High Low Option

Is the CAD Headed for a Breakout?  By GoLearn Forex

USD/CAD:

The Canadian Dollar from a technical standpoint is giving every indication it is going to breakout.   Price has been consolidating for several weeks.  You can see more clearly the consolidation in the Chart below depicted by the orange triangle.

Typically we draw a triangle where only one side represents the slope.  However, the triangle drawn below is indicative of investor’s uncertainty with regards to the CAD.  The Canadian economy is holding strong.  The CAD is a commodity currency and will rise and fall as commodity prices rise and fall (in particular Oil).  The Dollar has been rallying which should mean a weaker Loonie, but this rally stems from positive U.S economic data.  The U.S economy and that of their northern neighbor are linked to a certain extent as they feed off of one another.  Therefore, positive U.S data should also be good for the CAD.  Therein lies the conflict and thus you have a dual sided sloping triangle.

The CAD is currently trading above its 50 day MA.  Similar to the AUD and NZD it failed to breach the 100 day MA in spite of the Dollar rally.  As the CAD wedges itself into the triangle we are looking for the following to occur in order to trip an entry signal.  If the Loonie produces a candle south of the 50 day MA and south of the bottom slope of the triangle then look to enter a Long CAD position.  Alternatively, if the CAD produces a candle body north up the upper slope of the triangle and the 100 day MA then enter a Short CAD position.  Lastly, if a Short CAD signal triggers we see a near term take profit level at 1.0880 coinciding with the Fibonacci 23.6% Retrace level.  We view this level as strong point of resistance.

Oil Takes Off by GoLearn Forex

The FOMC meeting came and went without stirring the waters.  In the Euro-zone and London, Equity Markets finished their sessions in positive territory ahead of the highly anticipated U.S FED rate decision.  The accompanying FOMC statement was intentionally left mostly unchanged so as not to roil markets. It served its purpose well as the DJIA finished the day off slightly lower by 10.88 points to close at 10,441.12 while the tech heavy NASDAQ closed up 5.86 points to 2,206.91.

In the Currency Markets the Dollar followed Equity Markets finishing the session nearly flat against its G-7 counterparts.  The AUD gave up .61% still reeling from CB comments that took on a more dovish tone in regards to any near term future rate hikes.

Oil soared to 73.54 during intra-day trading before leveling off the day at 72.66, a gain of $1.97.  Gold climbed $12.70 an ounce to 1,137.90.  On the Agricultural front Soybeans, Cotton and Sugar continued to rally while Copper, Wheat and Corn declined on Dollar strength.

On the economic data docket for today we have the BOJ rate decision to be announced, although no change is expected.  In the U.K, Retails Sales are set to be released while in Canada CPI data will hit the wire.  In the U.S, Jobless Claims will print as will the measure of Leading Indicators and the Philadelphia FED survey.

Upcoming Forex Events for December 17, 2009

GBP  Retail Sales (MoM) Forecast  0.50%  Previous  0.40%

CAD  Core CPI (MoM) Forecast  0.10%  Previous  0.10%

USD Initial Jobless Claims Forecast    470.00K  Previous  474.00K

JPY Interest Rate Decision  Forecast  0.10%  Previous  0.10%

Analysis by http://www.golearnforex.net

Review Key Support and Resistance Levels for USD by GoLearn Forex

Key Support & Resistance (S/R) Levels:

As the Greenback continues to rally heading into the end of the year we thought it would be a good time to review a couple key S/R levels.  Traders generate S/R based on a number of factors.  One key factor is based on the tenor of the chart the trader is using.  A trader using a tick or minute chart will be less concerned about S/R generated from a 4 hour chart that is 100+ pips from the current handle.  However, that same trader will want to know where the longer term S/R levels sit. If price moves towards those points he can integrate them into his trading strategies thereby profiting and or avoiding losses.

GBP/USD:

The Cable is currently sitting below its 100 day MA which generates an already negative bias.  A candle body below 1.6198 would generate the next Short entry point  Near term profit taking would be the 200 day MA.  If the 200 day MA is breached we would target the low of this range bound period near 1.5683 which also represents the Fibonacci  38.2% Retrace level.  The 38.2% Retrace level was generated from the Sterlings turn around in January of this year.

AUD/USD:

The Aussie has shown great resilience and for good reason.  The RBA had taken a hawkish stance on rates as it was amongst the first to raise rates.  The Australian economy is in relatively good shape.  Additionally, the AUD is a commodity currency and it has ridden the commodity rally. Currently the AUD is sitting just below the 50 day MA.  A candle body appearing below .8944 equal to the Fibonacci 76.4% Retrace level, which also coincides with recent support levels would trigger a near term Short entry.  We would increase the Short position with a close below the 100 day MA, currently holding at .8834.  A long signal would be generated with a close well above near term resistance at .9325.

With the EUR taking a sharp nose dive yesterday it prompts us to look at recent relative price levels on the G-7.  The EUR/USD is the most commonly traded pair in the world.  The price of the EUR has broad implications on the relative value of other G-7 currencies.  Although the below data can be shown graphically it is easier to view price differentials in a table.  If the EUR is a leading indicator of relative  value then the CAD, AUD, and GBP may be in for a minor drop.

Historical

Date  EUR  CAD  AUD  NZD  JPY  GBP

2009-10-02 1.4576  1.0797 0.8652 0.7160  89.8050 1.5946

2009-10-01 1.4545  1.0839  0.8697  0.7149  89.6050 1.5955

2009-09-30 1.4640  1.0695  0.8828  0.7232  89.7050 1.5982

2009-09-29 1.4587  1.0846  0.8703  0.7143  90.0885 1.5961

Current

Date  EUR  CAD  AUD  NZD  JPY  GBP

2009-12-15 1.4533  1.0611 0.9067 0.7224  89.6355 1.6272

NZD Beginning to Falter by GoLearn Forex

NZD/USD:

The New Zealand Dollar is starting to falter and like most of its G-10 counterparts it is holding at pivotal levels against the Greenback.  One slip either way may send the currency tumbling or ready to resume its advance on the Dollar.  We have mentioned the Kiwi in the past as we feel it may yield the biggest percentage loss when the Dollar does finally rally.

In the graph below we see the formation of a downward sloping Triangle beginning to emerge.  The Kiwi has been riding the 50 day SMA as support on its path to .7600.  You can observe that NZD peaked in late October but after 3 attempts it has failed to break the October high.

Short term support has been holding near .7100 represented by the bottom leg of the triangle.  As the hypotenuse converges on near term support the more likely it is that a breakout will occur in the direction of the slope.  We have also diagrammed a pattern we use often to identify trend and that is a step pattern whereby there are lower high’s and lower lows (or vice versa as the case maybe).  Typically we like to see more obvious lower lows than what the Kiwi has shown us thus far.

The NZD is currently sitting below its 50 day MA, which we mentioned prior, represented support for the NZD’s move over the last 9 months.  During the Dollar’s rally last week the Kiwi was able to bounce off of the 100 day MA but was not able to bounce back above the 50 SMA.  As price action moves into the wedge of the triangle it may force price below the 100 SMA.

For good measure we added a Fibonacci Retrace starting back in March when the Kiwi dipped below      .50 running through its most recent high in October when the NZD struck .7635.  This data range produces the 23.6% Fibo Retrace at a handle of .6988.  To trigger a strong short signal the Kiwi would need to take out the 100 day MA, near term support (the base leg of the triangle), and the Fibo 23.6% level, as we then target a .6500 handle.  In order to resume a Long NZD position at this point the NZD would need to break north of the hypotenuse, the 50 day MA, and near term resistance at .7525.

EUR/USD:

The EUR is perilously close to falling into a tailspin.  We have been stating for some time that a candle appearing below the 50 day Moving Average (MA) would generate a strong signal for a Short entry.  As you can see in the Graph below that signal occurred last week, with the 50 day MA currently holding at 1.4880 while the EUR is trading at 1.46.

The EUR is now on the cusp of an even larger fall. It closed last Friday’s session at the 100 day MA an even more significant breach than the 50 day MA.  Perhaps even more troublesome for the EUR is that it is just a hairsbreadth above 61.8% Fibonacci level at a handle of 1.4621.

INSERT CHART EUR

A close below the 61.8% Fibo level coupled with a close below the 100 day MA as they converge may equal real trouble for the EUR.  The EUR has not been south of the 100 day MA since April 2009 which coincidently occurred when the 100 day MA and Fibo 23.6% level converged.  The EUR proceeded to advance 14.6% from that point.  We therefore target the 50% Fibo level with a handle of 1.4184 as the next support level should the EUR breach the 61.8% Fibo level.

USD/CHF:

The CHF is another currency holding at a very pivotal level.  With Friday’s session closing just below the 100 day MA the CHF is trying to hold its ground against the Greenback.  The Swiss Franc has been one of the benefactors of Gold’s jump in value.  However, as the Dollar has rallied and Gold prices have begun to fall so has the CHF.

The Franc closed above its 50 day MA for the first time since August, representing only the 3^rd such close since April of 2009. This coincided with it’s last close above the 100 day MA.  The Franc has another issue to contend with and that is the 23.6% Fibonacci Retrace level created from the CHF low of 1.20 back in March of 2009.

INSERT CHART CHF

If the CHF closes above the 100 day MA and the 23.6% Fibonacci level at a handle of 1.0402 is breached then we would expect the CHF to test support at the 38.2% Fibo level or 1.0701.

The Gold & CHF Correlation by GoLearn Forex

USD/CHF:

The Swiss Franc has a positive correlation to Gold.  Thus, as Gold appreciates so does the CHF and vice versa.  When the Gold rush of 2009 began the CHF participated in the precious metal’s appreciation.  However, the correlation broke down as Gold broke its all time high.  In the below Chart the CHF hesitated as it broached Dollar parity while Gold enjoyed near new daily highs.  We would have expected the CHF to enjoy new highs, in line with Gold, once breaking parity with the Greenback but that did not transpire.

INSERT CHART CORR

The CHF like most of the G-10 is currently holding at very volatile handles.  During the Dollar’s initial rally the Franc closed just above the 50 day MA and has since surpassed it.  Currently the CHF has breached S1 at 1.0278.  In the Chart below we have drawn a Fibonacci Retrace from the CHF low on April 20^th, then trading at 1.17. We used the CHF high on November 26^th, with a handle at .9918 to complete the Fibonacci range.

INSERT CHART CHF

The Fibonacci Retrace puts the 23.6% retrace level at 1.0350.  The 100 day MA is also converging on the same level.  If the Swiss Franc takes out the FIBO 23.6% level and closes below the 100 day MA this would trigger an additional short CHF entry.  A close below the 50 day MA at 1.0163 would generate a long CHF entry.

There are a number of moving parts to watch when trading this pair.  Gold has been hit hard during this Dollar rally and most analysts felt a retrace was imminent given the metal’s stellar rise.  However, most analysts also forecast Gold to retain most if it’s appreciation given the high level of demand.  This view may shield the Franc from massive depreciation.  However, if the CHF takes out the 100 day MA prior to Gold firming then we would expect to see significant price action.

What If the Dollar Takes Off?  By GoLearn Forex

NZD/USD:

We are not suggesting the Dollar bulls are running wild, however, every rally in hindsight has a defining moment.  Every trader on the street is aware that when the Dollar bulls get set free they are going to come charging.  Even if you are a skeptic to the end just the mere massive unwinding of the carry trade would rocket the Greenback.

Our pick would be the NZD and here 3 reasons why:

Performance – Going back to March 9th, 2009 through December 7th, 2009 the top performing G-10 currency (on a percentage basis) against the Greenback has been the Kiwi.  It is up 47.24% which is quite shocking given the New Zealand economy is not among the largest of the G-10. To put some perspective on it the EUR is only up 19.59% and the GBP 20.57%

INSERT CHART A

Technical – There are 2 obvious technical reasons that stand out to us.  A) A pattern we look for are lower lows and lower highs and vice versa.  In the chart below we have depicted the initial emergence of this pattern. B) The Kiwi is already trading below its 50 day MA and on the verge of taking out its 100 day MA, a more significant breakout level than the 50 day MA, which many other G-10 currencies have yet to crack.

INSERT CHART B

Commodities – The Kiwi benefits from rising commodity prices as it is a commodity currency.  Commodity prices are quoted in USD so as the Dollar strengthens commodity prices cheapen.  If commodity prices cheapen so will the NZD.

Combine these three factors and you may see significant price action on this pair.  Of course if the Dollar rallies all currencies will be on their heels but as a trader you are looking for the best trade, and this may be it.  We define the best trade as the one with the best risk to return ratio.

Market Flat on Monday by GoLearn Forex

Global Equity Markets were off slightly Monday.  A combination of light volume and a lack of any real economic data releases left markets essentially flat as traders continue to be risk averse heading into year end. The Dollar had looked to continue its rally until Fed Reserve Chairman Ben Bernanke’s comments regarding U.S rates remaining low for an “extended period of time” and his seemingly unimpressed manner regarding unemployment put the rally on hold.

The Dollar held its gains from Friday as the DXY closed down only a couple points to 75.757.  Gold finished modestly lower to 1,158.10 while Oil gave up a little over a 1.50 a barrel to finish the day at 73.93.

The CAD moved into positive territory as Building Permits jumped 18%.  This once again reaffirmed that Canada is in the midst of substantive recovery.  This news comes on the heels of the BOC Rate decision today.  Mark Carney, Governor of the BOC, has already expressed his commitment to keep rates on hold at least through mid 2010.  In Japan, GDP figures are set to print and in the U.K. Industrial Production number are due out.  We expect a good amount of volatility in the market today given recent events and today’s prints.

Upcoming Forex Events for December 8, 2009

CAD Interest Rate Decision  Forecast  0.25%  Previous  0.25%

GBP NIESR GDP Estimate  Previous  -0.40%  Your browser may not support display of this image.

JPY GDP (QoQ) Forecast    0.90%  Previous  1.20%

AUD Home Loans (MoM) Forecast  -1.80%  Previous  5.10%

Analysis by http://www.golearnforex.net

Dollar Bear Ready for Hibernation? by GoLearn Forex

The Greenback has been offered across the board since March 2009.  As long as risk did not rear its ugly head investors were
selling the dollar in favor of better yielding assets.  When risk showed up at the Market’s doorstep the Dollar was right
there with it ready to regain market control.  We saw this a week and half ago when Dubai spooked the market with a needed
debt restructuring.

The pattern we have seen for the last 9 months has been  equities advancing as the dollar slides.  Equities would advance on
positive (or at least less negative) economic data. The correlation between increasingly better news and the Greenback was
therefore negative. When normal markets are in control positive news typically strengthens a currency.  What we witnessed
Friday may be an early indicator that the Dollar bear is finally ready to hibernate.

Friday brought us 2 very important prints from the U.S. The first was the Change in Nonfarm Payrolls and the Unemployment
Rate.  The Change in Nonfarm Payrolls fell by just 11k and the Unemployment Rate fell from 10.2% to 10%.  This is obviously
positive news for the U.S economy and the Global economy as well. Stock’s advanced, but this time the Greenback would not
yield any ground instead it posted gains on all its G-10 rivals.  The Dollar move was positively correlated with the
economic news, something not seen in 9 months.  There was a tangible shift in market sentiment regarding the timing of a
potential rate increase.  Originally, forecasts were  calling for an increase in Q4, however, analysts now think it may come
sooner.

It is not by coincidence that a number of pairs slid almost exactly to Support levels before firming against the Dollar.  A
breakthrough of support would most likely trigger a massive Dollar rally, something the market is not whole heartily a
believer in at this point in time.  Rather, the move on Friday was one of caution as it may be the first signal the Bull is
getting ready to run.

Let’s analyze current key technical levels and what the trading implications are:

EUR – Friday’s close put the EUR right at the 50 SMA.  The 50 SMA has been holding as support for nearly 9 months.  An
entire candle below the 50 SMA would trigger a Short EUR entry while  a quick  bounce off of support levels would trigger a
a resumption of our EUR Long

INSERT EUR CHART

AUD – Similar to the EUR, the 50 SMA has been holding firm support.  Therefore, a Short AUD  entry would be triggered
with the appearance of an entire candle below support.  We would resume a Long AUD position with a bounce off of support.

INSERT AUD CHART

GBP – The Cable has been trading the range but has not dipped below the 50 SMA since mid September at which point it
gave up over 4.5% to the Dollar.  As with the EUR and AUD, an appearance of entire candle below the 50 SMA would trigger a
Short GBP entry.

INSERT GBP CHART

Obviously one occurrence hardly represents an entire shift in trend, however, a shift in trend starts with one occurrence.
Continue to monitor the correlation between economic news and the Dollar.  In addition pay special attention to support and
resistance levels on the majors, as a breach of S&R may signal future changes and should be capitalized on.

Good News for the Greenback Finally Pushes Gold Down a Few Pegs by GoLearn Forex

Gold tumbled on Friday as better than expected Unemployment and Nonfarm Payroll figures helped prop up the Greenback.  Gold
fell 5.1% during intra-day trading to a session low of 1,150.  Crude Oil was mixed on Friday as it originally bounced higher
on the positive news, however, it gave up its gains and then some as the Dollar firmed throughout the day. Both Gold and Oil
are quoted in Dollars ,so as the Dollar strengthens it sends commodity prices lower.

Global Equity Markets advanced Friday finishing the week in positive territory.  The DJIA added 22.75 points to close at
10,388.90. At the moment Equity Futures are pointing lower ahead of the open.  Economic data releases will be on the lighter
side for Monday although the remainder of the week will yield some interesting price action as Canada, New Zealand,
Switzerland, and the U.K  are on deck for rate decisions.

The DXY soared to highs not seen since early November as the DXY touched 75.911 during the  Friday session.  Traders were
unwinding some bets and covering shorts as the positive employment data gave rise to concerns that the U.S Federal Reserve
may raise rates sooner then later.  With little economic data due out today do not expect much price action.

Important Forex Events for December 7, 2009

EUR    ECB President Trichet Speaks
CAD    Building Permits (MoM)    Forecast  1.00%    Previous  1.60%
USD    Fed Chairman Bernanke Speaks
AUD    Current Account     Forecast      -17.00B    Previous  -13.30B

Analysis by http://www.golearnforex.net

EURUSD Survives Dubai Scare – What Next?  By GoLearn Forex

EUR/USD:

Now that the EUR has safely breached resistance and survived the Dubai scare let’s take a look at where the EUR may be heading next. In order to project forward we must first look back at where the EUR has been.  In the Graph below you can clearly see the period of complete market turmoil, commencing July of 2008. Over the next year notice the ensuing volatility represented by the white circle.  The area in the red box shows a steadier trend emerging in June 2009.  This is further evidenced by price cleanly riding up the 50 SMA in yellow.

INSERT CHART EUR1

I drew a Fibonacci Projection from the low indicated by Box A to the high indicated by Box B on the Graph below.  These points are significant because they are inflection points that began the EUR rally.  Additionally, they are located in the area of volatility circled in white above.  Fibonacci makes sense and order from disorder and chaos.  Therefore using these points for the basis of the projection is taking chaos or what we refer to as volatility and making order and sense from it which is the period of time represented by the red box above. View the results in the Graph below.

NSERT CHART EUR2

The Fibonacci’s Projections land on almost precisely the last 3 resistance levels and highlights past price action resistance points as well.  The FIBO 138.2% level at 1.5048 was struck in October when the EUR finally broke the psychological 1.50 barrier.  It was tested again in November before finally being taken out a few days ago.

So where is the EUR headed next? Based on the Fibonacci Projections we expect to meet resistance at 150%, which coincides with previous support levels as indicated by the 2 blue circles back in May and June of 2008.  If the Fibonacci 150% level is taken out then the next point of resistance is the 161.8% or approximately 1.55.  You can see the congestion at that level starting in May 2008 and lasting through June 2008.

Since the 50 SMA has been holding such strong support for this EUR move our new Long entries would trigger near the 50 SMA (buying on the dips). If we breach the 150% Fibonacci level then we would increase our Long and look to take profit near 1.55.  However, in order to enter a short we would need to see an entire candle appear below the 50 SMA.  This is an occurrence that has not taken place in months.

INSERT CHART EUR3

Good News Give the USD a Slide – by GoLearn Forex

The Dollar tumbled Tuesday falling just south of 74.30 on the DXY.  The Kiwi was the big winner advancing 1.38% followed by the Pound at 1.03%.  Meanwhile the JPY was the only major to lose ground to the Greenback as an emergency meeting of finance minister in Japan was convened to discuss the JPY’s continued strength.

The Dollar slide was triggered by a wave of positive economic data releases.  On the home front, contracts to purchased existing homes jumped 3.7% unexpectedly.  ISM figures remained above the critical 50 level.  Couple the data releases with positive Black Friday and weekend sales as well as Dubai shoring up its debt facility payments and we had the ingredients for a massive Global Equity Market rally.  It will be a quiet Wednesday for economic releases.

Oil finished the day up just over a dollar a barrel to 78.37.  Gold closed at 1,196.60 up $20 from the day before. In intra-day trading Gold broke 1,200 before retracing, although futures are pointing up this morning so 1,200 should be no barrier today.

Upcoming Forex Events for December 2, 2009

EUR PPI (MoM) Forecast   0.10%  Previous  -0.40%

USD ADP Nonfarm Employment Change Forecast  -148.00K  Previous  -203.00K

USD Beige Book

AUD Retail Sales (MoM) Forecast  0.50%  Previous  -0.20%

Analysis by http://www.golearnforex.net