Next update from 18 Jun 2013... Happy trading!

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The time has come....

Spectacular rally in E$ exceeded my expectation by a touch to print high of 1.2977. Looking at the recent sessions (see chart with eclipse), one would have noticed that each sell-off is followed by a bullish engulfing candlestick pattern the very next day. Combining this occurrences with other technical signals, the probability of E$ breaking out and up has increased significantly. Note that a survey with traders revealed that many are still favouring to fade into rally just below 1.3000 with tight stops.

Europe order book:
Stop loss: 1.2890 and 1.3050/55
Limit: 1.2990/300

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Bullish (Down/Up market with potential for breakout)

Technically, intraday indicator is in the o/b zone. Shorter intraday oscillator indicator is suggesting consolidation which at current level would mean more downside bias. However, the longer intraday momentum indicator is still pointing firmly higher. Taking all available intraday technical signals into consideration, the highest probability scenario would be a down first then up market. Expected range 1.2890/910 to 1.3050/70. Initial strong resistance at 1.3020/30 and strong support at 1.2830/40. Prefer to buy dips.

E$ Daily chart - Bull up for a breakout

No incentive to breakout....

E$ remained stucked within the defined range as expected. It was sold off during the NY session and consolidated till early Europe came in to knock it lower to 1.2838. Having studied the Asia order book, I expect the 1.28/1.30 range to hold for at least another 24 hours. There is basically no notable stop loss orders on the outside of the range to incentivize any breakout for now.

Asia order book:
Stop loss: Nil
Limit: 1.2750, 1.2820/00, 1.2993-98 and 1.3000

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Bullish within the defined of 1.2800 to 1.3000

Technically, intraday indicator is at o/s level after the sell-off last night. Intraday oscillator indicator continues to suggest consolidation which at current level of 1.2845, there is more mileage on the upside. First level of strong resistance stands at 1.2890/2900. Expected range for today, 1.2820/40 to 1.2950/60. Risk/reward favours going long.

E$ 8Hourly

Range defined for now....

Looking back at the past 8 days' price action, one would have noticed the defined range of 1.2800 to 1.3000. With the more recent rejection at the 1.3000 resistance, E$ could be pressured to retest the lower band of the range this week. The 61.8% retracement level is at 1.2873 and the trendline is around 1.2850 where some stop loss orders are currently lurking. Having said that, we have to take note that last week actually closed a bullish piercing candlestick pattern. Therefore, one should not get overly bearish when near to the lower band. For today, without much fundamentals driving the market, it may end up being stop loss seeking, whichever is nearer (check out the Europe order book).

CFTC COT speculator's orders as of 21 May 2013:
Eur: -80,949 vs -46,921  (net shorts increased by 73%)
Jpy: -95,186 vs -78,560

Europe order book:
Stop loss: 1.2860/50, 1.2960/65 and 1.3050
Limit: 1.2820/00, 1.2993-98 and 1.3000

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Bearish within the 1.2800-1.3000 range

Technically, intraday indicator is at around the neutral 50. Intraday oscillator indicator is suggesting consolidation within 1.2890/900 to 1.2960/70 before expanding to 1.2840/50 - 1.2960/70 during the NY session. I would look to fade into the rally for today with risk above 1.3000.

E$ Daily chart - Defined range for next 48 hours

Eyes on Bernanke....

Currently, the 1.3000 pivot is the level to watch and recapturing would relieve the recent bearish pressure on E$ and should subsequently see E$ trade up to test 1 May's high of 1.3243. Gentle reminder that today is the start of the full moon zone and I am sure Ben Bernanke is going to inject volatility into the market when he testifies tonight at 10pm (Sin/HK).

Europe order book:
Stop loss: 1.2750/35, 1.2940/50, 1.2960/70 and 1.2970/300
Limit: 1.2790/70, 1.2820/00 and 1.2860/40
Orders do look very lopsided with strong bids below and buy stop orders lining up to 1.3000.

Primary trend: Bullish
Intermediate trend: Bullish for 1.34/1.35 (unless 1.27447 is breached)
Minor trend: Bullish for 1.3000

Technically, intraday indicator has swung into o/b zone and that will probably add on more resistance for rate to pull higher. However, intraday oscillator indicator is still showing momentum pointing firmly higher. Expected trading range 1.2850/70 to 1.2980/300. Risk/reward still favours buying on dips.

E$ Daily chart - Mean reversion?

Euro bulls have upper hand....

E$ remained well bid throughout yesterday's session with every dip meeting demand and closing Monday just off the high of 1.2900, forming an bullish engulfing candlestick. However, the resistance at 1.2900/10 proved to be formidable, at least for this round, as intraday indicator went into the o/b zone. Market is probably too quick to jump into the reversal story and this current sell-off should flush out the weak longs before it find first level of support around 1.2820/30 and stronger at 1.2780/900 for a rebound for the 1.2950-1.3000 area in the days ahead.

Europe order book:
Stop loss: 1.2750/35, 1.2905/15 and 1.2915/25
Limit: 1.2790/70

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Bullish for initial target 1.3000

Technically, intraday indicators have come off its highs and still have room on the downside based on current level of 1.2864. Intraday oscillator indicator suggest range consolidation and at this moment a base is also in the making. Given a bullish engulfing candlestick pattern, one has to be cautious getting overly bearish when nearer the lower band of the range. Expected range 1.2820/30 to 1.2930/40. Risk/reward still favours buying on dips.

E$ 4hourly chart - Bullish price action....

Near term turning point....

Indeed, E$ tested to a low of 1.2796 before rebounding and closed the week at around 1.2835. As I have mentioned in "Mixed signals...." (17 May Fri), the waning downside momentum, coupled with an extreme o/s condition resulted in a rejection in the 1.2800 area. At this point, bullish convergence has emerged and this has increased the probability of a near term base. A potential reversal within a full moon zone, which starts from this Wednesday and possibly into next Monday, will certainly makes things a whole lot more interesting and exciting.
Considering a 40% jump in the net euro short positions from the previous week, market does look more susceptible to shortcovering.

CFTC COT report: Speculator's account as of 14 May 2013
EUR: -46,921 vs -33,533
JPY:   -88,407 vs -78,560

Asia order book:
Stop loss: 1.2800/790 and 1.2890/900
Limit: 1.2950

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 is breached)
Minor trend: Bullish for 1.3000 (initial target)

Technically, shorter intraday indicator is getting into o/b level whereas the longer intraday/daily are still in o/s zone. Intraday oscillator indicator suggest range consolidation. Taking all available technical signals into consideration, I expect today's range from 1.2810/20 to 1.2890/900. Risk/reward favours buying on dips.

E$ 8hourly chart - Bullish convergence

Mixed signals.....

E$ managed to hold off the selling pressure with a low of 1.2846 against Wednesday's low of 1.2843 before shortcovering to a high of 1.2929. E$ then came off and closed Thursday at around 1.2883. Admittedly, we are very closed to critical level of 1.27447 where a break would change the intermediate trend picture to bearish and E$ can fall to 1.24/1.25 (as per H&S formation in the chart on 15 May, Tue). There is a mixed bag of technical signals with the bearish ones dominating for now, ie weekly momentum is still pointing lower. However, there are a few supporting signals for 1.2800 to hold for a rebound where one of them is the intraday and daily indicators are at extreme o/s zone. Currently, there are talks of a large option barrier at 1.2950 and this will provide market incentive for a deeper squeeze higher.

Europe order book:
Stop loss: 1.2800/790, 1.2850/40 and 1.2910/20
Limit: 1.2850/40 and 1.2950

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 breached)
Minor trend: Mildly bullish

Technically, intraday indicators are in o/s zone and I do not see any sell-off to be sustainable. As the range consolidation continues, the intraday oscillator indicator is starting to show waning downside momentum. As I have warned in the past 2 days, one should not get overly bearish when closer to 1.2800. The signals are stronger now. For today, I have still not discounted the possibility of a test at 1.2800/20 and therefore today's expected range is from 1.2800/20 to 1.2950/60.

E$ Weekly chart - Either way, E$ is expected to finish higher this year

Neckline in focus but wait.....

E$ broke through WMA50 at 1.2890 and close the day at 1.2886, further reinforcing the near term bearish tone. Selling came to a pause after stop loss orders were tripped at 1.2845, printing a low of 1.2843. Up till this point in time, the probability of the Head & Shoulder formation materializing is getting higher and the critical level to watch is 1.2745 (previous low) and 1.2760/70 (neckline). Eurozone CPI at 5pm (Sin/HK) and US Weekly Jobless Claims at 8:30pm (Sin/HK) should inject some life into the market.

Europe order book:
Stop loss: 1.2800/790, 1.2850 and 1.2900/05
Limit: 1.2950

Primary trend: Bullish
Intermediate trend: Bullish for 1.33/1.34 (unless 1.27447 is breached)
Minor trend: Mildly bearish (Up / Down market, can't get overly bearish when nearer 1.2790/1.2810)

Technically, intraday indicators are in o/s zone. Shorter intraday momentum indicator is suggesting consolidation but the longer intraday is still pointing firmly lower. In view of the mixed technical signals, I am mentally prepared for a squeeze higher before retesting yesterday low again. Strong resistance stands at 1.2940/50 with today's expected range 1.2910/20 to 1.2800/790.
Note: I will not get too bearish sub-1.2800 this round as the intraday indicators will be at extreme o/s levels by then.

E$ Weekly chart - Staying convincingly below WMA21 (red) and briefly below WMA50 (green)

Bears making their presence felt....

Tricky whipsaw price action yesterday, normally witnessed only during the full moon zone. I kind of anticipated that but it was really a combination of scenario 1&2. In hindsight, E$'s ability to only manage a high of 1.3029, way short of the DMA21 at 13065, indicates a powerful short term bear trend. It was confirmed by the subsequent sell-off to break 1.2935. Up till tis point in time, low had been 1.28916. Clearly the subtle USD resurgence has revealed itself. In view of that, one has to anticipate the possibility of E$'s price action in the months ahead.

Asia order book:
Stop loss: 1.2880/75 and 1.2845
Limit: Nil

Primary trend: Bullish
Intermediate trend: Bullish for 1.33/1.34 (unless 1.27447 breached...  this view is under threat now)
Minor trend: Bearish

Technically, intraday indicator are in o/s zone but intraday momentum indicators are all pointing firmly lower which has increased the probability of a trending market picking up steam. Expected range 1.2940/50 to 1.2800/30 (extended 1.2760/70).

E$ Daily chart - Staying below the DMA200 (Blue) again......

E$ Weekly chart - If H&S materializes, E$ is projected to fall towards 1.24/1.25

Mean reversion day?

Despite the strong downside momentum from last week's weak close, E$ managed to hold 1.29348 (last week's low) with a low of 1.29358 on Monday before rebounding to today's high of 1.3026. Given the last 24 hours' price action, it has increased the probability of a near term bottom with E$ gearing up to retest the DMA21 (1.3065) that it broke down from last Thursday. I am sure with the ongoing ECOFIN meeting and the German ZEW Economic Sentiment (5pm Sin/HK), there are more than enough stimulant to inject volatility into the market.
Interestingly, a subtle difference between the Asia and Europe order book has indicated the importance around the DMA21.

Asia order book:
Stop loss: 1.2845 and 1.3055
Limit: 1.2860/50, 1.2935 and 1.3040/50

Europe order book:
Stop loss: 1.2845 and 1.3035-50
Limit: 1.2860/50, 1.2935 and 1.3050-70

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Mildly bullish (Down / Up market)

Technically, shorter intraday indicator is near to o/b zone but the longer intraday one is still at the o/s level, which fits my other technical signals that the probability of a down/up market from here. Shorter intraday oscillator indicator is suggesting range consolidation with current price level being at the upper band. However, longer intraday momentum is a mixed bag. Putting everything together, I see 2 probable scenarios:
Scenario1: 1.3020/30 to cap with E$ falling back to 1.2950/60 before a rally for 1.3050/70
Scenario2: E$ holds 1.2980/90 and rally for 1.3050/70 before falling back to 1.2940/50.
I have to admit that at this point in time, I am leaning more towards Scenario1.
Stay nimble and don't be a slave to a single position!!

E$ Daily chart - Mean reversion to DMA21

E$ caught between tectonic plates again...

More signals are converging to affirm a USD resurgence, which concomitantly would also mean an end to the commodity cycle (AUD, XAU, etc....). In a situation as such, euro benefits from the stronger EURXXX but on a relative basis will still be weaker than the greenback. Being caught in between 2 tectonic plates, it will become trickier. My concern is the divergence between the currency market from the equity market. In 1987, the US treasury bonds and the equity market diverged for around 7/8 months before the equity market plummeted. Are we in the making of the same? If so, then there should a big correction in the equity market this year, probably in the Q3.
Back to the E$.... with the weak close last week at 1.2990, we are now trading below the DMA21, 50 and 200, which are bearish signals. Strong resistance stands at 1.2995/3010 and pivot at 1.3060/70. First support level is the 61.8% target (see chart) which the market had already bounced away on first test with the next stronger one at 1.2910/890.

CFTC COT report - Speculative accounts (as per May 7):
Net euro short -33,533 vs 30,149
Net short jpy   -78,560 vs -71,127

Europe order book:
Stop loss: 1.2845 and 1.3055
Limit: 1.2860/50, 1.2935 and 1.3040/50

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 breached)
Minor trend: Bearish (refrain from getting too bearish nearer 1.2900)

Technically, longer intraday indicators are in o/s zone. Shorter intraday momentum indicator is showing range consolidation but longer intraday momentum continues to point lower. I expect a trading range between 1.2890/3010 to 1.2990/3010. Overall technical signals favours selling E$ on rally.

E$ Daily chart - 61.8% corrected

BOK supporting E$....

Since 4th Apr this year, E$ has not closed one day below the DMA21 until yesterday. To add on to the bearish story, it broke below the trendline convincingly (see chart). Though these signals are simplistic but one has to take note and avoid being too aggressively bullish at this stage until the above levels are recaptured. Yesterday, 1.3120/40 proved to be an important support level and breaking which exposed E$ to the next stronger support at 1.3000 which we just saw tested and low printed 1.3005 as of now. Market chatters have it that an Asian central bank (ie. BOK) is recycling intervention dollar into euro at around the 1.3000 is providing support. But rumour of a large sell stop residing at 1.2950 will keep market focus on the downside.

Europe order book:
Stop loss: 1.2950, 1.3000 and 1.3050/55
Limit: 1.3095/105

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.27447 breached)
Minor trend: Consolidation (can't get overly bearish around 1.3000 for now)

Technically, intraday indicator is just coming out of the o/s zone. Intraday momentum indicator shows that 1.3000 is probably very close to the lower end of the band and that would encourage some form of shortcovering. Expected range today 1.2980/300 to 1.3070/100.
Stay nimble ahead of the weekend and don't hold on to a single position. Learn to flip and move with the momentum. I am already on my 8th trade of the day!

E$ Daily chart - Below trendline and close below DMA21 (red)

1.3200 is an important pivot....

E$ exceeded my topside target pushing up to a high of 1.3194 before easing off on the back of offers, understandably from the party who is protecting an option expiry at the 1.3200 strike which is due for expiry NY cut tonight. The rally took out buy stops till 1.3180 and at this point in time, market looks quite flushed with an uninteresting order book. ECB Weidman's latest comment that ECB can still take further action triggered some selling but E$ found support at 1.3130. Not too sure how reliable this information but one of the FX vendor revealed that their retail speculators' position is showing around 65% short E$.

Europe order book:
Stop loss: 1.3000
Limit: 1.3200, 1.3070/50 and 1.3000

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Mixed with upside bias

Technically, intraday indicator has come off the o/b zone following the consolidation last night till now. Intraday oscillator indicator has mixed signals but with a slight upside bias. If support at 1.3120/40 holds, E$ should push back to pressure the 1.3200 level and retest last week's high of 1.3243. 1.3200 is an important pivot point, inability to recapture this level will put pressure on E$ to test 1.3000. Expected range today 1.3120/40 to 1.3230/50.

E$ 6-hourly chart - Higher highs and higher lows....

Doji = Uncertainty

As expected, the disciplined E$ stayed within the range (l.3067 to 1.3132) except that it was capped at the first resistance before falling back to close the day exactly at where it opened (1.3075) forming a "doji". A "doji" candlestick pattern on its own and not at important high or low does not have much significance except that it indicates market uncertainty which can go either way. Looking at the price action within the outlined triangle, one would have quickly noticed that the market has spent more time testing the downside. Coupled with the order book information, the probability is still higher for further probe on the upside for the next 24hrs where there is still tradable range before it narrows further. Having said that, I am one who normally would avoid trading when closer to the apex in any consolidation because the probability would drop significantly to 50%, which is at gambling zone. Note that the French, Swiss and German will be off tomorrow but hopefully the Aussie employment numbers at 9:30am (Sin/HK) can spillover some action into E$.

Asia order book:
Stop loss: 1.3180
Limit: 1.3020/00, 1.3050 and 1.3130/50

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Mixed as consolidation range tapers

Technically, intraday indicator has just come out of the o/s zone as a result of this morning's reaction to the CNY trade balance number but there is still lots of room on the upside. Intraday oscillator indicator is still suggesting range consolidation between 1.3040/60 to 1.3130/50 with first level of stronger resistance at 1.3115/25. Advice: Stay nimble and trade in reduced notional amount.

E$ Hourly chart - Range tapering....

Trade the range....

E$ continues to consolidate within 1.3030/50 to 1.3160/80 ahead of the next stimulus. Could it be the German Factory Orders (6pm Sin/HK), German Industrial Production (Wed, 6pm Sin/HK), Spanish Bond Auction (Thu) or the upcoming G7 meeting starting from Friday? As far as the momentum indicator is concerned, it does not look like we are going to see a breakout in the next 24hrs. However, looking at this stage of the consolidation with reference to the order book, market seems to look more vulnerable on the upside as strong buy interest continues to build up with stop loss order on topside.
Nonetheless, I have come out with 2 possible scenarios for the week ahead:
Scenario 1: (Black color lines)
Consolidate within 1.3030/50 to 1.3180/200 before breakout on the upside.

Scenario 2: (Fushsia color lines)
Capped below 1.3110/30 and breakdown for 1.2960/80 before rebound.
This is a low probability scenario.

Europe order book:
Stop loss: 1.3100 and 1.3180
Limit: 1.2980/70, 1.3020/00, 1.3050 and 1.3130/50

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Consolidation before rally

Technically, indicators are mostly at neutral zone and momentum indicator is suggesting range consolidation with a slight downside bias at current level (1.3078). However, considering the expected range for today, risk/reward favours staying long here with a tight stop.

E$ 8-hourly chart - Consolidation before rally

Expect lacklustre price action....

E$ managed to hold the 1.3030 support, printing a low of 1.3033 before short squeezing all the way up to 1.3159 before easing off to close the week at around 1.3113. Lacklustre price action is quite typical on a Monday first half post US employment numbers but made worse today as UK is off. Taking into consideration that E$ managed to close above the DMA21 despite the better than expected Change in Non-farm Payroll data, we have to respect the underlying strength until proven otherwise ie. if 1.3033 is broken.

CFTC COT report (non-commercial speculator's account):
Euro net short -30,149 vs -34,275
JPY net short -71,127 vs -79,730

Europe order book:
Stop loss: 1.3025/20, 1.3155/60 and 1.3200
Limit: 1.2980/77, 1.3050 and 1.3200

Primary trend: Bullish
Intermediate trend: Bullish (unless 1.2953 breached)
Minor trend: Consolidation with slight upside bias

Technically, intraday oscillator indicators are all converging to suggest consolidation but the longer intraday is still showing a slight upside bias for now. Overall technical indicators are not throwing out convincing signals. For today, I would expect the range to be between 1.3060/80 to 1.3190/210 on wide.

E$ Daily chart - Price managed to stay above DMA21 (red)

E$ holding precariously....

E$ reacted almost exactly as forecast under Scenario 1 in "Major risk event to overwhelm....", 2 May Thu. High printed after the 25bps rate cut was 1.3218 before dropping to a low of 1.3038. Another major risk event tonight at 8:30pm (Sin/HK) and I have come up with the possible outcomes in reaction.

Scenario 1: Within expectation or Weaker than expected US employment numbers
1.3030/50 to hold and E$ stage a rebound to test 1.3170/3200

Scenario 2: Stronger than expected
1.3100/20 to cap and E$ plummets to 1.2960/80 before rebounding back above 1.3000 to close the week.

Asia order book:
Stop loss: 1.3100 and 1.3240/60
Limit: 1.3010 and 1.3055/50

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Subject to data, another dip before rebounding.

Technically, intraday indicator is in o/s level though not extreme. Shorter intraday oscillator indicator is starting to show a turn in momentum from down to consolidation which at current level would mean upside bias. However, longer intraday momentum is still pointing down. From now till tonight's US data release, I expect market to stay range trapped within 1.3030/50 to 1.3100/20. Do note that at this moment, E$ is staying below important technical levels which in fact has a higher probability for a test lower. Ability to regain 1.3100 will relieve the sell pressure. I prefer to react only after the data.

E$ 4-hourly chart - Trendline should hold unless data disppoints

Major risk event to overwhelm....

E$ managed to hit a high of 1.3243 before profit-taking set in and pressure the pair lower during the NY session. Expectations of a 25bp rate cut by ECB (7:45 / 8:30pm Sin/HK) continue to cap any advance. This is an important risk event and it will overwhelm technical analysis. But considering the price actions where E$ rallied past 1.32012 despite the negative sentiment overhanging the market since Monday, I will try to come up with a couple of scenarios to better prepare ourselves mentally.

Scenario 1: ECB fails to cut or cuts 25bps.....
Knee-jerk reaction to take us back to test 1.3200/20 before sell-off to 1.3040/60 as market would believe the probability of a cut in the subsequent meeting will become even higher. Can't get overly bearish there as I expect a rebound after that. Note that 1.2960/80 is a much stronger support level.

Scenario 2: ECB cuts 50bps.....
This is a shocker and E$ could plummet as deep as 1.2960/80 by tomorrow but I expect a subsequent rebound.

European order book:
Stop loss: 1.3130/20 and 1.3240/60
Limit: 1.3030/10

Primary trend: Bullish
Intermediate trend: Bullish
Minor trend: Vulnerable to long liquidation to flush downside after recent rally before higher again.

Technically, all intraday signals will not be relevant on a major risk event like today. I'll react accordingly to how the market unfolds having the above 2 scenarios and the intermediate trend as guide.

E$ 4-hourly chart - A dip before higher?

Easy money is over for now....

Easy money for this rally is nearing the end and expect market to profit take ahead of FOMC rate decision and statements.

Risk events this week include:
Wednesday's FOMC rate decision and statement (2 May, Thu 2am Sin/HK)
Thursday's ECB rate decision (7:45pm Sin/HK) and Press Conference (8:30pm Sin/HK)
Friday's US employment numbers (8:30pm Sin/HK)

CFTC COT report (positions as of 23 Apr 13):
Euro:  -34,275 vs -29,764
Jpy:    -79,730 vs -93,411

NY order book:
Stop loss: 1.3130/20
Limit: 1.3030/10, 1.3055/50 and 1.3130/20

Primary trend: Bullish
Intermediate trend: Bullish (1.32012 breached)
Minor trend: Can't get overly bullish around 1.3260/70, expect consolidative price action

Technically, intraday indicators are all in o/b zone though not in extreme. Shorter intraday momentum is suggesting a near term top but longer intraday momentum is still pointing firmly higher. These contradicting signals may not indicate a turning point but it serve as a warning against getting aggressively bullish. For today, I see 1.3260/70 to cap for now with 1.3160/70 to hold on the downside.

E$ Daily chart - 50% fibo target reached

Regular update will resume in the afternoon tomorrow.