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)