was published yesterday and produced an outcome of minus -169K, which was worse than the estimate of minus -149K. Today the weekly Unemployment Claims figures will be brought forth and are expected to have a number of 479K, which would be slightly worse than last week’s result of 466K. Also of importance today will be the testimony from Fed Chairman Ben Bernanke who will be in front of the Senate Banking Committee explaining why he should be allowed to serve a second term. Tomorrow will be the always critical Non Farm Employment Change numbers from the U.S. government. Yesterday’s trading in stocks turned in mixed results and this was likely because of the barrage of economic risk events that will be coming today and tomorrow.
    The unemployment figures and jobless statistics that are on schedule will be enough to make investors take notice. However, the results from the equity markets since March have proven that data is not necessarily the determining factor while assets with a potential for greater returns are considered. Questions persists regarding the ‘market disconnect’ from the real economy. Can revenues from companies live up to what has taken place the past nine months on international bourses? Unemployment figures continue to signal that job creation remains a difficult task. Consumers will be increasingly under the microscope taking into consideration the holiday season, and if joblessness continues to cast a dark shadow, good retail results will be hard to come by. Ben Bernanke’s testimony may create news today depending on the depth of the questions and his rhetoric. Today and tomorrow may prove to be instrumental days for the USD as it hovers near the weaker side of its range.

    Though it was a quiet day of data from Europe on Wednesday the EUR continued to find enough support to push it near its highs against the USD. The European Central Bank will take center stage for investors today. The ECB will certainly not hike its interest rate but the possibility exists that it may begin to introduce the notion of a variable rate depending on the borrower. Also of critical importance will be the comments coming from ECB President Trichet this afternoon. The EUR has been remarkably strong the past few months and its trend has been rather constant during this upsurge in risk appetite. The problem that President Trichet has is that the EUR is too strong, and it will be of keen interest today to see if he expresses misgivings about its strength. The outlook for the European economy is still clouded and data has shown this from a wide variety of spheres. The EUR is hampering its own exporting economic powerhouses to importing giants such as America because of its present value. However, due to the current low interest rates internationally, the EUR may continue to find takers until a sea change takes place in the degrees of risk appetite that certain asset classes are receiving.

    The Sterling finds itself at the higher end of its range against the USD going into today’s trading sessions. The Construction PMI statistics were released yesterday and turned in a number that almost matched expectations with a reading of 47. Today the Services PMI data will be brought forth and the anticipated result is 57.1, which would be an improvement over the previous report. Tomorrow the Halifax HPI is tentatively scheduled. The GBP continues to turn in a very curious trading range with so many economic issues shadowing it. Traders who have participated in the Sterling have found abundant price movement for a few months and going into these last two days before the weekend, it will likely find rapid price action again.

    The JPY continued to weaken slightly against the USD as Asian bourses including the Nikkei moved positively. The JPY however does remain near the high end of its range against the USD and investors must take into consideration short term outlooks versus long term endeavors. The strong JPY is being met with derision from a number of Japanese leaders who understand that the strength of the currency is not helping its economy. Gold continues to test its record pace and is trading near it highs.

    Uncertainty Still Strong In The Equity Markets

    I continue to gladly stand aside from this market. The only way I would really venture into this market would be from a day trader’s perspective. We traded higher on the open and about half an hour later began to retrace the whole up move only to form new lows. The market closed less than half a point away from the open forming a doji candle with a nice selling tail. On a five minute chart there are really only two or three good trading opportunities and they all occurred within the first three hours of trading. Yesterday I suggested that this market wanted to trade higher but I would continue to stand aside. It did trade higher, and broke through resistance, but notice how badly you can be hurt if you venture into a longer term position with that bullish mentality. Play the American equity market with caution as it seems that indecision is currently omnipresent. Support 1103.4, 1099.1, 1084.9, 1076.6, 1068.9 Resistance 1115.58, 1153.8

    This precious commodity continues to make new highs and dazzle all those that are watching it. We made a new high of $1226.60, and retraced $9. When I look at this chart, I see our favorite trading pattern of consolidation followed by a push higher, followed by consolidation etc. However, as I have been suggesting over the last couple of weeks, I am not certain this market will trade much higher. Reason being is that when I look at how the consolidation and push higher is forming I see that it is no longer as clean as it once was with well defined support and resistance levels. Notice how in the last highlighted area on this one hour chart we broke below support into our previous area of consolidation (or trading channel). There are traders out there who are taking profits on their long positions, and seller who think we may have pushed too far too fast. At some point they will overcome the huge population of buyers who have been dominating the gold market for the last three and a half months. Support 1217.1, 1205.65, 1194.6, 1181.75, 1175.2, 1163 Resistance 1226.6…

    The Sterling continues to trade within a well defined trading range. I continue to stand aside, and will probably attempt to buy the bottom of this range or sell the top. As we neared 1.6743 again, I decided against selling, in case we broke up to 1.6876, but in hindsight that was a mistake. I could have sold around 1.6710 with a 50 pip stop with and held onto it with a target near 1.6249, or almost 500 pips! Worst case scenario I would get stopped out and sell it again near 1.6876, with a similar stop and target. In the meantime my standing aside mentality may be clouding my judgment. As I have repeated in the past, always identify the market you are trading. This one is definitely a range bound market and we have to continue to sell resistance and buy support. Support 1.6590, 1.6461, 1.6379, 1.6249, 1.6119 Resistance 1.6743, 1.6876, 1.7042

    The Euro Zone currency has been able to maintain its momentum against a US Dollar that tried to push higher yesterday. Today as the greenback trades lower, the Euro is near resistance of 1.5145 and is looking strong. Next stop from here should be 1.5284. The uptrend is holding and each time we do trade close to it a nice buying tail forms confirming the strength behind this market. Entry should have been around 1.4970 as we formed a good support level. While many are claiming the EUR/USD is overvalued, technically it is looking strong and there is not much in the way to stop it. Play this trade with caution however, because any real dollar strength could send this currency spiraling downwards. Support 1.5062, 1.4970, 1.4828, 1.4683, 1.4449 Resistance 1.5145, 1.5284, 1.5343, 1.5460.

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