In our opinion, the following forex trading positions are justified – summary:

EUR/USD: long (stop loss order at 1.1056)
GBP/USD: none
USD/JPY: none
USD/CAD: short (stop loss order at 1.2876)
USD/CHF: none (Swiss Franc)
AUD/USD: none

Forex Trading Alert originally published on Feb 19, 2015, 10:15 AM

Earlier today, the U.S. Department of Labor reported that the number of initial jobless claims in the week ending February 14 dropped by 21,000, beating analysts’ expectations for a fall by 11,000. Thanks to these bullish numbers, USD/CHF extended rally, but how much more room for further gains does the exchange rate have?

EUR/USD

The situation in the medium term hasn’t changed much as EUR/USD still remains above the support zone created by the 61.8% Fibonacci retracement (based on the entire 2000-2008 rally) and the 100% Fibonacci price projection, which means that an invalidation of the breakdown below these levels and its positive impact on the exchange rate are still in effect. Therefore, today we’ll focus on the very short-term changes.

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From today’s point of view, we see that although currency bulls tried to push EUR/USD higher, the blue resistance line still keeps gains in check. Nevertheless, as long as there is no breakdown under the right shoulder of the reverse head and shoulders formation another attempt to break above this important line is likely. If we see a breakout, it would be a bullish signal, which will trigger further improvement and an increase to around 1.1617, where the size of an upward move will correspond to the height of the formation and where the previously-broken 50-day moving average is. Nevertheless, before we see a realization of the above-mentioned scenario currency bulls will have to push the pair above 1.1533, where the upper border of the consolidation is.

Very short-term outlook: bullish
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term): Long positions with a stop loss order at 1.1056 are justified from the risk/reward perspective at the moment.

USD/CHF

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The medium-term picture has improved once again as USD/CHF (Swiss Franc) extended gains above the long-term resistance line (in terms of weekly opening prices).

How did this increase influence the very short-term picture? Let’s zoom in our picture and find out.

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Quoting our previous Forex Trading Alert:

The first thing that catches the eye on the above chart is a breakout above the orange resistance zone (created by the 50% Fibonacci retracement and the Oct 2014 low) and the upper line of the consolidation (marked with blue). This is a bullish signal that suggests further improvement and an increase to around 0.9492, where the size of the upswing will correspond to the height of the formation.

Looking at the daily chart, we see that the situation developed in line with the above-mentioned scenario and USD/CHF reached our upside target earlier today. Taking this fact into account, and combining it with the medium-term picture, we think that yesterday’s commentary is up to date:

(…) slightly above this level is the previously-broken long-term red declining resistance line, which will pause or even stop further rally. This scenario is currently reinforced by the position of the indicators (the CCI and Stochastic Oscillator are overbought, which suggests that they could generate sell signals in the coming days, encouraging currency bears to act). Nevertheless, as long as there are no sell signals, higher values of the exchange rate are still ahead us.

Very short-term outlook: bullish
Short-term outlook: mixed with bullish bias
MT outlook: mixed
LT outlook: bearish

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment.

AUD/USD

The situation in the medium term hasn’t changed much as an invalidation of the breakdown below the Jul 2009 lows and its potential positive impact on future moves is still in effect.

Having said that, let’s take a closer look at the daily chart.

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On the above chart, we see that the situation in the very short-term also hasn’t changed much as the exchange rate is still trading in the consolidation. Nevertheless, taking into account the current position of the indicators (the CCI and Stochastic Oscillator generated sell signals), it seems that the pair will move lower and test of the lower border of the formation (around 0.7718) in the coming day(s).

Very short-term outlook: mixed with bearish bias
Short-term outlook: mixed
MT outlook: mixed
LT outlook: mixed

Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective at the moment.

Thank you.

USDCAD Overnight Range 1.2425-1.2535                  

The Loonie was beaten by the proverbial “ugly stick” following the worst Retail Sales report in nearly 5 years.  Statistics Canada announced that Retail Sales dropped 2.0% in December.  A poor number was expected which is probably why the US dollar rally stalled at 1.2530. However, the data also provides the Bank of Canada  with additional ammunition for another rate cut which should keep US dollar bears in check.

The EURUSD went for a ride lower, taking out stops below 1.1350, without any real catalyst, suggesting that perhaps US dollar long positions were being reloaded in case of a nasty surprise from the Greece debt re-negotiations.

The lack of US data today and Monday suggest that the US dollar will be confined to its current ranges with ebbs and flows dictated by Euro-centric headlines and oil price movements

USDCAD technical Outlook

The short term technicals are bullish and looking for a decisive break of 1.2550 to extend gains to 1.2650.  A failure to break 1.2550 decisively warns of a retracement back to the morning’s low of 1.2460.  Longer term, the USDCAD uptrend remains intact above 1.2420 looking for a break of 1.2750-1.2800 to extend gains to 1.3050.

USDCAD Overnight Range 1.2425-1.2535  

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USDCAD Overnight Range 1.2442-1.2552

USDCAD spiked to 1.2550 from 1.2490, just as local traders were getting to their desks, indicative of either a “one-off”order, a simultaneous bullish USDCAD bias or both.  The move may have also been a case of “if the bottom holds, try the top”.

The US dollar has recouped almost all of yesterday’s post FOMC minutes losses in a thin and choppy overnight session although the re-existing currency ranges remain intact. The FOMC minutes were considered doveish, initially and eventually dismissed with a few analysts noting that the meeting occurred prior to the strong non-farm payroll report. The Fed focus shifts to Tuesday and Janet Yellen’s Humphrey-Hawkins Testimony.

The Asian markets suffered from greatly reduced liquidity due to the Year of the Ram festivities with AUD, NZD and JPY all down. EURUSD trading was erratic within a narrow range.  Another EU meeting about Greece is slated for Friday.

USDCAD technical Outlook

The short term technicals are bullish with the break of resistance in the 1.2490-1.2500 area but need to extend gains through 1.2550-75 resistance to target the 2015 highs again or risk further consolidation within the 1.2360-1.2560 trading band. For today, USD support is at 1.2520 and 1.2490.  Resistance is at 1.2550 and 1.2575

Today’s Range 1.2490-1.2555

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USDCAD Overnight Range 1.2366-1.2470

Rising oil prices in a market well long USDCAD put the Loonie on the griddle. After spending Monday in a 1.2420-80 range,USDCAD fell through support at 1.2420, triggering stops at 1.2380 and touched 1.2366. Oil rallied on the risk of supply disruptions due to Egypt’s bombing of ISIS targets in Libya. USDCAD is off the lows in early New York trading as WTI gives ups some gains.

EURUSD shrugged off news that the Greek negotiations were still on-going but enjoyed the better than expected German ZEW index gain.EURUSD recouped all of Monday’s losses and then some. The RBA minutes didn’t provide any additional guidance as to future rate moves and AUDUSD ticked higher.

There isn’t any data of note today leaving oil price movements and Greek debt headlines to provide trading direction.

USDCAD technical Outlook

The intraday USDCAD technicals are bearish while trading below 1.2440 supported by the break of support at 1.2415.Failure to climb above 1.2390 risks another probe of support in the 1.2340-60 area. The line in the sand is 1.2320. A break here would lead to 1.2050 in a hurry. A rally above 1.2440 negates the downtrend and argues for further gains to 1.2550.

Today’s Range 1.2360-1.2440

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We can start to see how the one-world currency comes into play with BIG BANG. The more these governments try to manipulate the outcome of the free markets, the worse everything becomes. I met with members of the board in charge of the Swiss/Euro Peg just before the Berlin Conference. I explained that no peg has ever lasted and Bretton Woods stands as witness to that in recent memory no less the Pound/DMark Peg that made George Soros famous. Pegs only suppress the free market, they cannot prevent the eventual outcome.

Instead of an orderly market, the Swiss got overloaded with buying Euros. Had they continued to keep buying, they would have simply bankrupted the entire country if they did not abandon the peg. But what happens is rather simple to comprehend. The volatility increases and its released all in one shot. We can see here that the collapse was still orderly. The market fell to test the Downtrend Line from 2011. It would have reached that target in a normal fashion. The peg simply postponed the inevitable increasing the price shock the longer it was extended. The more you postponed, the steeper the shock for the market will still test that Downtrend line no matter what or when.

The G20 Finance ministers are now pleading with the Fed not to raise rates since they have seen the impact of a rising Swiss franc on everyone who had Swiss loans outside the country demonstrates the crisis we have in currency developing. They have yet to understand why Greece and Southern Europe got screwed. Their debts were transferred to Euros which then DOUBLED. They had to pay back twice as much and that stripped mined their economies.

The G20 wants the Fed to surrender its domestic policy objective to serve external policy objectives. The Fed cannot and will not take that action. For when the stock market rises on an influx of foreign capital, they will see no other choice but raise rates. Everyone domestically will blame the Fed for low rates creating the bubble. They will set off a major debt crisis outside the USA by raising rates, but if they don’t they will be blamed for the Phase Transition into stocks from outside the country precisely as the bubble was created in Japan with the rising yen going into 1989.95.

This is all part of the crisis we have in the total lack of understanding the global economy. This is what I am warning about that politicians cannot stand up and even promise change when the influences are external. ONLY those of us who have actually dealt internationally can see what is unfolding. The rest are confined by their traditional interventionist views that a local government can manipulate its economy irrespective of the world as Marx and the Keynes argued. Sorry – we are all connected.

We will be moving toward a one-world currency as everyone starts to comprehend that allowing one nation’s currency to serve as the world reserve currency, imposes obligations upon that nation that will be in conflict with its domestic policy objectives.

…also from Martin:

TIME – The Fourth Dimension