Posts Tagged ‘FOREX’
US Dollar–Head And Shoulders Above the Crowd
The US Dollar Index Futures, a major tool used to estimate the US Dollar’s true worldwide value as it trades against the major currencies of the world, has been quietly making a technical pattern called a “head and shoulders” . If you look at it carefully you will see an image, more or less of a man’s head and shoulders, with the shoulders peaking slightly at their end. This is the classical look of the pattern. Once more, the Index has already broken out from the pattern, i.e. passed the neckline, and is on the way to fulfill its destiny and head to the target I listed on the Chart below, that is, 82.00 points.
Since this pattern is usually associated with major tops and we have no reason to believe that such is not the case here, I do believe we are at the start of a major downwards trend that could last a few months to a year and drag the Dollar down to places it has not seen in a long time. More than 10 years of US Government spending on wars and bailing out financial criminals have flooded the world with its own currency of reference. Now it is time for the Dollar to pay back for the devastation it has wreaked on many innocent people. It will be only a symbolic gesture, and we may well forget it this time next year. Because, you know, this is a world where lies thrive and the Mighty Dollar rules!
This is the way the Chart looks:
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The Euro Is Bottoming Out Against the Japanese Yen
If one gives a brief glance at the Charts of major currencies as they are currently being traded against the Euro, there can be observed a certain change, maybe even a trend-reversal in the making. This is especially true when you see the EUR/JPY cross rates in the Chart below:
The June Double Bottom can be clearly seen as a W shaped bottom built in a classically-shaped pattern. What makes the bottom even more commanding is the long and extremely proving negative divergence that I show in blue from the beginning of May to the start of June. The RSI trend, as shown by the blue line below, is in an upwards trend, while the prices are in a definite downwards trend, as shown by the blue line above. This lends credence to my thesis of a W bottom having formed on this Chart.
All of this is good news for the Euro, which had little good news to smile at lately. And, considering the 6-8 possible bottoming patterns I have seen in Charts depicting trading of the major currencies vs. the Euro, this may be indeed the time to invest in what I see is a relatively cheap Euro that in my mind has been bashed enough and is now in turn for better days.
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Sterling Is Due For A Pounding
A reality knock is on its way for the pound. For the past week or so, sterling has been gliding higher, boosted by the new coalition government’s fiscal discipline and by talk from one Bank of England monetary policy maker that rates should rise. In a world where austerity is becoming the norm, Chancellor George Osborne’s plans to slash public spending even more than expected removed the risk of a credit downgrade.
For investors who have spent the last few months dodging the debt crisis sweeping through the euro zone, this could only be seen as good news. However, as data on Monday indicated, the economic price for reducing the country’s deficit so fast will be high. The economic recovery that showed signs of taking off in the first half of this year has already started to falter, even before the fiscal measures in the emergency budget late last month have been introduced. Although the manufacturing industry may not have contracted quite as much as many feared last month, the much larger and much more important services sector of the economy has proved a lot less resilient. The latest purchasing managers’ index fell much more than expected with business expectations plunging to a 15-month low.
Coming against a background of increased fears about a double-dip recession not only in the euro zone but in the global economy as a whole, the prospects for the U.K. economy are looking decidedly dim. So, although the economy may have achieved growth of 0.6% in the second quarter, that is the best the country is likely to see for some time. “The survey data have continued to cast doubt on the ability of the private sector to weather the fiscal tightening when it begins in earnest soon,” warned Vicky Redwood, U.K. economist with Capital Economics, an independent research group, in London. By taking its fiscal medicine on the chin, the U.K. economy may yet achieve more sustainable growth sooner than its competitors, paving the way for U.K. interest rates to start rising well before their peers do.
But, there is little sign that higher U.K. rates are needed in the near term. On the contrary, pricing power in the service sector appears fairly limited while input prices are running at the lowest level in six months. Given this, there should hardly be any fresh pressure for the Bank of England to start tightening policy when its policy members hold their next meeting on Thursday. Last week, three other members of the policy committee made it clear that they didn’t support any early move. This should ensure that sterling remains at a disadvantage to high yields just now and even if general market sentiment improves that the pound loses some of its recent support.
Even though sterling is still trading firmly over $1.5100, technical analysis suggests that its recent rally is more or less over. See how the pound has glided higher against the dollar and seems to be nearing a certain top as it bounces off the historically strong resistance line that is active for over 20 years.
This is the way the Chart looks:
At Den Dansk Bank, analysts are putting out a sell recommendation for any rise over $1.5304, warning that there is scope for a return all the way back down to $1.3500.
Early Tuesday, financial markets were having a little bit of relief rally with the Nikkei rising 0.8% and the Shanghai Composite gaining 1.1% after the Reserve Bank of Australia left rates unchanged as predicted but proved much less dovish about global growth prospects than expected. A larger-than-expected increase in Australia’s trade surplus also helped to offset some of the recent negative sentiment that has been dominating global markets.
By 0645 GMT, the pound was up at $1.5192 from $1.5135 late on Monday in North America, according to EBS.
The euro was up at $1.2585 from $1.2541 and rose to Y110.50 from Y110.02. The dollar was essentially flat at Y87.77 compared with Y87.75.
The improvement in sentiment may not last long given that a continued decline in the Baltic Dry Index points to a further reduction in global trade, suggesting lower demand from countries such as China. Also, the latest Institute for Supply Management survey for U.S. non-manufacturing is expected to show another decline, reminding investors that the U.S. recovery is stalling.
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European Stock and Currency Summary
The Federal Reserve Bank chairman Ted Bernanke commented Tuesday that the U.S. recovery will remain intact. This continues to lend a prop to risk appetite as did talk that Thursday’s China export data will show a 50% increase. European equity exchanges traded positive throughout the session.
The risk currencies advanced, CDS rates came down and peripheral Euro Dollar zone bond rates came down somewhat. EUR/USD nudged 1.20 from a 1.1924 low, GBP/USD recovered from its ratings-worry sell off Tuesday adding one cent to 1.4534, despite a surprise widening in the visible trade balance to GBP7.2B. USD/JPY pivoted around 91.50. The main European indices are up around 0.4%, gold is down $3 at 1234oz after printing a lifetime high Tuesday and oil is up $1 at $73bbl.
Where the turnarounds are happening are all around strong support/resistance lines all historic in importance. The Dollar Index Futures hit a major resistance line yesterday at an in day high above 89 points and retreated. This seems to be the end of the monthly upwards trend that started when prices broke the long-term symmetric triangle upwards as I pointed in my previous article. The Futures Index will not, it seems to me, make its intended goal of 92.3 points, but this is true for most pattern breaks. It is hard to say for now what will be with the US Dollar rates around the world, but the upswing seems to be ended when looking at Dollar/World Currency pairs as they end streaks and hit s/r lines in addition to seeing the Dollar Index Futures as is shown on the Chart Below.
This is the way the Chart looks:
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G-D Bless America
By this I mean, of course, none other than the US Dollar. Oh Mighty One!! Bestow your blessings on our fluctuating currency, for ’tis to be majestically and majically going up again against all fundamental odds. It’s been very hard to follow, much less to invest by. As these lines are written the US Dollar Index Futures have been going upwards nicely, breaking their previous daily downwards movement which could hardly be called a trend. The strong upward trend is confirmed today with the gap up that was caused by good world-wide news over the weekend. This trend is not expected to end soon. But, as I always have written when addressing the Dollar, any upwards trend is only a correction of the long-term downwards pattern that has plagues the Dollar since the start of this current Depression. Check out the chart to enlighten you to the short-term facts and the strong possibility that this short-term trend pattern will continue for some time to come.
This is the way the Chart looks:
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America’s Retail Markets: Part V
I have decided to add another installment in this series before the final overview chapter is written. And indeed, it can not be written until we examine the United States’ leading retail foods giant, Wal-Mart.
Wal-Mart is now in the midst of a daily downwards fan pattern as shown on the Daily Chart below. This pattern can be somewhat unstable at the end, and it indeed seems to be nearing its’ end. It can break upwards and is likely to given the fresh upwards trends taken by the retail companies mentioned in my 2 previous articles. These are fresh trends and recently the 1st two articles’ stocks has started an upwards trend as well. Wal-Mart’s price level has been at or below the lower bounds of the Bollinger Bands, showing a tendency of over-selling, since the fan has started. The RSI is also right by the 30 level which is, basically, sold-out. The buyers may come, and probably soon, technically speaking. But economically this will rely on the major companies’ sales, revenue and profit margins as quoted in their next fiscal reports.
There seems to be good times ahead for the Retail Markets, as shown by the Bollinger Bands showing their crossing of the price levels, and the indicators that show oversold prices on the way in the Weekly Chart below. As I said, the RSI is sold-out and ready to accept buyers, or rather “bargain hunters”. And the Average True Range, or ATR is low indicating little intra-day changes in prices and signaling a breakout soon. Do not act in any way on this “tip” because there is no breakout yet. Watch your charts daily and, when you see a true pattern break, then it is more wise to act on.
This is the way the Weekly Chart looks:
