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Sunday December 6, 2009 - 19:22:01 GMT
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Short-term outlook (12/07-12/11)
Despite several attempts to breach higher last week, the euro failed to hold gains as the dollar rallied across the board on Friday, as a result of better than expected unemployment figures. The 270 points decline of Friday has cleared half of euroâ€™s gains accumulated during the previous two months, hence December started by favoring the dollar bulls. Is this the time of a prolonged correction? Could beâ€¦ but I maintain my positive view on EUR against the buck, for now, treating such declines as potential opportunities to re-initiate EUR long positions. Speaking of current market conditions â€“ short-term sentiment is slightly bearish due to recent rejection into the 1.5150 region along with Fridayâ€™s collapse below the 1.49 handle, back into the key support region around 1.4850. A rising trend line support coming from Julyâ€™s low at 1.3830 has been reached and limited intra-day losses but in case of the declineâ€™s resumption within the coming trading sessions, we should focus towards the next support levels â€“ into the 1.4700/30 and 1.4600 regions. In case of a recovery, which at this moment seem more plausible to me, I expect the 1.5000 mark, along with 1.5050, to provide a minor barrier â€“ a lot weaker than before (during October and November). A sustained breach above the 1.5 handle would also turn momentum positive, signaling that the correction is over. Also keep an eye on the S&P500 as important levels are still intact into the upside â€“ the 1113 barrier which is still intact, despite several attempts to breach higher along with false breaks/spikes to as high as 1119. Another key barrier is the median retracement of the long-term decline from 1576 to 666.75 which is set at 1121. Due to the solid correlation between EURUSD and S&P500: no sustained break above 1113 -> no breach above the 1.5100/50 region, simple as that.
EURUSD daily chart
S&P500 daily chart
The superior band of the uptrend channel (seen in the chart below) is, once again, providing support on current pullback. In case of a break lower, next downside barriers into the 1126 and 1100 regions may limit losses. Short-term sentiment shows some bearish signs but it was about time to look for a correction â€“ because it canâ€™t just climb to record highs forever, right? However, if the correction continues â€“ below 1100, bulls should start to worry. On a medium term basis â€“ uptrend is intact and extended dips will favor further buying.
Gold short-term chart
Gold daily chart
In my previous article, when cable was trying to recover some ground pushing on the 1.6600 handle from below, I pointed out that more selling towards 1.64 was likely â€“ further weakness emerging, as expected, and cable printed session lows around 1.6420 before closing the week .36% lower. Downside remains favored for now, and a break above 1.6700 is needed to confirm the positive bias. Recent hesitation into the 1.6700 zone confirms the indecision of both bulls and bears and the 1.6270-1.6700 range will probably remain valid for now. However, the said 1.6270/00 support region may limit extended losses and provide a reversal point, as thatâ€™s quite an important level.
GBPUSD daily chart
Former support provided by the rising trend line coming from .6475 of July has provided a stable resistance on last upside attempts into the .7280/00 region. A break was needed to resume uptrend but selling into rallies favored the current decline which extended to as low as .7130 on Friday. Although NZDâ€™s losses have been relatively smaller comparing to EUR (-0.86% vs. -1.37%), there are no signs of uptrendâ€™s recovery yet. Below current market levels, important support is formed around .7050 by the 61.8% fibonacci retracement of .6685 â€“ .7635. Weâ€™ll see how it reacts if current decline continues.
NZDUSD daily chart
Thank you for reading this article and I wish you a great week! Happy trading!
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Amazing Trader EVENT RISK Calendar:
Mon 18 Dec
10:00 EZ- final HICP
Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account
Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude
Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP
Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
John M. Bland, MBA
- POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
- POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
- POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
- POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
- POTENTIAL PRICE RISK: Medium- Wed --15:30-- US- EIA Crude
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