I have not been that active for awhile but yesterday was exceptional and I was kinda surprised when I looked at my trade blotter. I traded in EURUSD, EURGBP, EURAUD, EURJPY and USDCAD. Of course, as far as the EURxxx are concerned, it was entered at different phases and not all at a go. That is something I want to share for the purpose of learning. Never over-expose yourself on the same same currency cross just because they all gave the same buy or sell signal (they often do when broken out of range). In case you are wrong, they normally will be wrong for most. Learn to be conservatively aggressive even when trading with a high confidence level.
EURUSD
E$ finally retested the 100DMA (blue) as expected. So what's next? Not surprising, it seems like the market is starting to factor in a resolution to the U.S. fiscal cliff. It is not in the interest of whichever party to see the country fall further into the abyss as a result of politicking. There will be a bipartisan resolution at the eleventh hour! In view of that, I see a firmer USD environment going into year end. Then one will question me as to why the E$ would move higher then.... let me remind you once again that the euro is actually the next most popular left hand side currency. As the market sells the AUD, NZD, GBP and JPY against the USD, they buy the EURxxx too.
Order book is reflecting active participation too:
Stop loss: 1.2650/55, 1.2680, 1.2700/05, 1.2803, 1.2812 and 1.2820
Limit: 1.2700/05 and 1.2850
Technically, intraday indicator still has room for more upside. Price action is still on a healthy gradient with momentum still firming pointing higher. The rally in the EURAUD has the characteristic of a reversal at the early stage i.e. powerful. This supports the view that E$ should have more mileage on the upside.
For today, expect market to consolidate within 1.2750/60 to 1.2800/10 before breaking higher for 1.2850/60. Risk to below 1.2715.
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| E$ Daily chart - Fibonacci retracement levels |
Now you are going to question why I am going short USDCAD when I see USD strength. Sometimes, I get the signals from my technical tools before I analyze the possible rationale. Admittedly, this trade is against the weekly trend but signal is strong. The unwinding in the inter-commodity currencies (i.e. AUDCAD & NZDCAD) will put pressure on this pair for now. Bearish divergence and weak momentum support this view.
For today, 1.0050/60 should cap and I expect it to fall towards 0.9940/50. Watch the price action when it tests 0.9970/80.
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| $CAD Daily chart - Bearish divergence |
USDSGD
This currency pair often acts as a confirmation of a change in the USD trend. Why? because it does not lead, it follows as the SGD is weighted against a basket of currencies of our trading partners and it reacts according to the relative value. Fundamentally, the Ministry of Trade & Industry (MTI) cut its 2012 GDP growth forecast to the low end of the estimate at 1.5% and forecast 2013 to be within 1-3%.
Technically, USDSGD has broken out of its consolidation and down trend line (see chart) and this has increased the probability of heading towards 1.2380 and then 1.2500 in the weeks ahead.
All the best and have a great weekend!!
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