Chaosforex Weekly Report Journal

Hi all,

In this thread I am going to post the weekly reports that my team is producing every week. Due to it takes sometime to translate from its original language, it will be a bit delayed, but the analyzing style in the report should be unique and advanced on the market. So hope you enjoy!

Weekly Key Report 2009/3/08

by Chaosforex Trading Team

Overview

Last week was full of events. On Monday, unemployment rate in Euro zone improved from 10.0% to 9.9%, but it did not boost EUR. Due to sluggish economic recovery in UK, its uncertainties caused by election, high deficits, potential risk of lowered credit rating, GBP was dumped, and this also dragged down EUR. Tuesday, Australia raised rate by 0.25%, Japan’s unemployment rate came out better than expected, Switzerland’s GDP also came out better than expected, stock and commodity markets went up, market’s risk appetite raised, then non-USD currencies bounced up -- AUD and CAD had the most gains. Wednesday, Greece announced €4.8 billion deficit reduction plan, that relieved the crisis and non-USD currencies. But on Thursday, ECB and BOE kept interest rates unchanged, UK’s possibility of expanding its loose policy remained, and Germany did not confirm its intention to support Greece. This all brought up risk-averse sentiment. Also, USD’s 3-month LIBOR surpassed JPY’s LIBOR rate, the first time since last September. This confirmed market’s view that JPY will again become the best instrument for interest-rate arbitrage, thus strengthening USD. Also, Greece’s €5 billion worth of 10-year bonds was over-demanded on Thursday, showing the market is welling to take risk for a 6.25% return. Friday’s non-farm payroll data came out better than expected, showing a sign that US is continuing its recovery. All these factors favor the risk-seeking sentiment. Combining with the thoughts that BOJ may further loosen its policies to stimulate economy, the increased motivation for interest-rate arbitrage will suppress JPY, and can push up JPY crosses. If JPY crosses go up, it will enhance the performance of non-USD currencies against USD.

Before the closing of New York market on Friday, US released the data that its consumer loan in January increased $5 billion, which is the first positive result since January 2009, and the largest increase since July 2008. Dow Jones had a 2.33% weekly gain, and other major industrial countries also gained. Dow Jones broke 10438 level and DAX broke 5743 level. They are likely to keep rising this week. Commodities like gold and crude oil also bounced up.

Overall, the FX market was more volatile last week. European currencies and commodity currencies were performing differently. But with the relief of Greece’s crisis, signs of recovery in US, bullish global stock and commodity markets, the risk appetite in a macro scope is expected to raise. Also due to fewer events, there are not as many suppressing factors this week. The shift of short USD positions to short JPY positions, within the interest-rate arbitrage scope, will boost JPY crosses, and enhance non-USD currencies performance against USD.

View # 1

EUR was dragged down last week due to GBP’s bad performance. Finally EURUSD bottomed at 1.3444, then rebounded and broke 1.3692 level, the upper limit of a small range. It then pulled back before the 1.3735 resistance, the 50% fib level of the fractal 1.4026~1.3444. Then it reached the 200% projection of the fractal 1.3735~1.6333 and rebounded again, and closed the weekly candle with doji pattern. This showed that there were good buying forces around 1.3444 level. With the MA100 line moving downward on 8-hour chart, the resistance zone became thinner and more breakable. If bulls can protect 1.3530 level well, there is good chance for an upward breakout. EURUSD’s resistances this week are 1.3735, 1.3804, 1.3878, and supports are 1.3530 and 1.3444.

On EUR’s crosses, EURAUD and EURCAD’s new lows were 1.4900 and 1.3914, and these can be bears’ technical projection and take-profit points. Algorithmically, EURAUD’s 1.4886 is the 261.8% projection point of fractal 1.6627~1.5962, and EURCAD’s projection point of fractal 1.6010~1.5228 is 1.3663. If these two levels are protected well, it will give EURUSD support. Since EURGBP broke 0.8841 line and advanced, it closed the weekly candle high, which is the third upside stick in a row -- bull’s edge remained. Last week the fib resistance, 0.9100, was broke as expected, but 0.9153 level became a new resistance. So on the weekly chart, EURGBP still have not broke the symmetric triangle, suggesting it will keep consolidating and will not be able to drive EURUSD up, unless it can break 0.9153. EURCHF is still consolidating and currently on the upper side of the range 1.4617~1.4700, so the likelihood of pull back remained, and it will discourage EURUSD. The only chance for an upside breakout is probably on SNB’s intervention. EURJPY is the cross that can provide better upward force to EURUSD, if 119.63 can be well protected. If 121.82 limit is open, EURJPY’s new goal is 125.27. If EURJPY reaches 125.27, USDJPY stays below 90.70, EURUSD WILL be above 1.3804.

So EURUSD has good chance to rise in a consolidating manner, and its activities should be in the range 1.3530~1.3878. Due to Greece’s crisis is not fully solved, keep in mind the possibility that 1.3444 being broke and stops below the level being hit. This would accelerate the fall. On trading side, buy above 1.3444 and 1.3530 this week, with shorter profit take. Only when it passes MA50, longer upside goal will be more proper. If 1.3444 is broke, go short!

http://www.chaosforex.com/upload/fckimages/EUR.GIF

http://www.chaosforex.com/upload/fckimages/eurgbp周.gif

http://www.chaosforex.com/upload/fck.../eurgbp(2).gif

http://www.chaosforex.com/upload/fck.../eurjpy(1).gif


...to be continued

(continued)

CHF and EUR basically moved in unity last week – they both dropped 0.1% against USD. USDCHF also completed 3 doji candles on weekly chart, like EURUSD. There are more events in Switzerland this week. Watch out Monday’s employment data, Tuesday’s CPI and Thursday’s interest rate decision. If any unfavorable event goes against CHF, be careful that SNB may take the chance and sell off CHF. On trading side, buying USDCHF low is safer choice. Long position of EURCHF can be placed around 1.4617 with short stop and target as high as 1.4750. USDCHF’s resistances this week are 1.0809 and 1.0890, and supports are 1.0605 and 1.0500.

http://www.chaosforex.com/upload/fckimages/chf(1).gif

http://www.chaosforex.com/upload/fckimages/eurchf.gif


View # 2

As expected in last week’s key report, GBPUSD fulfilled 1.4790 level, the 200% projection point of 1.6876~1.5833, however in a surprisingly fast manner. It closed at 1.5133 last week with a reverse hummer candlestick type. This shows that price around the 61.8% fib level was well-supported. If GBPJPY bounces up, it will provide upward force to GBPUSD. Because UK lacks news events this week, it gives GBP better chance to rebound. If market’s risk appetite rises, GBP may even outperform other non-USD currencies. But by looking at bigger picture, GBPUSD is still in bearish atmosphere. The election and its bad fundamentals are unlikely to reverse such condition. So its rebound will provide traders chances to enter long-term short positions at higher points. 1.5830 is a key battle line. Bears have to guard it.

GBPUSD’s key supports are 1.4992, 1.4862 and 1.4781, and its resistances are 1.5176, 5298 and 1.5422. Short-term traders can buy GBPUSD and GBPJPY at low points. GBPJPY’s rebounding goal is 139.13/17. If it broke 1.4781, new space will be open for further downward move. If it eventually reaches the projection point 1.4140, that is 4.33% below 1.4781, which means a good profit region for shorting. Therefore, buy above 1.4781, and switch to selling with doubled volume if the level is broke.


http://www.chaosforex.com/upload/fckimages/gbp.gif



http://www.chaosforex.com/upload/fck.../gbpchf(1).gif




http://www.chaosforex.com/upload/fckimages/gbpjpy.gif

...to be continued

(continued)

View # 3

Due to stock and commodity markets rose, AUD and CAD both gained. CAD rose 5 days in a row with 2.17% gain against USD, and was the star amongst major currencies. Though Reserve Bank of Australia raised rate to 4.0%, it did not cause AUD’s rise. MA100 is pressing down, and buyers were hesitating to enter in unity. While European currencies are rising, AUD has fulfilled technical levels on EURAUD, GBPAUD, and AUDCHF, so the needs for correction rise. AUDJPY faces 82.80 resistance, so the crosses are giving AUD all the suppressing factors. AUDUSD’s rising potential may be limited this week. Strong resistance is around 0.9150/70, and supports are 0.9038 and 0.8981. It is expected to move between 0.8981 and 0.9170. Buying low is more preferred.

USDCAD is approaching 1.0220, the big bottom established since last October. This level is protected by lots of buy orders, so the space for USDCAD’s downward move is decreasing.
If 1.0220 is broke, stops below the level being triggered, USDCAD will accelerate towards parity level, and then the new targets are 1.0135 and 0.9980. On crosses, CAD is also facing risk of technical correction against European currencies. AUDCAD is continuing a descending triangle pattern since last November, and CADJPY is facing 88.45 resistance. So USDCAD does not seem to have falling motivation. 1.0225 is the 261.8% projection point of the fractal 1.0680~1.0506, and gives bears the reason to take profit above it. The expected range for this week is 1.0452~1.0220, and range trading technique can be used – buy low and sell high. 1.0220 is the key battle line. Buy above the level, and switch to sell with doubled volume if broke. Watch out Canada’s merchandise trade data on Thursday, and employment data on Friday.


http://www.chaosforex.com/upload/fckimages/aud(1).gif



http://www.chaosforex.com/upload/fckimages/cad(2).gif



http://www.chaosforex.com/upload/fckimages/audcad.gif


View # 4

USDJPY is near historical low. It is approaching the end of March, Japan’s fiscal ending month. Lots of company’s oversea money flowing back will push up Yen, and it is hurting the exporters. Strong Yen will cut companies profits, and then affect their financial statements and stock prices. Therefore the exports and government are definitely going to interfere if USDJPY continue to fall. Last week, its 3-month LIBOR rate surpassed USD’s LIBOR rate.
Also, Japanese government claims they will further stimulate economy, which can be a way of
verbally interfering the exchange rate. Due to all these factors, USDJPY rebounded at 88.23, the 61.8% fib level. JPY crosses all went up as well. From the fundamentals and the lending cost point of view, Yen will again become the top instrument for interest-rate arbitrage.
Also think about non-USD currencies may have chance to fall. A possible and logical assumption is -- if JPY crosses keep rising, then USDJPY has to rise further, in order to pull down non-USD currencies. Therefore, the chance for USDJPY’s rebounding increases, and it is possible to surpass 100 level this year.

Last Friday USDJPY was limited by resistance 90.61, but closed the candle with limited pullback. Upward attacking pattern is good on hourly chart. If 90.61 limit is open, next goal is 91.70. Supports are 89.50 and 88.14. Trading-wise, buying low is preferred, and it is okay to place long entries with longer profit take.


http://www.chaosforex.com/upload/fckimages/jpy(1).gif



Conclusion

After passing several challenging events last week, market’s risk-averse sentiment is relieved,, and non-USD currencies are showing rebounding sign. This week, watch out Australia’s employment data and SNB’s interest rate decision on Thursday, Canada’s employment data and USD retail data on Friday. While Greece’s crisis is eased, global stock and commodity markets are rebounding, suppressing fundamental factors should have limited impact, and technical factors will drive the market this week. European currencies tend to bounce up for correction. GBP-based pairs have good profit potential if corrections happen, and can benefit day traders. Commodity currencies tend to consolidate at high points, and they are more suitable for range trading. JPY crosses are expected to keep bouncing up – buying at low points are safer choices. GBPUSD and USDJPY are good choices for placing long-term entries – selling GBPUSD high and buying USDJPY low.


(end)

Weekly Key Report 2009/3/15

by Chaosforex Trading Team

Intro

1. Stock and commodity markets were suppressed last week and USD and JPY had strong gains during the week.

2. China released the February trade data with 45.7% increase in exports, and 44.7% increase in imports. Its CPI reaches 2.7%. It is the first time it has a negative real interest rate since September 2008, considering the 1-year depository rate last year is 2.25%.

3. Therefore China is facing the need to raise its interest rate. But consider the Lunar new year effect and its structural factors, it still needs more inflation data to support the action. Also, keeping same interest rate can avoid more hot money flowing into China. So it is expected that before June China will tighten through raising bank reserve ratio and open market operations. China’s economic performance has undoubtedly enhanced the market’s confidence in the global economic recovery, pushed non-USD currencies up.

4. Portugal successfully issued 990 million worth of bonds, and the spread between the Portuguese and Germany bonds decreased. European Monetary Fund was established, and rumor suggests the supporting plan for Greece reaches a figure of 20 to 25 billions of Euro, that furthermore eases market’s concern.

5. Trade and employment data in Canada and retail data in US are better than expected. January’s industrial output in Euro zone is strong, that also improve market’s mood.

6. Non-USD currencies rose in 3 consecutive days, and European currencies had good performance. Though Michigan consumer sentiment index dropped slightly, non-USD currencies had limited pullbacks and still closed strong.

7. Overall, credit crisis in Euro zone and UK is relieved, and the money that entered the commodity market for safety purpose flew back -- but commodity market overall is still in good rising form. With stock markets remaining strong, the overall risk appetite is expected to rise.

8. Technically, non-USD currencies have opened the rising space, so their upward correction should remain this week. But in the long run, credit crisis in euro zone and UK is still the concern. EUR and GBP still have falling potentials, if unfavorable factor arises.


View # 1

1. EURUSD stayed above 1.3530 last week. With multiple favorable news, it closed high 3 days in a row, broke and climb up 1.3735 level. After closing the third weekly candle as a doji, last week was an upward stick with good-sized real body. An U-turn shape was formed on daily chart, and also an upward channel. Moving averages are forming a gold cross on 8-hour chart. After MA100 and 1.3704 level was broke, upward space is open.

2. If it breaks 1.3800 short-term resistance, if will face 1.3872/92 resistance zone, where weekly MA10 and MA200 pass through, daily MA50 and upper limit of upward trend pass through, so is the 38.2% fib level of the section 1.4579~1.3435, 200% projection level of the section 1.3537~1.3704, and 200% projection level of the section 1.3625~1.3707. If EURUSD can break this resistance zone, it will trigger the stop orders above the level, and take advantage of the new force and push up further – the zone 1.4030~1.4086 will become the new target.

3. Therefore 1.3872/92 has the attracting power – the stop zone above the level is bull’s attacking target. It price heads to the other direction, it will form a M-shape pattern, thus increasing the likelihood of further drop. The supports this week are 1.3704, 1.3660, and 1.3610.




http://www.chaosforex.com/upload/fckimages/eur(1).gif


http://www.chaosforex.com/upload/fckimages/eur1h.gif





4. On its cross, EURJPY closed the second upward stick last week, but could not pass the strong resistance area 135.20/40, with multiple resistance levels. If it breaks the level this week, it will still face 126.84~127.04, the previous big bottom becoming new resistance, and also the 50% fib level.

5. If EURJPY reaches 126.84, USDJPY reaches 91.31, then EURUSD will be at 1.3891, which is just below its multiple resistances. If USDJPY reaches 91.70, EURJPY can not pass 125.20, then EURUSD will pull back down to 1.3653 and below. If EURJPY tests the support 123.13, USDJPY stays above 90.17, EURUSD will pull back to 1.3655. Because USDJPY is in a good rising form, and 90.82 resistance was passed last week, if EURJPY can not pass 125.40, it will increase the difficulty for EURUSD to advance forward. If EURJPY drops below 123.13, it will very likely pull down EURUSD.




http://www.chaosforex.com/upload/fck.../eurjpy(2).gif


http://www.chaosforex.com/upload/fck.../eurgbp(6).gif



...to be continued

(continued)


6. EURGBP could not pass the top 0.9153, and closed last week with a reverse-hummer-shaped upside stick. It is forming a double-top on daily chart, and thus increasing the risk of downward pullback. This week it may test the neck 0.8994, which is also the 161.8% projection level of section 0.9133~0.9047.

7. If EURGBP reaches this level, GBPUSD reaches 1.5422, EURUSD will then reach 1.3870 resistance. If EURUSD wants to move upward, the it is important that EURGBP’s 0.8994 level being protected well. Otherwise, if price drops to 0.8841 level, it will greatly suppress EURUSD, and making it difficult to break 1.3872/92 resistance.

8. EURAUD and EURCAD both fulfilled the projection levels downward last week and rebounded. But they are still close to their bottoms and still have risk of further dropping. From the recent moving pattern of EURAUD and EURCAD, they drop mostly during the time when non-USD currencies are falling.

9. If non-USD currencies bounce up, EURAUD finds support at 1.4953, and AUDUSD reaches 0.9110 support, then EURUSD will reach 1.3622. If EURCAD finds support at 1.3910, USDCAD pulls back to the previous key level 1.0220, EURUSD will then reach 1.3610. Therefore, the success of defending EURAUD’s 1.4953 and EURCAD’s 1.3910 will give support to EURUSD. Failure to do so will likely to pull down EURUSD.

10. EURCHF’s support 1.4617 was broke last week, that ended a narrow consolidation thread that had lasted a month. Before Friday’s closing it tested 1.4557 level, the previous low and the lower edge of the downward channel. There have been 13 consecutive downside sticks on weekly chart, and the downward space is now open.

11. By using EURCHF’s fractal 1.5139~1.4816 and 1.4815~1.4617 for projections, the overlapping levels are 1.4495 and 1.4297. Therefore, if it breaks 1.4557 support, it will test 1.4297, the historical low in October 2008, with a 1.8% falling potential. From noticing that it reached 1.4297 last time with a quick and strong rebound, for a range over 450 pips, it suggests that this is a level that SNB can use for intervention.

12. If non-USD currencies keep rebounding, USDCHF reaches 1.0291, the 61.8% fib level, and EURCHF reaches 1.4297, then EURUSD will reach 1.3892. If EURCHF drops to 1.4495, USDCHF pulls back to 1.0650 level, EURUSD will then reach 1.3610.

13. Summing up, EUR’s supports from cross pairs are moderate. More support should come from EURJPY, EURAUD, and EURCAD. Combining with cross calculation, we believe EURUSD still has rising momentum, and it should fall in the 1.3610~1.3892 range. And it needs to break 1.3872/92 key resistance in order to enter the next area. Otherwise it can pull back and test the bottom again.

14. On trading side, buy EURUSD above 1.3610, and place stop below 1.3530. 1.3872 can be the level for pullback and breakout trades. Sell below the level, buy breakout with double volume, and exit below 1.4030.

http://www.chaosforex.com/upload/fck.../eurchf(1).gif


http://www.chaosforex.com/upload/fckimages/chf(2).gif




15. SNB kept the rate as 0.25% and claimed it has no room to intervene through policies. It rather sell off Swissy in order to protect its exporting sector. But due to good risk appetite of the market, CHF outperformed other non-USD currencies last week, with 1.3% gain against USD.

16. USDCHF broke 1.0647 level and destroyed the descending triangle pattern, and opened the downward space. Form the charting point, USDCHF is in a downward channel and waiting to fulfill the downside technical level. The supports this week are 1.0497, 1.0405 and 1.0291, and resistances are 1.0647, 1.0693 and 1.0739.

17. USDCHF is expected to fall between 1.0739 and 1.0405. On trading side, sell high is better operation. 1.0405 is a strong support, so exit the short position above the level.


View # 2

1. GBP had supports from all pairs last week. EURGBP approached top, GBPCHF and GBPJPY approached bottoms. GBPAUD and GBPCAD both fulfilled the projection levels.

2. GBPUSD’s reached 1.4872 and rebounded strong. Then it broke 1.4992 and triggered the stops above the level and pushed up further. On Friday it fulfilled the projection level 1.5217, closed near the level. Two downside shadows were formed on weekly chart, suggesting strong support below exists. MA’s are forming golden crosses on daily and 8-hour charts. It broke MA50 on 8-hour chart，and resistance 1.5176, and opened the upside space.

3. A double-bottom pattern of GBPUSD is formed, and it is also in a upward channel. But it may soon face multiple strong resistance. 1.5278 was the key support level, 50% fib level of the fractal 1.3514~1.7042, that became the new resistance, and many projection levels also lay on this level. Above the level, there is an intersection of two trend lines – the upper side of the upward channel and a bigger downward trend line.

4. On GBP’s cross, GBPJPY is basically on the same pace as GBPUSD. GBPJPY fulfilled the projection level 138.07 last week. The next resistance is 139.17 with multiple overlapped resistances. Assuming GBPJPY reaches 139.17, if GBPUSD reaches 1.5278, then USDJPY has to stay below 91.08. Or GBPJPY needs to break 139.17, in order to provide support to GBPUSD.

5. Therefore, the GBPUSD’s resistance at 1.5278 should be strong. On the crosses, if EURGBP breaks 0.8994 support, GBPCHF breaks 1.6181, GBPAUD breaks 1.6700, or GBPCAD breaks 1.5516, will provide support to GBPUSD.

6. GBPUSD needs to break 1.5278 in order to advance further towards 1.5422. Otherwise, it will likely to stay on the upper side of the upward channel. Key supports this week are 1.5123 and 1.5027.

7. Overall, GBPUSD tends to rise this week. Buy above 1.5027, with stop placed below 1.4992. 1.5278 can be the level for both pull back and breakout trades. Sell below the level and buy breakout with double the amount. If breakout trade enters, exit below 1.5422.


http://www.chaosforex.com/upload/fckimages/gbp(3).gif


http://www.chaosforex.com/upload/fck.../gbpjpy(1).gif



...to be continued

(continued)


View # 3

1. AUDUSD gained 0.73% last week, formed the second upward stick on weekly chart, but was suppressed by the 0.9193 level. It can be explained that the falls of Gold, Sliver,, and Copper limited AUD’s advancing power.

2. It is believed that Gold price dropped because Greece’s crisis was relieved and money was flowing away from Gold a bit.

3. Overall, AUDUSD is in a good upward channel on daily chart, but is also closing another downward trend line.

4. Aud's limited momentum can also be explained that its bulls were taking profits on AUD crosses.

5. AUDUSD is expected to consolidate and rise. Resistances are 0.9193, 0.9238 and 0.9324, and supports are 0.9110, 0.9043 and 0.8997. Range trading between 0.9043 and 0.9193 is more proper. If 0.9193 is broke, buy it when price pulls back down.


http://www.chaosforex.com/upload/fckimages/aud(2).gif



6. Due to geographical similarity, Canada and US are both having good economic data, including housing, trading, and employment data. Correlation between CAD and USD became high recently.

7. By using the good employment data, USDCAD jumped and broke the big bottom level 1.0220, that had been protected for 5 months, and hit the stops below it. It then fulfilled 1.0157, the first projection line of the fractal 1.0322~1.0220.

8. Last week USDCAD closed the second weekly downside candle. Overall pattern trend is downward, and it is close to 1:1 parity.

9. The buying force around the parity level should increase. Below 1.0157, there are supports at 1.0118 and 1.0055. If 1.0055 is broke, with triggered stops, it will head to 0.9960.

10. USDCAD’s resistances are 1.0220, 1.0260 and 1.0320. It is most likely to fall between 1.0260 and 1.0055.

11. Considering USDCAD has the need to fill the gap around 1.022 level, it is safer to short USDCAD at high points. Buy above 1.0055, and stop can be placed 0.2% below 1.0055.


http://www.chaosforex.com/upload/fckimages/cad(3).gif



View # 4

1. Japan has not yet gotten rid of deflation problem.

2. Its interest rate decision is on Wednesday, and market expects that BOJ will offer more emergency fund to banks, in order to increase liquidity. Ongoing support is needed till the end of April. This will decrease net long position of JPY.

3. US is exiting its intervention and will likely raise interest rate in near future. The difference of US and Japan’s monetary approaches is reflected on 3-month LIBOR. According to the data during the last 4 weeks, USD is extending the interest rate differential over JPY.

4. So JPY is continuing taking away the attention, and becoming the top vehicle for interest-rate arbitrage. While market’s risk appetite improves, JPY is being dumped.

5. JPY-based pairs are all on a rise last week, which is what the government would like to see.

6. But Yen flowing back to home country during the last month of its fiscal ending year will slow down the upward momentum of JPY-based pairs.

7. USDJPY broke 90.82 key resistance last week, but failed to pushing up higher and closed with a doji candle. It is now showing a symmetric triangle pattern, with tangled moving average lines. Basically it is heading up in a consolidating pattern.

8. Resistances are 91.31, 91.70 and 92.36, and supports are 90.36, 89.96 and 89.61.

9. It needs to break 91.70 in order to destroy the symmetrical triangle. This week it is expected to move between 89.96 and 91.70, and it is suitable for range trading.

10. Last week JPY crosses benefited from the rise of non-USD currencies. CADJPY and AUDJPY broke the key levels, and other JPY crosses also have their upward space open. So the JPY-based pairs are expected to continue the rebound, and buying low is better strategy this week.


http://www.chaosforex.com/upload/fckimages/jpy(2).gif


http://www.chaosforex.com/upload/fckimages/audjpy.gif


http://www.chaosforex.com/upload/fck.../cadjpy(1).gif



Conclusion

With more and more coming supporting plan for the Euro zone credit issues, and the sign that Greece’s crisis has come to an end for now, Non-USD currencies had strong rebound last week. But market’s mood towards risk is still unstable. Any news related to an European country’s deficit problem is enough to magnify risk-averse level. More focus will be shifted to economic data this week, such as Wednesday’s interest rate decisions of Japan and US, UK’s unemployment rate, CPI of US on Thursday, and CPI of Canada on Friday. Given it is the believed that the rate will remained the same in US, the market will see how the Feb respond to the China’s foreseen tightening action. If the statement is hawkish, USD bulls will enter and it will jeopardize EUR and GBP’s rebounds.

Overall, non-USD currencies are still forming bigger rebounds within the price frames. From seeing the breakout extension potentials on the majors and the interactions with cross pairs, European currencies are expected to outperform commodity currencies. However, the market will tend to have high repetitions of movement, so more activities will be short-term-profit-driven within price frames.


(end)

Weekly Key Report 2009/3/22

by Chaosforex Trading Team

Intro

FX market has experienced the up and down last week. Good news came in the beginning. Sixteen members of euro zone agreed to support Greece, S&P held Greece’s credit rating unchanged, and Fed kept interest rate the same and claimed it will maintain low interest in order to ensure recovery. BOJ provided additional 111 billion USD worth of liquidity to improve its money market, UK’s survey suggest the opposition party should win the election, and this eased some the political concern. Stock and Commodity markets remained stable, and this increased the overall sentiment. On Wednesday, UK’s unemployment population reduced sharply, and this boosted Pound and market’s risk appetite. Non-USD currencies were making new high’s of the year, and all reached the upside technical levels.

But on Thursday, market concerned that Greece’s bond interest is too high for it to make long term payments. Germany and France had different thoughts in helping Greece, and euro zone as a whole is still lack of a concrete plan for Greece. Greece will face another challenge of refinancing 20 billion euro of debt, and the source is uncertain – can be from euro zone itself or IMF. This uncertainty caused a lot of exits of EUR long positions, and the demand of USD and JPY increased. After Fed revealed it will raise discount rate and BOE member warned that UK may enter a double-dip recession, USD strengthened sharply. Friday, India surprisingly raise its interest rate to 5.00%. Due to India is the largest gold consumer, rate increase will suppress its demand of gold and other commodities. The rate increase also leads the market to expect that other emerging countries will start their rate hike sooner. China, Australia and US all have the potential to raise discount rate in near future. Also, USD’s 3-month overnight index swap reflected that US has high chance to raise rate in Q3. Although rate hikes in emerging countries may be beneficial to interest-rate-arbitrage activities, it can on the other hand slow down the recovery, and it can be harmful to global recovery as a whole. So such concern encouraged the market to buy USD for hedging purpose. Prices of gold, oil and silver dropped a lot that day, and so did commodity currencies. Investors pulling money from this higher-risk asset type led to a overall fall on non-USD currencies. Pound and commodity currencies dropped the most on Friday.


This week, euro zone will hold the summit on Wednesday. If a concrete plan for Greece can come out, EURUSD can then stop its falling. Otherwise, it is not difficult to break 1.3440 and extend the falling. UK will also release the 2010/2011 budget on Wednesday. Due to market’s general disappointment towards UK’s economic future, any unfavorable news from the budget release can push GBPUSD further down. Also, the recent confrontation between China and US can force both sides to take hard policies on the exchange rate, and this can increase the chance of broken relation, thus triggering a trade war. The uneven global recovery, credit crisis of euro zone and UK, and potential trade war between US and China are all reasons causing investors to hedge money into USD and JPY.

The market is lack of important data this week, so the events mentioned above can drive the market. Due to the increased risk-adverse sentiment and the fact that more money will flow back to Japan at the end of its fiscal year, non-USD currencies overall have more suppressing factors. Euro and Pound will face deciding points, and the overall fluctuation is expected to increase.


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View # 1

Greece requested for help from IMF and revoke the market’s concern. EURUSD failed to bounce up strong, and then were suppressed by MA10 on weekly chart. Three consecutive downside candles on daily chart were formed. It dropped 1.76% last week, and became the weakest currency of the week. Big engulfing bearish candle was formed on weekly chart, increase the likelihood of further drop. On daily chart, it is still within 1.3435~1.3800 range, and MA’s are showing bearish sign. Double-top was formed on 8-hour chart, and support 1.3530 was broke. And before this, all the upward rebounding effort was stopped by 1.3620 level, which indicating heavy selling pressure. 1.3435 is a key level that bears will face. Breaking this level can trigger the stops, and open new space. If not, EURUSD will remain in the range and make correction. It needs to pass 1.3620 in order to resolve the immediate falling risk.

Before the risk events on Wednesday, EURUSD should remain in the range 1.3435~1.3620. If the summit can produce good news, EURUSD can bounce from the bottom of the frame, and the market can seek profit in range bound. If the concern is unsolved, bears can take the chance and attack 1.3435 level. If stops below the level are triggered, it will destroy the bullish structure that was built since March 2009. Then bears target will be toward the lower end of the big triangle on the monthly chart. This week, the projection levels below 1.3435 are 1.3353 and 1.3243. Resistances are 1.3572, 1.3620, and 1.3695.


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Take a look on EUR crosses. EURGBP filled the gap of 0.8941~0.8964, and pulled back up quickly after it reached 0.8910 level, protected by multiple technical lines. Wednesday, because EURUSD fell quickly and GBPUSD remained high, it caused EURGBP’s slump with a gap around 0.9044 level, which can be seen on 15-min chart. This level now becomes the resistance. If EURGBP fills the gap above 0.9044, and GBPUSD reaches 1.4875 support, EURUSD will then be at 1.3452. So if EURUSD wants to stay above 1.3435, the bottom of the frame, then EURGBP will have to pull back to 0.9044 and above, and GBPUSD will have to stay above 1.4875.

On weekly chart, EURGBP is within a big triangle, and now limited by box 0.8841~0.9153. Overall, EURGBP needs to surpass 0.9153 and open the space, in order to provide new energy to EURUSD. From technical stand point, the frame 0.8841~0.9153 should be firm, and it will favor range trading.


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...to be continued

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EURJPY was limited by fib resistance 125.27 and MA50 on daily chart. It then pulled back down and formed an engulfing bearish candle. It dropped and broke 123.32 neck on 8-hour chart, formed a double-top. MA’s are crossing downward, Due to USDJPY still remains above 90, so EURJPY’s going down will suppress EURUSD. By using 125.06 as starting point, 123.32 as reference level, the 161.8%, 200%, and 261.8% projection levels are 122.25, 121.58 and 120.50. It reached and fulfilled 122.25 last Friday. 121.58 was also a deciding level in the past, and there should be a lot of bulls’ stops placed below the level. This can be attractive to the bears.

If EURJPY reaches 121.58, USDJPY stays above 90.35, EURUSD will then reach 1.3456, which is near the bottom of the frame. If EURJPY reaches 120.5, USDJPY stays around 90.35, EURUSD will then head to 1.3337, which is close to the projection level 1.3353. If EURJPY pulls back up to 123.32, USDJPY is limited by 90.70, EURUSD will then rebound and reach 1.3596, and will still be below 1.3620. Therefore, EURJPY’s bad performance can pull down EURUSD, and USDJPY can even move around to increase the effect. In other words, market is using USDJPY as an adjusting tool in order to balance other pairs. Either EURJPY dropping below 121.58 or USDJPY surpassing 90.70 will greatly increase the chance for EURUSD to break its key support level.


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EURAUD and EURCAD both broke the supports last week and entered into a downward wedge-shaped channel. Risk of further drop remains. Though technical levels were fulfilled and the correction is temporally providing support to EUR, EURAUD needs to surpass 1.4947 and EURCAD needs to surpass 1.3920, in order to furthermore resolve EUR’s falling risk. If EURAUD breaks 1.4712, and EURCAD breaks 1.3622, it will very likely drag down EURUSD.


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Switzerland kept its interest rate unchanged last week, but increased the expectation of its CPI. Deflation pressure is lowered, and economic growth seems optimistic, and the need for exchange-rate intervention seems to be lowered. Swissy’s strengthening pressure is arise again, and it causes EUR and CHF performing in different directions. EURCHF dropped 1.45% last week, and range reached 1.78%. Since it broke 1.4600, the daily range has been increased. It closed the 14th weekly downside candle. Price last week was as low as 1.4318, which is close to historical low, 1.4297. It was the level where SNB intervened in October 2008, that caused EURCHF’s great turning. Due to EURUSD is quite low, and the selling pressure still remains, EURCHF’s further drop will hurt the exporters IN Switzerland, so the exchange rate is really in a sensitive area where intervention can happen anytime. If intervention occurs, it will provide support to EURUSD. If EURCHF drops below 1.4297, a new space will be opened, and it can harm EURUSD. 1.4297 is reference level worth buying and waiting for intervention.

Overall, EUR-based pairs are facing the attacks on their bottom frames. Combining with the depressing factors, euro is expected to be weak. Trading-wise, sell below 1.3620 level this week. Buy above 1.3435, and switch to sell with double volume if breakout happens. If 1.3423 is broke, it will confirm EURUSD’s bearish status – selling with the momentum or selling when the exchange rate pulls up will both be fine, and the target can be set around 1.3125.


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USDCHF was limited by the neck 1.0647, but was well-supported at 1.0506, the level with multiple technical supports. Weekly chart closed with an upside candle that broke both the upside and downside of the frame. Downside shadow with a length of about 100 pips showed the supporting power is sufficient. But overall it is still within the downward channel. It needs to surpass 1.0647 in order to resolve the immediate pressure. Considering its MA’s are tangling on 8-hour chart, USDCHF is expected to fluctuate towards upside. Resistances this week are 1.0647, 1.0713 and 1.0779, and supports are 1.0580 and 1.0506. If 1.0506 is broke, another strong support is at 1.0407. Trading-wise, buy above 1.0506, with weekly target before 1.0713. If 1.0506 is broke, switch to sell with target before 1.0407.




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....to be continued

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View # 2

Pound had roller Coaster experience last week. It first reached 1.4975, then due to good election expectation and better unemployment data, it bounced up and triggered bears’ stops above 1.5206, and pushed till it hit the MA100 on 8-hour chart. It was good enough to make it become the strongest currency of that day. But after BOE member’s Andrew Sentence’s warning regarding UK is still at risk of double-dip recession and other suppressing factors, GBP dropped sharply and became the weakest currency of the day. It shows that as a high risk currency, its buying support is quite vulnerable.

GBPUSD closed the weekly chart with a reverse hammer, and formed second downside candle on daily chart – bearish sign. On Monday, the uptrend line will intersect with the recent low 1.4975. By using 1.5382~1.5128 for fib projection, the 3 levels are 1.4971, 1.4874 and 1.4747. The first 2 projection levels also coincide with the previous technical levels. If GBPUSD is going to make the third downside candle on daily chart, the 1.4975 support seems to be vulnerable. The key support should be 1.4862/74. If this level is well-protected, GBPUSD will continue its rebound, and will need to surpass 1.5130 in order to resolve the immediate falling concern. If 1.4862/74 is broke and stops below it are triggered, new space will be opened, and next targets are 1.4717 and 1.4601, which is the lower end of the downward channel on weekly chart. Resistances this week are 1.5130, 1.5206 and 1.5278.

Last week GBP crosses were all weak, but on Friday they all reached the technical levels and this could provide support to GBP. If the supports of cross pairs are broke, GBPUSD will face great selling pressure. From charting, EURGBP has the motivation to move up and fill the 0.9044 gap, and this will suppress GBPUSD in the short run. GBPCHF reached 1.5902, the bottom of the frame. But by using the 161.8% projection level of the fractal 1.7112~1.6316, 1.5824 as GBPCHF’s target, it is not yet fulfilled. If GBPCHF reaches 1.5824, USDCHF reaches 1.0647 resistance, GBPUSD will be at 1.4862, which is just above its key support. But on March 1st GBPCHF left the gap 1.6447~1.6312 unfilled on daily chart. This gap can attract market rate, and provide supporting effect to GBP. GBPJPY was within upward channel, and was limited by the upper edge. On Friday it reached the lower edge of the channel, 135.67, and was supported. But it formed long downside candle on daily chart, and formed double-top on 8-hour chart -- so the falling risk still remains. Key support is at 133.91. GBPJPY can exert greater suppressing force to GBP than GBPUSD itself.

GBPAUD is now above the neck 1.6373, but has also formed a double-top pattern. GBPCAD broke the bottom 1.5266 and opened new space. It now fulfilled the projection level on hourly chart, but the supporting effect should be very limited. Therefore, the supports on GBP’s crosses will probably have short effect. GBP is expected to face great selling pressure this week. Trading-wise, selling at high point is safer choice. 1.5130~1.5206 is a good area for shorting , and target can be just above 1.4874. It is proper to buy above 1.4874 with smaller volume, and switch to sell if breakout occurs. For the breakout sell, target can be set near 1.4601.


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View # 3

Due to good risk appetite in the first half of last week, AUD and CAD both performed well. But on Thursday, market’s concern towards euro zone pulled down the prices of precious metals. On Friday, the news suggested US will likely raise discounting rate before next interest rate meeting on April 28th. India’s surprising raise of interest rate is expected to fasten other emerging countries rate hike, and this decrease the demand of commodities, suppressing gold, silver, oil, and other major commodities. Commodities currencies remained suppressed.

AUDUSD was limited by the big downward trend, and could not protect the 0.9190 level, that it had used good support for about 10 trading days. The last candle closed downward, and broke MA10 on daily chart. Weekly candle was closed as reverse hammer, and it formed the second bearish candle on daily chart. The pull down pressure is still on in the immediate term, but overall it still remain the bullish pattern in the bigger picture. Supports this week are 0.9115, 0.9063 and 0.8994, and resistances are 0.9190 and 0.9250. Range trading can be used – sell below 0.9190, with target near 0.8994, and buy above the target level.


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Canada is recovering in a stable pace, so CAD has been outstanding since year beginning. But while it is approaching parity level, the buying strength is increasing, which limits CAD’s further strengthening. February’s CPI came out to be better on Friday, enhance markets expectation about Canada’s rate hike. Therefore USDCAD jumped downward with a gap, and reached as low as 1.0061, which is the new low since 2008. This is also close to the projection levels of the fractal 1.0680~1.0370 and 1.0322~1.0221, so the levels were fulfilled. With India’s surprise rate increase, bears took profit above the level, and the gap on hourly chart was quickly filled. Weekly candle closed as doji, and double-bottom was formed on hourly chart. USDCAD is expected to continue the rebound this week. Resistances are 1.0224, 1.0297, 1.0370 and 1.0444, and supports should be 1.0123 and 1.0060. If it breaks 1.0060, stops below the level will be triggered and new space will be opened, and the next target will be 0.9960. Therefore 1.0060 cannot be broke on a strategic point, otherwise it will harm the exporting sector, and slow down the overall recovery.

Overall, USDCAD is expected to fluctuate at the bottom, and it needs to surpass 1.0370 neck in order to create an upward attacking picture. Trading-wise, buy above 1.0060, and switch to sell below 1.0370 level.


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View # 4

USDJPY closed last week with a small reserve hammer. Thursday, due to US CPI of February dropped that suppress the expectation of Fed’s interest rate raise, USDJPY dropped and broke 89.97. Due to risk-averse sentiment also provide support to USD, USDJPY overall remained between 89.97~90.90.

Due to it is close to the end of the month, the ending month of Japan’s fiscal year, more money is expected to flow back to Japan and converted to JPY, thus strengthening JPY’s performance. But the 3-month LIBOR rate of USD and JPY continued to extend their differential. It is believed that the money will flow from JPY to USD, and this will balance Yen’s strengthening caused by the effect of Japan’s fiscal year ending. Therefore, it is difficult for USDJPY to destroy the symmetrical triangle. USDJPY is likely to fluctuate in the range 89.61~90.90. Day traders can range trade – sell high or buy low. USDJPY needs to break 91.70 in order to open new space. Traders with bigger picture can gradually enter long positions above 88.62 level, with stops placed below 88.

Due to bad sentiment, bulls of JPY-based pairs took profit and prices pulled back after the boost, but still have some distance from the bottom of the frames. While EURUSD and GBPUSD are close to the bottom, commodity pairs are high and facing pressure, if USDJPY remain its its fluctuation within the frame, it will produce more selling pressure to non-USD currencies. USDJPY will act as tool currency, so the major pairs and JPY-crosses should move closely. Therefore, for combo trading, it is safer to short non-USD currencies against USD, but long their corresponding pairs against JPY at different level corresponding to the frames.


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Conclusion

Market’s focus is back to Greece and UK again. With some countries gradually tightening their policies, many countries are facing tough choices – to exit intervention or to maintain recovery. This causes uncertainties of global recovery, and heats up risk-adverse sentiment. Non-USD currencies were lack of momentum and failed to continue the rebound. Market is lack of a certain direction. The fluctuation is increased, and currencies are performing differently. Non-USD currencies will face high risk of further drops. On majors, traders seeking higher risk-award ratio can short EURUSD and GBPUSD. While AUDUSD, USDCAD and USDCHF are good for range trading, USDJPY is still the safest choice for range trading.


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