September 4, 2011
USD Weakness Is Still Very Real As many know, I really only view the USD through the lens of the GBPUSD. The USD has weakened versus GBP and regardless of the catalyst of a USD rally, cable continues to put in higher lows since the July 11th low at 1.5770. So while GBPUSD did put in a bearish week last week, the daily chart still remains bullish as the new trading week opens. The daily chart played out very technically as the August 24/25 lows broke below the 61.8% Fibonacci retracement levels (purple) of the rally from 1.6100 to 1.6618. A break of the 61.8% Fib usually signals a reversal. And that is what unfolded as the ensuing rally fizzled out and resulted in a new low at 1.6140 on Thursday of last week. There are a lot of bears out there on cable. And as long as price struggles above 1.6500, it is hard for the bears to go away. But the fundamentals continue to point to a LOWER US dollar. Economic data is deteriorating in the US after a decent first half of the year. The Federal Reserve has confirmed the worst is indeed coming back in the form of QE3. As the year ends, I think we will see worsening economic numbers as the consumer spending decreases in response to the slowdown in manufacturing and labor markets we have seen thus far. And while the UK economy doesn’t bode better, the Fed is much more dovish than the BoE. And for that reason, the fundamental picture favors GBP over the USD. Technically, I raise my eyebrows at the 3 bearish waves that were unable to break below 1.6100 level. This is a serious level of support and we have seen that candles that have closed above 1.61000 have led to sharp rallies back towards 1.6500. As the week opens, all eyes should be on 1.6250 to the upside and 1.6150 to the downside. These levels will dictate direction into the open especially with US markets closed Monday in observance of the Labor Day holiday. Over the week, however, the larger levels to pay attention to are 1.6100 if prices remain below 1.6250. If prices find support above 1.6250, the key level for further rallies remains 1.6500. Trade what you see! The Fed’s Plan - Rumors of News (Bruce Krasting) UK economic outlook darkens (The Financial Times)

USD Weakness Is Still Very Real

As many know, I really only view the USD through the lens of the GBPUSD. The USD has weakened versus GBP and regardless of the catalyst of a USD rally, cable continues to put in higher lows since the July 11th low at 1.5770. So while GBPUSD did put in a bearish week last week, the daily chart still remains bullish as the new trading week opens.

The daily chart played out very technically as the August 24/25 lows broke below the 61.8% Fibonacci retracement levels (purple) of the rally from 1.6100 to 1.6618. A break of the 61.8% Fib usually signals a reversal. And that is what unfolded as the ensuing rally fizzled out and resulted in a new low at 1.6140 on Thursday of last week.

There are a lot of bears out there on cable. And as long as price struggles above 1.6500, it is hard for the bears to go away. But the fundamentals continue to point to a LOWER US dollar. Economic data is deteriorating in the US after a decent first half of the year. The Federal Reserve has confirmed the worst is indeed coming back in the form of QE3. As the year ends, I think we will see worsening economic numbers as the consumer spending decreases in response to the slowdown in manufacturing and labor markets we have seen thus far. And while the UK economy doesn’t bode better, the Fed is much more dovish than the BoE. And for that reason, the fundamental picture favors GBP over the USD.

Technically, I raise my eyebrows at the 3 bearish waves that were unable to break below 1.6100 level. This is a serious level of support and we have seen that candles that have closed above 1.61000 have led to sharp rallies back towards 1.6500.

As the week opens, all eyes should be on 1.6250 to the upside and 1.6150 to the downside. These levels will dictate direction into the open especially with US markets closed Monday in observance of the Labor Day holiday. Over the week, however, the larger levels to pay attention to are 1.6100 if prices remain below 1.6250. If prices find support above 1.6250, the key level for further rallies remains 1.6500. Trade what you see!

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FILED UNDER: GBPUSD daily chart technical fundamental analysis 
August 26, 2011
EURGBP Week End Wrap The EURGBP has rallied for the last 2 trading weeks. But the trend gained considerable strength this week as the bulls targeted the short term resistance level at 0.8880. However, despite the momentum of this trend, I saw too many bears in my Twitter and StockTwits streams this morning. It seems the plan is to step in front of this train as it nears 0.8880 level where price has failed at this level 3 times prior. While seemingly logic, it actually isn’t. First off, follow the trend, especially a daily chart trend. This rally is a result of another failure at the 0.8650 level, a short term support level on the daily chart. A trend that has rallied over 200 pips shouldn’t be ignored. Plus, the failed low is a higher low - a subtle bullish hint. Secondly, when a currency pair looks to challenge a level more 2 or more times, it is usually a hint of an eventual breakout of that particular level. My mentor taught me that. Third, there is NOTHING bearish about this candle. What we need to watch for in the new trading week ahead is if the next candle puts in a wick like the 3 times before it. Remember that the European Central Bank President speak tomorrow when the markets are closed. With the European sovereign debt crisis in full swing, market participants will listen carefully as to whether or not Trichet chooses to finally acknowledge the crisis with monetary policy. The market will execute judgement on Sunday at the open. Enjoy the weekend!

EURGBP Week End Wrap

The EURGBP has rallied for the last 2 trading weeks. But the trend gained considerable strength this week as the bulls targeted the short term resistance level at 0.8880. However, despite the momentum of this trend, I saw too many bears in my Twitter and StockTwits streams this morning. It seems the plan is to step in front of this train as it nears 0.8880 level where price has failed at this level 3 times prior. While seemingly logic, it actually isn’t.

First off, follow the trend, especially a daily chart trend. This rally is a result of another failure at the 0.8650 level, a short term support level on the daily chart. A trend that has rallied over 200 pips shouldn’t be ignored. Plus, the failed low is a higher low - a subtle bullish hint.

Secondly, when a currency pair looks to challenge a level more 2 or more times, it is usually a hint of an eventual breakout of that particular level. My mentor taught me that.

Third, there is NOTHING bearish about this candle. What we need to watch for in the new trading week ahead is if the next candle puts in a wick like the 3 times before it.

Remember that the European Central Bank President speak tomorrow when the markets are closed. With the European sovereign debt crisis in full swing, market participants will listen carefully as to whether or not Trichet chooses to finally acknowledge the crisis with monetary policy. The market will execute judgement on Sunday at the open.

Enjoy the weekend!

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FILED UNDER: EURGBP daily chart analysis technical 
August 14, 2011
EURGBP New Week Outlook August 14 2011 The EURGBP also saw some wild moves last week as the market had to deal with the fact that now France as entered the European sovereign debt crisis discussion at the same time that Italy has become a serious concern in the market. Technically, however, the pair gave mixed signals as price made lows at 0.8640 rallied over 200 pips to 0.8880 and ended the week at 0.8750. The lows on Friday at 0.8730 gave a very small signal that EURGBP will head lower by piercing even the 78.6% Fibonacci level. Also, price closed the week below 0.8750 even if by only a few pips (0.8748 on my platform). Rallies to the 0.8880 highs continue to be met by sellers to target the green buy zone below 0.8700. However, the week closed before entering this green zone. Therefore, this pair continues to maintain is bearish bias into the 0.8600’s. Only a break and hold above 0.8880 changes this bias to bullish.

EURGBP New Week Outlook August 14 2011

The EURGBP also saw some wild moves last week as the market had to deal with the fact that now France as entered the European sovereign debt crisis discussion at the same time that Italy has become a serious concern in the market. Technically, however, the pair gave mixed signals as price made lows at 0.8640 rallied over 200 pips to 0.8880 and ended the week at 0.8750.

The lows on Friday at 0.8730 gave a very small signal that EURGBP will head lower by piercing even the 78.6% Fibonacci level. Also, price closed the week below 0.8750 even if by only a few pips (0.8748 on my platform). Rallies to the 0.8880 highs continue to be met by sellers to target the green buy zone below 0.8700. However, the week closed before entering this green zone. Therefore, this pair continues to maintain is bearish bias into the 0.8600’s. Only a break and hold above 0.8880 changes this bias to bullish.

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July 17, 2011
Sellers Can Gain Momentum in EURGBP If price can hold below 0.8720, the first target is 0.8670. The real test for bears will be 0.8600, the 61.8% Fibonacci level of the entire 2011 EURGBP rally. Watch price action going into the week.

Sellers Can Gain Momentum in EURGBP

If price can hold below 0.8720, the first target is 0.8670. The real test for bears will be 0.8600, the 61.8% Fibonacci level of the entire 2011 EURGBP rally. Watch price action going into the week.

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FILED UNDER: EURGBP daily chart technical analysis 
EURGBP starts the new trading week developing beautifully to the downside as the 38.2% Fib holds with lower highs and lower lows. 

EURGBP starts the new trading week developing beautifully to the downside as the 38.2% Fib holds with lower highs and lower lows. 

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FILED UNDER: EURGBP daily chart trading commentary 
July 13, 2011
Weak USD Rallies GBPUSD The USD has weakened significantly as the Federal Reserve talks down the USD and the market rumors about QE3 (a third round of quantitative easing in the United States) gather steam. After making a low at 1.5770, GBPUSD has actually been bullish. Another bounce off of the 1.5750 midterm support level A close above the 61.8% Fibonacci retracement level at 1.5880 despite breaking below it. A new high above 1.6150 To confirm the bullishness, a break and hold above the 61.8% Fibonacci retracement level at 1.6185 would be need with price completing the quarter to 1.6250. If this doesn’t develop, we could see corrective action back towards 1.6000, the 61.8% Fibonacci level of today’s rally. Ultimately, cable looks bullish above 1.6000 despite the bear trend since late April. Full disclosure

Weak USD Rallies GBPUSD

The USD has weakened significantly as the Federal Reserve talks down the USD and the market rumors about QE3 (a third round of quantitative easing in the United States) gather steam. After making a low at 1.5770, GBPUSD has actually been bullish.

  1. Another bounce off of the 1.5750 midterm support level
  2. A close above the 61.8% Fibonacci retracement level at 1.5880 despite breaking below it.
  3. A new high above 1.6150

To confirm the bullishness, a break and hold above the 61.8% Fibonacci retracement level at 1.6185 would be need with price completing the quarter to 1.6250. If this doesn’t develop, we could see corrective action back towards 1.6000, the 61.8% Fibonacci level of today’s rally.

Ultimately, cable looks bullish above 1.6000 despite the bear trend since late April.

Full disclosure

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FILED UNDER: GBPUD daily chart technical analysis 
June 27, 2011
GBPUSD Needs A Correction Then Lower As we anticipated 2 weeks ago, GBPUSD has transitioned into a new bearish trend. We were watching for the infamous 1.6000 level to be broken and for price to hold below it. Well, we got both last week as price closed last week BELOW 1.6000 major large quarter point. While a very bearish event, it is prudent to note that price fell to the 1.5912 lows with very shallow to no correction on its fall from 1.6260 high of last week. That makes this pair ripe for corrective action this week. Watch the Fibonacci levels on the daily chart. Also, news this week could fuel the correction if UK GDP surprises and comes in not so bad and US manufacturing comes weaker-than-expected. And yet on the other hand news could very well fuel a continuation in the rally as the marke really expects. Trade what you see!

GBPUSD Needs A Correction Then Lower

As we anticipated 2 weeks ago, GBPUSD has transitioned into a new bearish trend. We were watching for the infamous 1.6000 level to be broken and for price to hold below it. Well, we got both last week as price closed last week BELOW 1.6000 major large quarter point.

While a very bearish event, it is prudent to note that price fell to the 1.5912 lows with very shallow to no correction on its fall from 1.6260 high of last week. That makes this pair ripe for corrective action this week.

Watch the Fibonacci levels on the daily chart. Also, news this week could fuel the correction if UK GDP surprises and comes in not so bad and US manufacturing comes weaker-than-expected. And yet on the other hand news could very well fuel a continuation in the rally as the marke really expects. Trade what you see!

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FILED UNDER: GBPUSD technical daily chart analysis 
June 15, 2011
GBPUSD Heading Into Summer Doldrums After finding support ahead of the 50% Fibonacci retracement level on the daily chart, cable headed higher as expected in reaction to the Fib level at the start of this trading week. However, the pair failed to make a higher high on the daily chart and couldn’t even regain 1.6500 on its rally. Now the pair has made new lows at 1.6167 in today’s trading session after breaking last week’s lows at 1.6216. The fundamentals have proven to support this change as UK unemployment came out worse-than-expected while inflation came in lower-than-expected. Therefore it looks as though the BoE was spot on in its inflation reports and corresponding response in monetary policy after all and will have no further incentive to tighten monetary policy in the near future as the market previously expected. In contrast, US inflation ticked higher and if that trend picks up momentum, the market will begin to anticipate a move in tightening monetary policy sooner than expected. That would spell further USD strength in the midst of GBP weakness which could equal a new bear trend in the GBPUSD as we begin to shift into summer trading. Trade what you see! Intraday and intra-week, price will move up, down, and then up again. But that doesn’t change the fact that long term that the GBPUSD is seemingly moving into a new trend. In the meantime, let’s not get too far ahead of ourselves. 1.6000 is the first major level of support on the daily chart that price needs to break and remain below in order to see this new bear trend really begin to take hold.

GBPUSD Heading Into Summer Doldrums

After finding support ahead of the 50% Fibonacci retracement level on the daily chart, cable headed higher as expected in reaction to the Fib level at the start of this trading week. However, the pair failed to make a higher high on the daily chart and couldn’t even regain 1.6500 on its rally.

Now the pair has made new lows at 1.6167 in today’s trading session after breaking last week’s lows at 1.6216. The fundamentals have proven to support this change as UK unemployment came out worse-than-expected while inflation came in lower-than-expected. Therefore it looks as though the BoE was spot on in its inflation reports and corresponding response in monetary policy after all and will have no further incentive to tighten monetary policy in the near future as the market previously expected. In contrast, US inflation ticked higher and if that trend picks up momentum, the market will begin to anticipate a move in tightening monetary policy sooner than expected. That would spell further USD strength in the midst of GBP weakness which could equal a new bear trend in the GBPUSD as we begin to shift into summer trading.

Trade what you see! Intraday and intra-week, price will move up, down, and then up again. But that doesn’t change the fact that long term that the GBPUSD is seemingly moving into a new trend. In the meantime, let’s not get too far ahead of ourselves. 1.6000 is the first major level of support on the daily chart that price needs to break and remain below in order to see this new bear trend really begin to take hold.

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FILED UNDER: GBPUSD daily chart technical analysis 
May 4, 2011
GBPUSD Corrects, Now What?

A beautiful technical correction on the daily chart has occurred in the GBPUSD currency pair. The level to watch during this correction was the area between the 50% Fibonacci level at 1.6455 and the 61.8% Fibonacci level at 1.6385. If we had a break below 1.6385, it would be safe to say that a reversal in this uptrend was unfolding. A hold, however, would restart the uptrend that should make new highs above 1.6750.

GBPUSD daily chart

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April 26, 2011
EURGBP Ahead of UK GDP

While most of the market is looking ahead to the US FOMC meeting, sterling traders await the UK GDP number which will be released ahead of the Fed announcement. Today’s UK CBI manufacturing number was dismal and indicates to market participants that the British economy may have been weaker than the market expects in the 1st quarter of this year.

EURGBP 60 minute chart

After languishing during Monday’s session above 0.8800, the EURGBP broke out after the release of the poor UK CBI numbers as sterling took a hit on the news across the board. This breakout rally made highs at 0.8903 before falling back to the 38.2% Fibonacci retracement level late in the NY session.

EURGBP daily chart

If UK GDP is weak, fully expect price to break out and test the 12-month highs at 0.8940. A break above that level sees price complete the quarter to 0.9000, a call I made way back in January. However, if price surprises to the upside, price will retrace this rally back to 0.8850. A break of that level to the downside sees price go to 0.8800.

Remember, trade the market reaction (price action) not the news headline.

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FILED UNDER: EURGBP hourly daily chart technical analysis 
April 25, 2011
GBPUSD In The Week Ahead April 24, 2011

The GBPUSD closed last week above 1.6500 indicating that its breakout to 18-month highs at 1.6600 is legitimately bullish.

GBPUSD daily chart

The GBPUSD daily chart shows the breakout rally had no retracement. Therefore, I do expect the pair to retrace to 1.6400 before heading higher towards 1.6750. Only a daily close above 1.6575 after Monday’s trading session will change this short-term bias. That did not happen today.

GBPUSD 60 minute chart

Instead, cable dropped below 1.6500. Since the pair managed to hold above this level last week after breaking above it, this was a signal of weakness. This signal panned out as the pair dropped to an intraday low of 1.6466. Though price has sinced bounced back to 1.6500, price remains below the 1.6500 large quarter point signaling that more weakness could be in store for the GBPUSD.

Price targets 1.6450, 1.6430, 1.6380 to the downside and 1.6550, 1.6600, and 1.6625 to the upside.

This week all eyes will be on the FOMC. On Wednesday we will hear from the Federal Reserve as they will announce their decision on interest rates and US monetary policy. On the same day, we will get UK Q1 GDP and consumer confidence. Thursday is US GDP. The market will compare the health of both economics and we should see it played out in price. If the FOMC and US GDP are both optimistic or hawkish, expect further declines to be supported into 1.6380. However, if the Fed disappoints or UK GDP surprises to the upside, price will return to the 1.6600 highs.

Trade what you see!

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FILED UNDER: GBPUSD daily hourly technical chart 
April 19, 2011
Euro Bulls Won’t Go Away

Yesterday, Finnish elections and Greece soured the euro and supported the EURGBP’s descent to 0.8750. An expected correction after the failure at the 0.8920 highs, the pair remains bullish as it finds support at 0.8750 and begins to rally off the lows at 0.8740.

EURGBP daily chart

The EURGBP pair found support once again at the 61.8% Fibonacci level from the weekly chart at 0.8735. Despite the near-reversal, the pair remains well-supported and in today’s trading session has moved off the 0.8750 lows as it consolidated above 0.8750 at yesterday’s close. The bullish behavior around 0.8750, as price failed to push lower, prompted buyers to step in.

EURGBP hourly chart

Judging from the hourly chart, the pair has plenty of room to stage a corrective rally to 0.8810. However, I consider a break above 0.8800 a bullish development and would expect a close above the whole number to prompt further gains toward previous resistance at 0.8840/50.

After a blank economic calendar from the UK, the market looks ahead to the release of the Bank of England (BoE) meeting minutes tomorrow. If there are no hawkish clues, the market will be very disappointed and could help send the pair past 0.8850 and back to the 0.8920 highs. On the other hand, any hints of more hawks in the BoE beyond the expected 3 (Sentence, Weale, and Dale) and the EURGBP could find itself below 0.8750 to challenge the lows at 0.8720.

Read also:

  • The Week Ahead April 17 2011 (FMFX)
  • Euro Gains on Bets ECB Will Raise Rates Even Amid Sovereign-Debt Turmoil (Bloomberg)
  • U.K. Pound Declines Versus Euro on Bets BOE Will Increase Rates After ECB (Bloomberg)
  • Kenny Says Ireland Will Not Default as Greece Concerns Mount (Bloomberg)
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FILED UNDER: EURGBP technical analysis daily hourly chart 
April 18, 2011
Can The USD Garner More Strength?

The GBPUSD was already on the backfoot as the pair continued to fail at 1.6400/30 as we noted yesterday. The pair fell on technicals to 1.6250 but it was the news of US downgrade that sent the pair through the 1.6240 support to make new lows at 1.6160. Now that targets were met, let’s reasses the pair to see what cable could be offering next.

GBPUSD daily chart

Price fell between the 50% and 61.8% Fibonacci retracement levels hitting our targets at 1.6250 and 1.6180. The 61.8% Fibonacci level at 1.6146 did hold suggesting that the pair is ready to reverse back higher to make new highs above 1.6430 highs. However, before bulls start to get ahead of themselves, study today’s price action on the 5 minute chart.

GBPUSD 5 minute chart

The correction off the lows can rally all the way to 1.6266, the 61.8% Fibonacci retracement level of today’s breakdown, and still be considered bearish. Further support to bears would be a daily close below 1.6250. Only a close above 1.6266 would change my bearish view of this pair. 

Bears target 1.6110/00 next on the daily chart. A break below 1.6100 targets 1.6000.

Read also:

  • The Week Ahead April 17 2011 (FMFX)
  • Full Faith and Credit in…Your Stop Losses (iBankCoin)
  • Stocks Post Biggest Drop in Month (WSJ)
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FILED UNDER: GBPUSD technical analysis 5min chart daily 
April 17, 2011
The Week Ahead April 17 2011

The EURGBP looks like further declines. Even though it managed to end the week above 0.8940/50 previous resistance, it 1) respected the 50% Fibonacci level on the bounce after the breakdown from 0.8950 highs and 2) made lower highs on each bounce out of the 0.8810s lows.

EURGBP 60 minute chart

A break below 0.8800 targets 0.8750. A hold above 0.8800 targets 0.8900.

EURGBP daily chart

The GBPUSD also looks like it has put in a top at 1.6430, which is the 38.2% Fibonacci level on the monthly chart. Even as price continues to hold above 1.6250, it is the failure at 1.6400/30 that gives the pair an increasingly bearish outlook.

GBPUSD 60 minute chart

GBPUSD daily chart

Bears must hold below 1.6250 to build the momentum needed for price to target the 1.6182 50% Fibonacci retracement level. As long as price continues to remain below 1.6325 at the market open, price is likely to decline towards the 1.6250 support. A hold above 1.6250, however, will have price targeting 1.6400/30 highs again. A break above the highs targets 1.6500. However, only a daily close above 1.6430 will keep cable bullish.

The GBPAUD is a little more uncertain. After its breakdown below 1.5750, the pair became rangebound between 1.5440 and 1.5650. However, during Friday’s trading session the GBPAUD finally broke below the range bottom to a low of 1.5415. However, the pair closed the week back at 1.5440 signaling to me that this was merely a range extension to the downside rather than a breakdown. In addition, as GBPAUD broke to new lows, the AUDUSD failed to break above its highs at 1.0580.

GBPAUD daily chart

GBPAUD 60 minute chart

In my opinion, this pair remains rangebound. Watch these various Fibonacci retracement levels to see if the downside momentum remains. However, I anticipate GBPAUD will rally back to the top of the range at 1.5650 as long as AUDUSD remains below 1.0580. A break above 1.5670 high targets 1.5750. If price remains below 1.5440, expect price to target 1.5300 support.

Fundamentals

  • China PBOC Raises Deposit Reserve Requirement Again (MarketWatch)
  • Gold Over £900/oz As British Pound Falls Sharply - Soaring Inflation Sees UK Retail Sales Plunge Most On Record (Zero Hedge)
  • UK Inflation Plunges As Retail Sales Drop By Most On Record (Zero Hedge)
  • The Euro Is Sliding After Europe’s Worst Nightmare Comes True In Finland (Business Insider)
  • Greece Says No Restructuring Plan in Place as Traders Raise Default Bets (Bloomberg)
  • G-20 Names ‘Too Big to Ignore’ Economies, Downplays Shocks (Bloomberg)

Trade what you see!

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FILED UNDER: GBPUSD EURGBP GBPAUD hourly daily chart technical fundamental analysis 
April 14, 2011
EURGBP Still Bullish The 38.2 Fibonacci level is a good place for bulls to come in. A break below there targets 0.8820, also the 50% Fibonacci level. Not much news out of Europe this session so moves should be very technical if we don’t get any surprise announcements. Fundamentals still favor the euro with China assuring the markets that there is plenty of help for periphery European economies, the markets are left to weigh the sentiment of the central banks. The European Central Bank (ECB) is clearly more hawkish than the Bank of England (BoE). The uptrend is only in question if price closes below 0.8840. It changes with a close below 0.8750. Read also: Interest rates ‘on hold until August’ (The Telegraph) China to Help Spain’s Ailing Banks (The Fiscal Times)

EURGBP Still Bullish

The 38.2 Fibonacci level is a good place for bulls to come in. A break below there targets 0.8820, also the 50% Fibonacci level. Not much news out of Europe this session so moves should be very technical if we don’t get any surprise announcements. Fundamentals still favor the euro with China assuring the markets that there is plenty of help for periphery European economies, the markets are left to weigh the sentiment of the central banks. The European Central Bank (ECB) is clearly more hawkish than the Bank of England (BoE). The uptrend is only in question if price closes below 0.8840. It changes with a close below 0.8750.

Read also:

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FILED UNDER: EURGBP daily chart technical analysis