Thursday, 31 January 2013

The correction....

Good afternoon friends!! Can you believe today is the last day of January 2013 already?

E$ surged in NY to 1.35878 high taking out barriers and technical resistances (Fibonacci 61.8% @ 1.3535 inclusive) with ease. However as expected, month end profit taking should put initial pressure and start a corrective move lower. Heard from the market that starting from 1.3600, at every 50 pips, there are barrier options up to 1.3800.

Asia order book:
Stop loss: 1.3410/05 and 1.3450/40
Limit: 1.3380 and 1.3480

Technically, intraday indicators are in o/b levels and momentum is starting to turn from up to consolidation. However, daily and weekly momentum are still pointing firmly higher. At this moment, 1.3580/90 provides initial cap for a move back to 1.3520/30, first support. But bearish divergence signal has emerged and I feel a deeper correction to 1.3430/40 is highly probable in the next 48hours. Do note that, one shouldn't get overly bearish the E$ amid this correction because we are in a very bullish E$ trend and one must look out for buy opportunities rather than get obsessed and add on shorts especially from the mid-1.3400 onwards.
E$ Weekly chart - WMA21 and 50 crossover
The rally has fizzled and momentum is starting to turn down now clearly indicating a correction is underway. Look to take part profit around 0.8520/30 and the next level at 0.8490/500. Remember your trailing stop.
EURGBO 8 hourly chart - Bearish divergence

Wednesday, 30 January 2013

Near term reversal imminent....

Good morning friends, its mid of Week 4 already!!

E$ finally pushed past 2012 high of 1.34866 to print 1.34968, only to be denied 1.3500 as the Asian sovereign name defended that level ahead of the 1.3000-1.3500 DNT (Double No Touch), suspected to be expiring sometime this week.

Asian order book:
Stop loss: 1.3350/40, 1.3380/70, 1.3410/05 and 1.3510/15
Limit: 1.3497/500 and 1.3550

Technically, shorter intraday indicators showing weakening momentum and expect E$ to first correct itself lower. Do note that the longer intraday and daily momentum remains firm which warns of another challenge on the upside after this consolidation, probably timing it to the FOMC statement release next morning at 2:15am (Sin/HK). I expect Ldn/early NY range to be confined to 1.3420/30 to 1.3485/95. Expanded range 1.3380/90 to 1.3530/40 on any surprises. In the meantime, I can't get overly bullish the E$ over 1.3530/40 as there are more signs of short term reversal than a sustained rally.
E$ 4hourly chart - Signs of near term weakness

Recent weaker fundamentals had GBP hammered sending this cross skyward. In all things, a parabolic move is often followed by a pause to consolidate before its next wave higher, if any. The risk of going counter-trend is obviously high but with sufficient supporting technical signals, it is worth a try if risk/reward is probably controlled. In this case here, on the monthly chart, EURGBP has hit the MMA50 and also the Fibonacci 61.8% ratio. To further reinforce that, we have a harami/hanging man pattern on the daily chart with bearish divergence signal in the intraday momentum. Expected range 0.8500/10 to 0.8580/90.
EURGBP Monthly chart - MMA50 and Fibonacci 61.8%

Tuesday, 29 January 2013

Greenback is the main actor!

Good afternoon friends!!

E$ spent Monday consolidating its gains within my expected range as guided yesterday. High printed 1.3477 and the low 1.3424. Looking at the chart, one wonders if we are in the 4th of 5th and expecting another spike higher or we were already done and consolidating for the next leg lower. Either way, we seem to be close to the tail end of this recent rally. At this moment, I can't get too excited for a follow through of E$ towards 1.3800 or even 1.4000 for this round as I need more technical signals to support that scenario. Neither am I ready for a reversal call for E$ to head back to 1.3200. Shall we just take things one step at a time? Having said all these, I must remind all once again that ultimately, I am bullish the E$ in 2013 and my first target is 1.3800 but at this moment, 1.3480-1.3530 remains as a near term formidable resistance band as highlighted last Friday. Lastly, I want to remind myself that this current cycle, the greenback is the main actor and euro is only playing the supporting role.

London order book:
Stop loss: 1.3350/40, 1.3380/70, 1.3410/05, 1.3510/15
Limit: 1.3410/05, 1.3495/500 and 1.3550

Technically, if E$ continues to consolidate in this fashion (same range) for another 16 hours, chances are that upside momentum would have turned to down and will become more vulnerable to breaking the lower band for a test to 1.3370/80. However, daily momentum remains firm and we must bear that in mind. A subsequent rebound to retest 1.3480/90 is highly likely but these price actions will probably stretch into Wed/Thu. For the next 24hours, I placed a 60/40 chance for a lower E$ and would sell into rally. Stay nimble!!
E$ 2hourly chart - 4th of 5th?

Monday, 28 January 2013

2012 high within sight.... (Update1)

Good Monday morning, friends!!

I always make it a point to perform one each time so I know where I went wrong. To be very honest, I ignored bullish signals on both Wednesday ("Rebound first?") and Friday ("LTRO dictates..."). Wednesday's signal was when the daily momentum turned from consolidation to potentially higher and on Friday, the longer intraday momentum has yet to show signs of waning. I was never very bearish the E$ especially when closer to 1.3200 and in fact got confirmation on a bullish trend on Friday!! Lastly, I forgot to factor in the full moon effect. What an irony, admittedly I was just too caught up with the 1.3240 large stop loss order that it clouded my judgement. Part and parcel of trading but we must get wiser!  :)

This week will be event filled to ensure sufficient excitement. The major ones being FOMC meeting on Wednesday (Thursday 3:15am Sin/HK) and on Friday, the US employment figures at 9.30pm.

CFTC's COT report showed that speculative accounts increased their net long euro position to +21,381 contracts vs +7, 315 a week ago. Just for comparison, the all time largest net long positions stand at +119,538 and largest net short at -214,418 contracts. For the yen, spec accounts had a net short of -64,068 vs -65,727 contracts the week before.

Update1: Asian order book
Stop loss: 1.3240, 1.3265/60 and 1.3350/40
Limit: 1.3250, 1.3485 to 1.3500 (DNT) and 1.3550

Technically, the sideways consolidation has unwound the short term intraday indicator from o/b levels. Shorter intraday momentum has turned from up to consolidation whilst the longer intraday ones are still pointing up. Near term consolidation range to be confined to 1.3420/30 to 1.3480/90 probably into Ldn/NY. Subsequent breakout either side should see expanded range hold at 1.3370/80 to 1.3530/40. At this stage of the week, I see a 60/40 chance of market breaking lower first before challenging the high again from mid of the week. Bearing in mind that E$ broke out of a very elaborate consolidation, so one should expect further upside probe for at least this week.
2012's high is at 1.34866
E$ Monthly chart - MMA50 (Green) 1.3515 / MMA100 (Brown) 1.3440 and Fibonacci Ratio levels

Update1: USDJPY
Following my update on last Thursday (24 Jan), I see USDJPY power higher towards Y93 and it seems like we may see that level sooner than expected. But we must not forget the bearish divergence signal that has emerged. Looking at the price action in the past 3 to 4 weeks, we are probably coming to the near term last stage of this powerful rally. Knowing USDJPY, it will not turn around without a runaway parabolic rally and very potentially reversing to close lower. Expected range Y89.60/80 (first test before Y92.50/93.00 is seen) to 93.00 and be mentally prepared for overshooting to Y94. Thereafter, I would expect USDJPY to stall and correct back towards Y89.00 in February. A breach of Y88.00 is a good indication of short term weakness. Having said that, I maintain a bullish medium/long term outlook to Y100/105 within 2013 to early 2014.
USDJPY Weekly chart - Stretched Time and Price

Friday, 25 January 2013

LTRO dictates today...

TGIF friends!!

Indeed, E$ retested 1.3400 last night, touching a high of 1.3393 and continues to stay within the well defined wider range despite some volatility on the back of a couple of European economic data releases. Some anticipation of today's ECB LTRO repayments announcement provided support. But the undercurrent that really underpin the E$ was the revival of the USD. Confused? For those who have been following my blog since last year, you would have remembered that in several occasions that I mentioned that euro is the new USD or left-hand-side (LHS) currency. Yesterday, the euro and USD were the strongest against most major and minor currencies. What is more significant is that, there are further technical confirmation of the early stage of a medium term bullish trend. That being said, the USD will ultimately overtake the euro to be the strongest, at least for Q1. Though in second position, euro should continue to stay relatively firmer against most other currencies. Is this a signal that the US economy is already on the upswing and eurozone has seen its worst?

Asia order book:
Stop loss: 1.3240, 1.3300/285 and 1.3405/10
Limit: 1.3250 and 1.3395/405

Technically, E$ is unwinding from its o/b levels with no follow-through from yesterday's rally past 1.3400. Longer intraday indicator has yet to show signs of waning momentum but toppish technical signals across the EURxxx helped in my overall analysis of the E$ today. Still maintain range bound (1.3250/60-1.3380/90) with risk of breaking on the downside towards 1.3200/30. For the prudent, a part profit take around 1.3270/80 is advised. On the risk part, stop should be placed above 1.3430. 1.3480 to 1.3530 remains as very formidable resistance band.
E$ 8-hourly chart - MA21 (Red), MA50 (Green) , MA100 (Brown)

Thursday, 24 January 2013

Too yummy to pass.... (Update1)

Good Thursday morning friends!!! Its fantastic to wake up in the morning and be able to see the world, something that we all have taken for granted. There is this sense of relief after the doctor confirmed that my eyes are still in great condition despite suffering 3 separate occasions in a month where the capillaries burst in my right eye and the double images that have been bugging me for the past 1 week. Sounds like more trading and golfing days ahead!  :)

Another day passed and E$'s range tapers further and a breakout becomes even more imminent. Resistance today stand at 1.3330, 1.3350/60 and 1.3380/90 and support at 1.3260/50, 1.3230 and 1.3200. I am still looking to sell into rally and take profit, at different levels. The large stop loss below 1.3240 is probably too yummy for market to ignore at this point.
Having said that, I can't get overly bearish the E$ below 1.3200 for now. Somehow, I feel E$ is not ready to turn lower before giving 1.34ish another test.

I have not received the update on the Asian order book yet but these orders from last night's NY session should be quite consistent:
Stop loss: 1.3240, 1.3260/50, 1.3270, 1.3365 and 1.3405/10 (Updated)
Limit: 1.3260/50 and 1.3395/405
E$ Daily chart - DMA21 at 1.3233
Watching closely to take profit on my long USDJPY now. Just a quick reminder before a more elaborate update later. USDJPY should continue to reward those who dare to buy. For those who think that USDJPY is due for a major correction lower, don't hold your breath.

At this moment, I must admit that I will stay neutral on USDJPY for now after taking profit at Y88.93. Y89.00 remains as pivot and a daily close above would see a push for a retest of Y90. However, I do not foresee a breakaway rally but instead a sideways consolidation between Y88-90 on wide for this week. For today, strong resistance at Y89.40/50 and USDJPY remains susceptible to negative news and has scope for a short term fall back to Y87 where I see good support. Basing on the Elliot Wave count, there is no signs of a completion of a major 5th wave (which implies end of uptrend) and I see USDJPY to power higher towards Y93 (not my final target though) in the month ahead. Challenge now is where to buy in.

Asian order book:
Stop loss: 87.70, 89.40, 89.00, 90.00 and 90.30/40
Limit: 88.00 and 89.50 (61.8%)

USDJPY Daily chart - DMA21 and Fibonacci ratio levels

Wednesday, 23 January 2013

Rebound first?

Good morning friends, its the mid of week 3 already!!!

Nothing really exciting to talk about the E$ with market still happy to stay within the defined range of 1.3250/60 to 1.3380/90 for probably the next 12 hours. However, there is a new development as the daily momentum starts to turn from consolidation to potentially higher. With that, one has to be mentally prepared for expanded range of 1.3200/20 to 1.3430/40. I still maintain that the 1.3480-520 resistance band to be formidable and market will be rejected on first test and on the downside, 1.3250/60 will be taken out and 1.3200/20 tested by this week. As we are nearing the tail end of the tapering consolidation, one must avoid trading around the mid-range. Instead, be positioned to sell into the rally, that is before 1.3200/20 is tested first. In a situation like this, one should split and engage market on a tiered basis with corresponding stop loss level too. All that being said, I see upside bias from current level of 1.331ish for the scalpers!!

Noteworthy orders from the Asian book:
Stop loss: 1.3240, 1.3260/50 and 1.3405/10
Limit: 1.3260/50 and 1.3395/405

E$ 8hourly chart - Expanded range
Since E$ is getting boring, I shall move over to this pair today. Generally, the upside momentum is waning and bearish divergence signal has emerged. Its highly likely that we might have seen the short term top around Y90 and a correction lower is due within a very bullish trend in the week ahead. I see Y86.60/87.00 to provide strong support for this dip.
For today, some signs of near term JPYxxx bottoming out should see Y88.30/40 (stronger at Y88.00) to provide support for a rebound to Y89.00/50.
USDJPY 8hourly chart - Bearish divergence signal

Tuesday, 22 January 2013

Buy low, sell high for now....

Good afternoon friends.

Lots of things happening and delayed the update. However, there isn't going to be much of a deviation from what I have presented yesterday in "Round 3 - Bear's turn?", 21 Feb Mon. What triggered the whipsaw move this afternoon? 1.3300 held overnight and short squeezed on the back of firmer EURJPY to 1.3371 where semi-official supply capped the move. US investment bank's bid held 1.335ish until an unsubstantiated market talk of German bank profit warnings and a German official resignation, sent the E$ plunging through 1.3300 and 1.3280, flushing stops on its way to print a low of 1.3267. Stronger than expected German ZEW then saved E$'s day giving it the best excuse to squeeze it all the way back to 1.335ish. All these actions but still within the guided range.

Latest order book information:
Stop loss: 1.3240, 1.3260/50 and 1.3405/10
Limit: 1.3260/50 and 1.3395/405

Technically, indicators are turning to neutral and it does appear that the consolidation will continue for probably another day with another test at the upper band. Still maintain 1.3250/60 to 1.3380/90 with an eventual break of the lower band for 1.3200/20 this week.
E$ 4-hourly chart - Still range trapped for now

Monday, 21 January 2013

Round 3 - Bear's turn?

Good Monday morning, friends!!!

E$ disappointed again as it failed to make gains above 1.3400 last week despite the powerful rally the week before. If you have been following my updates, you would have sensed that though I am bullish E$ in 2013, I still expect it to test lower sub-1.3000 first before higher. I will be not surprised even if last November's low of 1.2662 be retested within Q2. So could the rejection last week be the start of this short term bear trend within a very bullish longer term trend? I will be watching for more telltale signs in the couple of weeks ahead to reinforce that view. In the meantime, whether you like it or not, there are some strong signals that the medium term USD bull trend has already started!!

CFTC's COT report revealed that speculative accounts have flipped back to holding net eur long position of +7,315 vs -8,035. It also reported net yen short of -65,727 vs prior week's -74,096. A quick analysis will show that market may be caught long euro which makes it susceptible to long liquidation, fitting in nicely with my view. As USDJPY touched Y90, it starts to draws in new USD shorts which probably explains the shift. But that would also imply that USDJPY may not have seen the high yet!

I will update the order book orders when I have them later. Just to share what I heard last week that there is a large 1.3000-1.3500 DNT (Double No Touch) option still in place. So one would expect lots of resistance nearer that level for now.

Technically for this week, a couple of observations to support a softer E$ have emerged.

  1. Rejection at the 1.3400 level has formed in simplistic term, a double top (1.34038 / 1.3398)
  2. Weak close last week at 1.3318 forming a bearish piercing candlestick pattern. As mentioned in "Lots of headwind...", 18 Jan Fri, this will put 1.3250/60 and 1.3200 back on the radar
As it is Martin Luther King Day, a national holiday in the USA, with very light economic data release worldwide, I expect market to trade within 1.3250/60 to 1.3380/90. This range will probably hold and tapers for a good part of the week with an eventual break of 1.3250/60 for 1.3200 in the later half.

A very light Asian book with pretty much the same orders since last week:
Stop loss: 1.3405/10
Limit: 1.3260/50, 1.3400 and 1.3485/500
E$ Daily chart - Double top formation

Friday, 18 January 2013

Lots of headwind....

TGIF friends!!

E$ fell short of my expected bottom before it staged a rebound for 1.3400 but only managed 1.3387 high so far. Traders continue to see Asian sovereign interest on both sides of the range, 1.3250/60 to 1.3395/405, for now with no mention of the US investment bank anymore.

I expect market to stay within 1.3330 to 1.3390 during the Asian/early Ldn session but very likely to retest Monday's high of 1.3404 during the NY session. Expanded range 1.3330 to 1.3430/40 (1.3470/80 aggressive). The next level of strong resistance is at 1.3520/30 (see chart, blue WMA). A firm close above 1.3400 for the week will increase the probability of 1.34866 being retested by next week. On the flipside, a softer close below 1.3330 will put 1.3250/60 and subsequently 1.3200 back on the radar.

With such a strong close last week, I would expect spillover momentum to take us higher this week. But to date E$ continue to struggle below 1.3400 which is not a good sign unless it takes off by this evening and close firm as mentioned. Even then, 1.3480 to 1.3530 remains as a formidable resistance band and I foresee E$ to be rejected on first test.

Asian order book:
Stop loss: 1.3245/40, 1.3280/70 and 1.3410
Limit: 1.3260/50 and 1.3395/405

E$ Weekly chart -  100WMA Brown & 200WMA Blue

Thursday, 17 January 2013


Good morning friends.

As expected, E$ managed to hold 1.3260/70 on first test and rebound to a high of 1.33248 before plunging sharply to print the day's low of 1.3256 where it found strong bids. What made yesterday's session so interesting was the fact that a US investment bank (wink, wink) was the notable seller!! so much for 1.3700 but they still walked away with 300ish pips profit all within a week's work  :)

Asian order book is getting busy:
Stop loss: 1.3200, 1.3235, 1.3250/45, 1.3330/50
Limit: 1.3200 (large opt expiry) and 1.3330

This morning, E$'s 2nd attempt at the 1.3330/40 resistance fell short at 1.3315 and was then sold off. This should keep E$ within the range of 1.3350/60 to 1.3320/30 through Asian to early Ldn session. However, intraday momentum is starting to turn from consolidation to down which has increased the probability of the lower band being broken with E$ falling to test the eventual target of 1.3200/10 as mentioned in my update yesterday. I foresee this happening probably during the Ldn/NY session. In the chart below, you would have noticed the red line (~1.3165) where you should understand the rationale of why I highlighted. Though I see 1.3190/200 to hold for a subsequent rebound to 1.3400, I am mentally prepared for the possibility of an overshoot (news induced) to 1.3165 but this level should hold for this round.
E$ 8hourly chart - Fibonacci retracement ratio

Wednesday, 16 January 2013

Juncker, the euro bear!

Good Wednesday morning friends!!

I forgot to share with all this funny incident that happened 2 days ago. I went short E$ at 1.3397, then my Apple wireless Magic Mouse went dead!! I didn't want to risk it when not in full control and instinctively called in to buy back at 1.3396. No prize for guessing, it drifted quite effortlessly to 1.335ish :(  Lesson learnt, either you use a wired Mac compatible mouse or you continue to use the wireless one but keep one wired mouse around. Apple eServ exchanged a new one for me later.

Clearly market was caught long with suckers after the release of GS's buy recommendation. Asian sovereign name was heard to have lurked around 1.3400 and macro names were also active sellers yesterday. But the highlight was when EU Juncker commented that euro was "dangerously overvalued" that knocked E$ socks off. It fell to a low of 1.3263 (Fibo 38.2% ratio) before rebounding.

Asian hour book revealed the following noteworthy orders:
Stop: 1.3240 and > 1.3400
Limit: 1.3440/50 and 1.3485/90

Technically, shorter intraday indicator is near the o/s territory but momentum is still pointing lower for now with a hint of turning to consolidation to higher. 1.3260/70 should hold on first test with resistance at 1.3330/40 to cap for an eventual test lower towards 1.3200/10 probably during the NY session or in the next 24hrs. Note: I wouldn't want to be too short into 1.3200 though.

E$ 2hourly chart - Fibonacci ratio retracement levels
E$ Daily chart - Dark cloud cover

Tuesday, 15 January 2013

Trapped no more....

Good afternoon friends. For my regular readers, most would have noticed that Tuesday's update will be later as I normally play my 18 holes in the morning. Further delayed today because I took on a quick long position at 1.33466 and took profit at 1.33556 :)  I can now stay focused to update my blog.

Market was pretty disciplined yesterday as it traded within the expected narrower range without much fanfare. High this round had been 1.3404 and was rejected another time at 1.3394. On the flipside, 1.3330 seemed to provide some near term support.

Order book isn't too exciting for now:
Stop loss: 1.3285/80, 1.3310/00 and 1.3400
Limit: 1.3450 and 1.3483/90 (opt)

Technically, fading upside momentum as evident in the hourly chart (below) suggest that E$ is probably nearing the last phase and any rally may not be sustainable. At the moment, E$ continues its consolidation within 1.3330 to 1.3400. Though longer term momentum is starting to turn lower, E$ is expected to trade firmer into early NY session to test the upper band again. I am mentally prepared for an expanded range to 1.3430/40 topside and subsequently breaking 1.3330 for 1.3310/00 in the next 36hrs.
E$ Hourly chart - Fading upside momentum

Monday, 14 January 2013

Good as gold....

Good Monday morning friends. We only just ended the 2nd week of 2013 and we are already greeted by some decent volatility.

It seems like times have not changed too much on how market reacts to the Goldie's reports. Last Friday, Goldman Sach issued a buy recommendation on E$ with a target price of 1.3700 with stop at 1.2900 when market was trading around 1.327ish. That sent the whole market scrambling for "cheap" eur and pushed price up to print high of 1.3366. Looking back at just a couple of days ago when I wrote "ECB rules..." (10 Jan Thu), one would have figured out which US investment bank bought the huge amount at around 1.305ish on Wednesday during the NY session!!

If you had read my blog "Christmas Special.... " (24 Dec 12), you would have already discovered how bullish I was of the E$ in 2013. Admittedly, I was looking for a slightly deeper correction lower before turning up. That being said, E$ would still have to contend with a couple of critical resistance levels ahead for now and I do not foresee a straight line rally towards 1.3700 or higher (trust me, GS will be profit-taking way ahead of their target).

Technically, having come so close to 2012's high of 1.3486, it will be such a waste not to even have a go at it this week. Coincidentally, that level also represents the 50% Fibonacci retracement level of the 24 Jul 12 low of 1.2042 and 4 May 2011 high of 1.4939. And its also sandwiched between the monthly moving averages (MMA) as seen in the chart below. This band will be formidable on first test.

Latest CFTC's COT report revealed that E$ speculative account has flipped from net euro long at +5,126 to net short position of -8,035 despite the rally. Sounds like recipe for trouble for the bears. In the same vein, spec accounts had a net yen short of -74,096 vs the prior week's net yen short of -80,517, also despite of the USDJPY rally.

For today, longer intraday indicator is at o/b levels but the daily still has room for further upside. Bearish divergence signals have emerged and momentum has turned from up to consolidation which suggest that very short term rally may not be sustainable. From now till early European session, I see a test on the upside with range of 1.3340/50 to 1.3390/400. Expanded range of 1.3300/10 to 1.3430/40 to cover the later half of the session.
E$ Monthly chart - MMA100 1.3440 (Brown) / MMA50 1.3518 (Green)

Friday, 11 January 2013

Round 2 - Bulls won

TGIF my friends!!

Hope someone out here has already made the budget for the month  :)

Indeed, round 2 unanimously went to the bulls as E$ staged a remarkable rally after holding 1.30366. The first powerful move came in reaction to ECB Mario's assessment of the eurozone's economic health as it surged to around 1.3210ish. The next wave then took E$ to a high of 1.3273. Market chatter has it that the second wave was attributed to some system guys who were caught really short and needed to cover their position before the end of the session.

Personally, I feel that a healthier and possibly more sustainable rally, based on time and price, would have been one that probably pause around 1.3200 last night and consolidate today for the next wave to around 1.3300 today. However, the characteristic of yesterday's parabolic rally gave hint of an intentional short squeeze. Looking back to the recent failed attempts at the 1.3300 region (see chart 1), it will be quite a challenge for the stretched E$ to sustain any gains above that zone for this round. However, E$ bears has to be cautious if it closes above 1.3300.

Not surprisingly, today's order book looks pretty empty:
Stop loss: 1.3160/50, 1.3245 and above 1.3300

Technically, longer intraday indicator remains at o/b level though shorter ones have unwound from the o/b condition. Shorter intraday momentum revealed bearish divergent signal which has increased the probability of a near term top in place. Meantime, due to the parabolic extension, I would expect a protracted consolidation with 1.3230/40 to provide short term support. On the topside, I will not discount a possible spike to test 1.3300 later today. Expected range 1.3210/20 to 1.3300/20.

Stay nimble ahead of the weekend :)
Chart 1: E$ 8hourly - Hi, bye area?
Chart 2: E$ Monthly - Will Jan13 form another green candlestick?

Thursday, 10 January 2013

ECB rules..... (Update1)

Good morning friends, its Thursday already and almost nearing the end of the 2nd week of 2013 which leaves us with 50 more weeks to go for the year.

E$ fell to an intraday low of 1.30366 taking out stops below 1.3040 before suspected sovereign demand caused a short-squeeze back to around 1.3055. Another bout of buying from a US investment name took it  to 1.3080 just ahead of Ldn close. However, gains were not sustainable and E$ fell back to around 1.306ish to close the trading day. Guess market is quite mixed on their take on the outcome of the ECB rate announcement/conference at 2045/2130hrs (Sin/HK).

Though E$ fell to my target level for profit taking (1.3040-20), the price action was more of a grind rather than an impulsive move that I was expecting. As a result of this information, it is apparent that E$ may not be ready to move much lower before it moves higher first. This bring to mind Scenario 2 that was outlined in "Step by step" (8 Jan 13, Tue).

Order book information from Ldn session yesterday (outdated) is as follows:
Stop loss: 1.3150/60 and 1.3200
Limit: 1.3010/00, 1.3140/50 and 1.3190

Technically, shorter intraday indicator is at o/s level with momentum turning from down to consolidation, which at current level would imply upside bias. This goes in line with the longer intraday chart pattern (circled). Pre-announcement, I would expect trading range to be confined to 1.3030/40 to 1.3080/90. Post announcement, I will not be surprised to see Tuesday's high of 1.3140 being challenged in the next 48hrs. Admittedly, at this juncture, I am leaning towards a firmer E$ towards 1.32ish first before lower again.

In view of a major risk event this evening, I feel a need to cover a bit more grounds as one has to be better prepared mentally for various scenarios:
E$ friendly scenario:
Very likely to hold 1.3010/30 for a rally to challenge 1.3140.
E$ unfriendly scenario:
Possible move into expanded lower range of 1.2990/1.3010 but still see a rebound subsequently.

A daily close below 1.2990 is a bearish signal and invalidates the rebound story. It will expose E$ to test 1.2930/40.
E$ 4hourly chart - Short term intraday reversal signal

Wednesday, 9 January 2013

Bearish piercing pattern (Update1)

Good morning folks!

E$ hit a high of 1.3140 before easing off as US name was heard to be the notable seller up there. Swiss name was later responsible for the fall below 1.3100. Market then capitalized on the sell momentum by pushing further on a rumour of a France credit rating downgrade to trigger more stops to touch a low 1.3056. Despite the denial from a french official, E$ only managed a mild recovery to close the trading day at 1.3080. Eurozone final GDP will announced at 1800hrs (Sin/HK).

Technically, E$ was rejected at the DMA21 (1.3140) and closed the day with a bearish piercing pattern. This does not bode well for E$ in the next 24hrs and I expect more selling pressure to challenge yesterday's low of 1.3056 and subsequently last week's low of 1.2998 which I see can be a tough level to break for now. Last heard was Asian sovereign demand around 1.3010 and from yesterday's order book, a couple of large option strikes at 1.3025 and 1.3010/00, which someone out here may have interest to defend unless it has already expired.

For today, E$'s mild rebound last night has unwound itself slightly off the o/s levels. Momentum continues to suggest a consolidation within a new range of 1.2990/300 to 1.3120/30 (retest of trend line, see chart). Initial resistance stands at 1.3090/3100 with stronger band at 1.3120/40. I will be a seller into rallies today and with stop above 1.3140 and happy to start profit taking around 1.3040-20.

Wake up, lazy bones! I have already sealed 2 trades. Sold at 1.3089, tp at 1.30699. Bought at 1.30732, tp 1.30781. Looks like some demand at 1.3070, not going to fight it. Await sell opportunities again.
$E Daily chart - 

Tuesday, 8 January 2013

Step by step...

Good Tuesday afternoon folks!!

E$ consolidated pretty much within 1.3000 to 1.3100 during the Asian/European session as Asian sovereign demand held 1.3010 and market chatters of LHS interest for the European fixing capped the topside. It subsequently broke higher taking out stop loss orders around 1.3100 and then printed a high of 1.3140 this morning before easing off to current level. I would expect further softening to first stronger support at 1.3085/95 and then potentially lower towards 1.3040/60. I would take at least half of the profit at the first support and stay nimble for the balance watching for next support. I will be mentally prepared for another spike towards 1.3160/80. If this materializes during the European session (before 1.3080/90 is seen), it will be tempting to fade into the rally. But if it happens during late NY session, one would have to be cautious as it has a higher probability of closing firm for the day, which is a short term bullish signal.

Meantime, I am watching the daily momentum unfold as I see 2 potential scenarios:
1. E$ failing below 1.3140/50 and fall towards 1.2930/40 where it holds and market rebound towards 1.3200
2. E$ falling back to 1.3040/60 and rebound towards 1.3200

Either way in the near term, I see a possible rebound to 1.3200 first before a drop towards 1.2600/2700 in the months ahead. However, from then on, it could be sunshine for E$ as I see a turnaround rally into 1.3800/4000 towards end of the year. Trust me, I am more interested in the day to day move too!  :)

Order book during the Asian session:
Stop loss: 1.2995-80 & 1.3160
Limit: 1.2950, 1.3010/00 (opt) & 1.3025 (opt)
*opt = large option expiry

For today, market is unwinding the o/b condition as momentum on the upside has waned with bearish divergence signal. Expect E$ to fall back and consolidate within new range of 1.3040/60 to 1.3140/60.

All the best!
E$ 8hourly chart - 61.8% correction ratio stands at 1.3184

Monday, 7 January 2013

CFTC data reveals....

Good Monday morning folks!!

Last Friday, E$'s price action unfolded as expected as it took another dip to a low of 1.2998 from around 1.303ish and bullish divergence signal emerged. It then subsequently rebounded to a high of 1.3089 on the back of the modest US employment numbers and consolidates till now.

A few observations:
1. A rebound and staying above 1.2980/90 is short term bullish.
2. A firm close on Friday puts pressure on resistance band at 1.3070/90, clearing which should open up E$ to next resistance band at 1.3135/50.
3. If the rally on Friday evening was a retest of the trend line (see Chart 1), then E$ will stay vulnerable to breaking lower to test another trend line support at 1.2910/20 (see Chart 2).

Interestingly, CFTC's report revealed that speculative accounts have shifted to holding net long EUR positions from -2,549 contracts seen last week to +5,126 contracts as of Monday. The last time where the speculative accounts were holding net long EUR was as per 23 Aug 2011.
As USDJPY continues to push for new recent highs, the spec accounts on the contrary, had a net yen short of -80,517 contracts as per Dec 31, against prior week's net short of -85,608. This could well be the signal that USDJPY's recent rally has not reached the peak yet.

For E$ today, intraday indicator is unwinding from the o/s level and intraday momentum has turned from down to consolidation with 1.3000 to 1.3100 being the potential range (1.3135/50 expanded). Admittedly, there is a mixed bag of signals but I will lean towards selling into rallies with a higher percentage call for lower band of range to be broken this week.

For $JPY (Y88.10), still the same message. I do not think the high has been seen yet though we may see a consolidation lower from here towards 87.40/60 (short term). I expect market to test closer to Y90. In the same vein, CFTC numbers also imply scope for higher $JPY as most are looking to go short the USD. Momentum remains strong and no signs of fracture yet. Likewise, as long as there is no signs of bearish divergence, I will not make a short call.

All the best!
Chart 1: E$ Daily - Bullish trend compromised (circled)

Chart 2: E$ Weekly - Trend line support at 1.2910/20

Friday, 4 January 2013

Round 1, bears won!!

Good morning and TGIF folks!!  Wow, what a way to start the new year as impulsive bulls were caught long and probably flushed when E$ fell in step fashion to 1.3019 low so far. I hope my update yesterday helped get someone out of trouble.

Having anticipated this potential sharp sell-off ("Christmas Special... Bears to pull the sleigh for now", 24 Dec 12), yesterday's move did not come as a surprise to me though it exceeded my expected range. Referring to the charts, one would have noticed that we are now at the yellow support band for the first stop and the next target is very likely to retest the trend line it broke up from. For this week if it comes, the trend line support stands at 1.2920/30 but I allow for a little overshooting which may land us at around 1.2870/900. Let's see if the US employment numbers this evening will provide that impetus.

For today, intraday indicators are obviously at o/s levels but momentum remains pointing down (albeit waning) implying scope for further probe to the downside. In a trending market move, it is still much safer to await for bullish divergence signals to emerge before one starts to contemplate buy calls. Meantime, I expect another dip which may find initial support at 1.2970/80 (look out for bullish divergence then) before a more elaborate sideways to slightly higher consolidation into the NY. Topside 1.3070/90 should provide strong resistance ahead of the US data.

A quick note on USDJPY.... if you dare not buy at this current level, don't try going short either. I expect a spike closer to Y88.50/89.00 before it turns back. Looking at Y85ish for long opportunity in the meantime. Will provide a more elaborate update when time is right.

All the best!!
E$ Weekly chart - Sitting on yellow band support and eyeing trend line

Thursday, 3 January 2013

Fiscal cliff postponed....

Happy 2013 folks! Seems like my computer had such a great holiday that it just want to stay idle for a little bit more. First, problem with my new fibre optic network modem and then one of the 2Tb drives in my Drobo crashed. But because its a Drobo, no data was lost as far as I know at this moment though I waited for more than a day for it to complete its recovery.

So we averted a fiscal cliff situation in the US for now and kicked the can down the road till March. Market loves the news obviously (but rating agencies don't) and bought the E$ to a high of 1.3299. However, there wasn't enough love to take it above recent high of 1.3307. Worse, it gave back all its gains by the end of the day to close at 1.3186 near its opening of 1.3180 (see chart). This tell tale sign does not bode well for E$ and has to be extra cautious if one had chase the market up yesterday. Looking back at the past 10 trading days, we would also have noticed that E$ had not closed above 1.3250 in any session. All in all, near term bull trend momentum seems to have fizzled off somewhat after buying on rumor and downside pressure is building on the technical chart. Market liquidity should have improved and I reckon it to return to normalcy by tomorrow.

Just to add an observation I made recently.... penny stocks in Singapore are taking off after blue chips have been staying stagnant for awhile and everyone seems to be getting excited. As far as the different phases of a bull cycle is concerned, penny stocks rally normally marks the euphoria phase which in the past happens to be the last leg in any market rally.

For today, intraday o/s condition should limit downside from here though shorter term intraday momentum has turned from consolidation to down. Daily momentum indicator is also starting to show downside bias. Expected range 1.3130/40 (1.3090/3100 expanded) to 1.3230/40. I will play the range but prefer to sell into rally if 1.3130/40 is not seen first.

All the best!
E$ Daily chart - Weak close after early rally