akats

Jamie – Has tested and held the 61.8% retracement of the rally from the October low and series of November lows from 9665 to 9690. Remember, the probability of a reversal increases with the beginning of a new month. Yesterday’s inside day at support offers a bullish setup (stop under 9687). Jamie – Use the first day of the month as an opening range from which to play breakouts. That range is 13218-13025. An upside break targets the 50% retracement of the decline from the October high at 13435 and a downside break targets former resistance at 12875. Near term support for Sunday/Monday is 13120.

The EURJPY (and Yen crosses) have NOT accelerated lower and one must consider the possibility that important lows have formed. The low on the first of the month occurred right where one would expect in a larger bullish structure (former 4th wave area…near its low). As such, I am favoring a bullish bias as long as price is above 9924 (21 low). Upside levels of interest in the coming weeks are 10440 (100% extension) and 10570 (December high). Recent commentary was “I’m on the lookout for formation of an important low (constructive pattern since the September low) in early February.” That low may be in place at 11958 (a drop below shifts focus to 11910). A bullish bias is valid against 11958 towards the confluence of the 100% extension at 12434 and November congestion (12400-12560).

The Australian dollar is the top performing currency against the greenback in early US trade with an advance of 0.47% on the session. Today’s blow-out non-farm payroll report showed the domestic economy added 243K jobs in January, besting calls for a print of just 140K with the unemployment rate unexpectedly falling to 8.3% from 8.5%. The report bodes well for the reserve currency as strong US data reduces the likelihood of further dollar diluting quantitative easing measures from the Fed. Still, the positive print continues to fuel the recent risk rally with high yielding assets advancing early in the session. The AUD/USD continued to trade within the confines of an ascending channel formation dating back to December 19th with the pair currently trading just above the 123.6% Fibonacci extension taken from the December 19th and January 8th troughs at 1.0765. Topside targets for the aussie are eyed at the convergence of channel resistance and soft resistance at the 1.08-figure, backed by the 138.2% extension at 1.0835 and 1.0875. Interim support rests at 1.0745 with subsequent floor seen at the 1.07-handle, 1.0680, and the 100% extension at 1.0645. Look for topside moves in the aussie to remain tempered as we head into the weekend with trader looking to next week’s RBA interest rate decision where the central bank is expected to cut interest rates by 25-basis points.

Have spiked higher following NFP. S&P futures are at their highest level since the July high and Dow futures their highest level since December 2007! The divergence between the 2 futures contracts (Dow above 2011 high and S&P below) is consistent with reversal conditions. USDOLLAR (Ticker: USDOLLAR): Hast tested and held the 61.8% retracement of the rally from the October low and series of November lows from 9665 to 9690. Remember, the probability of a reversal increases with the beginning of a new month. Yesterday’s inside day at support offers a bullish setup (stop under 9687). EURUSD – Use the first day of the month as an opening range from which to play breakouts. That range is 13218-13025. An upside break targets 13400/50 and a downside break 12875. GBPUSD – A clear bearish setup with yesterday’s inside day at the 2nd standard deviation band and resistance from November congestion. A break below 15706 would shift focus to 15635 and 15515. AUDUSD – Is trading right at the September and October highs. Again, the first day of the month range (10740-10568) is critical to the larger trend. Price traded above the upper end of the range yesterday but has been unable to extend gains. In any case, the next upside level of interest is late July support at 10900 and a drop under 10568 is needed in order to trigger a bearish bias. NZDUSD – Daily RSI is above 77. This is extremely rare and recent instances of this occurring are 1/27, 4/15/11, and then several days in July 2007. The top in July 2007 led to a drop of nearly 1500 pips in 1 month. There is no guarantee of course that this will happen again but the specter of a 15 month head and shoulders top and 5 wave decline from the 2011 high are ‘big picture’ bearish evidence.

Euro gains have stalled out, and in the end, it has been a week of consolidation in the markets. EUR/USD remains the key market to watch for broader directional insight, and the critical short-term levels to watch above and below come in by 1.3235 and 1.3025 respectively. A break and close above 1.3235 will open the door for the next upside extension towards the 100-Day SMA by 1.3350, while a close back under 1.3025 could suggest that a fresh medium-term lower top is in place in favor of bearish resumption. Relative performance versus the USD Friday (as of 11:25GMT) EUR +0.25% CHF +0.24% GBP +0.20% CAD -0.01% JPY -0.02% AUD -0.13% NZD -0.25% Fundamentally, there are any number of catalysts on the horizon which could spark the next round of volatility. The ongoing Greek PSI talks are most probably at the forefront of investor minds and any clear resolution here will likely inspire a fresh round of Euro bids through the 1.3235 resistance. Conversely, a breakdown in talks which leads to the default of Greece, will likely open a bout of risk liquidation which will weigh on the Euro back below 1.3025. Another event on traders’ minds is today’s US NFP report. Overall, we have been seeing a steady recovery in US economic data, and a number which deviates far from expectation on either side, could very well open a wave of volatility which results in a break of the mentioned levels in the Euro.

Eur/SekThe market remains under some intense pressure, with the latest setbacks threatening a return to the key lows from early 2011 by 8.70. However, daily studies are now tracking in oversold territory and any additional setbacks should prove to be very well supported once again towards 8.70. Ultimately, only a close back below 8.70 would give reason for concern, while dips towards the figure are viewed as formidable buy opportunities. Usd/SekThe market looks to be in the process of a major structural shift, with the latest multi-day consolidation broken to confirm the formation of a higher low and next major upside extension beyond 7.00. Recent setbacks have been well supported by previous resistance at 6.30 to further confirm constructive outlook and expose a retest of the critical November 2010 highs by 7.07 further up. Above 7.07 open next upside extension towards 7.50 further up, while any interday declines should find renewed bids ahead of 6.50. Usd/Nok The market looks to be in the process of a major structural shift, with the latest multi-day consolidation broken to confirm the formation of a higher low and next major upside extension beyond 6.00. Recent setbacks have been well supported by previous resistance at 5.40 to further confirm constructive outlook and expose a sustained break of the 6.00 handle. Next key resistance at 6.25 now in focus, while setbacks should be well supported ahead of 5.70. Eur/NokWe believe are finally starting to see the formation of a potential base in the cross following the latest sharp bounce out from some very solid support in the 7.50 area. From here, look for an acceleration of gains through the multi-week range highs by 7.95, with further acceleration expected on a break above 8.00. Only back below 7.60 concerns.

Floating Profit / Loss: +394 pips We initially sold EURUSD at 1.3526. Prices have now completed a bearish Three Inside Down candlestick pattern below resistance at 1.3231, the late-November swing bottom and our revised stop-loss level, hinting the corrective upswing that played out over the past two weeks may be running out of steam. We will continue to hold short, revising our soft target slightly higher to 1.2623, the latest swing low. A daily close above 1.3231 triggers the stop-loss. Initial support lines up in the 1.2927-2966 area.

Strategy: Pending Short NZDUSD put in a Shooting Star candle below resistance at 0.8374, a level that has acted as a significant barrier for price action since July. Negative RSI divergence reinforces the case for a downside scenario. However, the Shooting Star is a relatively weak signal by itself and needs confirmation before being considered actionable, so we will stand aside for now. Near-term support lines up at 0.8241.

Strategy: Pending Short AUDUSD put in a bearish Shooting Star candlestick below double top resistance at 1.0728, hinting a move lower is ahead. Negative RSI divergence bolsters the case for a downside scenario but confirmation remains elusive for now and we will stand aside until prices show greater conviction. The first layer of rising trend line support stands up at 1.0490.

Strategy: Flat Positioning is little changed from what we identified last week: USDCAD broke through the bottom of a descending Triangle chart pattern at 1.0072, with prices now testing support in the 0.9907-0.9964 region. An actionable entry signal is absent at present and we will stand aside something more compelling presents itself.

Strategy: Flat USDJPY put in a Hammer candlestick above support at 76.14, hinting a bounce is ahead. We are not keen to get involved however as prices hover near levels where Japanese authorities have previously intervened. Although a long position would be complimentary to any intervention efforts, the markets’ tendency to test policymakers’ resolve suggests we may see speculators attempt a run at the late October low at 75.56 and it is far from clear that the Ministry of Finance would necessarily step in and if so, where. As such, we will stand aside for now. A recovery from here sees initial resistance at 76.58.

S&P 500 – Prices produced a candle in Star position below support-turned-resistance at a rising trend line set from late December, hinting a pullback may be on tap ahead. Initial support lines up at 1302.90, the 23.6% Fibonacci retracement. Major near-term resistance stands at 1334.40, the January 26 high. CRUDE OIL – Prices continued lower after clearing support at 97.70, with sellers testing the previously broken top of a falling channel set from mid-November recast as support (now at 95.55). A break below this boundary initially exposes the 93.90-93.35 area. The 97.70 level is now acting as near-term resistance. GOLD – Prices took out resistance at 1746.10 to challenge the December 2 swing high at 1763.00. A break above this barrier exposes the November 8 top at 1802.80. The 1746.10 level has been recast as near-term support, with a break back below that exposing 1720.38.

Strategy: Pending Short GBPUSD put in a bearish Harami candlestick below resistance at 1.5875, a formidable pivot that has acted as both significant support and resistance over recent months, hinting a pullback is ahead. However, a Harami pattern is not a very strong signal by itself so confirmation is needed on the close of the current bar before the setup can be called actionable. As such, we will remain on the sidelines for now. Initial support lines up at 1.5726.

Floating Profit / Loss: +394 pips We initially sold EURUSD at 1.3526. Prices have now completed a bearish Three Inside Down candlestick pattern below resistance at 1.3231, the late-November swing bottom and our revised stop-loss level, hinting the corrective upswing that played out over the past two weeks may be running out of steam. We will continue to hold short, revising our soft target slightly higher to 1.2623, the latest swing low. A daily close above 1.3231 triggers the stop-loss. Initial support lines up in the 1.2927-2966 area.

The Japanese Yen has found some ceiling this week after strengthening sharply at the latter part of January. The CAD/JPY fell from near 77.60 to about 74.75. Although the bullish momentum seen in the 4H chart is killed (RSI went below 40 and even kissed 30), the market still holds a bullish bias. It is respecting the rising trendline drawn from Jan.9, and is respecting the 200 4H simple moving average. This is also between 50% and 61.8% retracement of the rally from 74.51 to 77.59. It has basically flattened after the sharp correction back to “mean price action”. What are some factors that would help build up the CAD/JPY? First, the closer USD/JPY gets to the record low of 75.55, the more likely the prospect of Japanese yen intervention. The USD/JPY market has also started to flatten out at 76.00. The speculation of intervention at the moment stalls Japanese yen strength but what about the Loonie? (CAD)? The Canadian dollar tends to track oil as Canada is one of the major oil exporters, (mostly going toward the US). The chart below of Brent Crude oil. As you can see the market has a bullish momentum (RSI held above 40 and has tagged 70). However it is now stuck in a triangle. So, if the market rallies above 112.60, clearing the triangle to the upside, and extends higher the CAD should track and gain an edge as well against the JPY, which has intervention watch limiting its strength.