Onehourworkweek's Blog

Disclaimer: The opinions expressed in this article are the personal views of the author and do not constitute investment advice.

As I previously suspected 1.57 came under threat, not just once but for the second time in January after a relentless rally that followed the false break of range support at 1.5270.

My view is still that cable is at risk of a significant fall as a bearish RSI divergence can be seen on the charts. The fundamentals are also negatively aligned for the pound with less than impressive data and talk of more QE (money printing). In fact this seems like a prime opportunity for establishing shorts as great falls often follow these furious rallies. Of course it would be better to see more evidence of a top forming and I would be careful with selling until February gets underway for a number of reasons. The first day of the month (or the last one) can be very volatile on position adjustments, the EUR, gold and CHF just made new highs for the week (month and year) in late US trading on Friday, and that could continue at least a few more days. However, yen crosses, stocks and commodity currencies started to fall back a bit,  and that along with the EUR’s apparent struggle to get this high could be hints of a turn in market sentiment favouring the USD despite Mr Bernanke’s newest attempts at sinking the greenback.

In cable, the 1.5770 level has been tested 3 times and held, which is the next resistance after 10 days of continuous gains. On a break of the rising trendline the first meaningful support is 1.567. A daily close below that could open the way to a retest of the range bottom at 1.5250 where the widening daily Bollinger band is now situated.

Disclaimer: The opinions expressed in this article are the personal views of the author and do not constitute investment advice.

I’ve spotted what appears to be a forming bearish flag on the GBP/USD daily chart. The range support at 1.5300 managed to hold throughout the holiday period although despite a nasty selloff on 29 December. We are in the process of yet another bounce from those lows and we might see 1.5700 challenged once again. But as the weekly chart shows a triangle I expect the first break of that to the downside with the 1.5000 level coming into view and a possible drop to all the way to 1.4300 – the 2010 low. As for the long term, fundamentally the UK still appears to be ahead of the curve compared to the stricken Eurozone and the pound could benefit, even becoming a future safe haven currency – but for now it might just have to suffer along with the other major currencies on flows to USD and US treasuries. Keeping an eye on oversold bounces though, especially for the EUR that is still looking frail but could catch up a bit in the next days or weeks.

Since the SNB has put a floor under the swissie, the CHF pairs were probably out of favour for most traders, bar the 5 minute scalpers.

However, as this crazy market is desperately trying to find “safe havens” for money, we could see over the next two weeks a strong demand for the CHF and perhaps the yen, also for gold. As I’m writing this, USD/CHF has breached the 4 hour ascending trendline and is turning bearish. Gold has given us a false break yesterday but as traders are leaving their desks for the holidays, most of them would probably like to see their investment in gold rather than anything else.

Personally I think that the people in power are running out or have already run out of things to do to save the world but are of course not going to admit it.

Nevertheless the markets are still waiting as have been all summer for another meeting of central bankers before deciding what to sell and what to buy. There are some things though that could not be contained, one is stocks that took a tumble already, and now it’s gold that posted the first very bearish daily candles this week. But hang on….who wants to really sell gold at this time? Most traders would much rather buy it and are just waiting for it to hit 1600 again…anyway, watching next week as holidaymakers return in the US and Europe and volumes start to return to normal. Stocks might be in for an interesting few weeks along with the so called “risk currencies” As for EUR/USD? As Soros says there is a mystery buyer of Euros in the market and we might just find out how deep their pocket is if stocks crash or start a steady descend….

They’ve done it again! But this time it must be a better “solution” to the EZ debt problems, obviously it will stop the contagion risk to other indebted nations such as Portugal, Ireland, Spain and Italy…..(let’s stop with the list here before we have to start mentioning others than the peripherial economies)

So now all is fine and dandy, and we can again start worrying about the US debt situation, and of course give the old greenback a real good whacking….again….and again….and again….

The majors responded pretty well to the good news  (that our politicians are still cleverly managing the art of making money out of nothing) and so the EUR, GBP, AUD and especially the NZD rallied against the USD, not only that but also the CHF. Gold was also down. There’s only a few little worries. One is the JPY which seems to be hesitant in giving back much of its latest gains, and the other one is the EUR/USD daily chart where the 13 day EMA somehow failed to turn up.

My worry is that the longer CBs and governments keep meddling in the economy and finances of the world, the more tension is going to build up in the markets and some day in the future we are going to see something very ugly when the truth and the true value of everything will be finally seen.

Well, whatever they did, it worked…..bond buying by the ECB and China and sending out messages of unity among EU leaders…..at least it was good for a quick turnaround and sharp rally, and let’s not forget the Monday morning gaps that were left unfilled in some pairs…..I guess until the US debt ceiling issue is out of the market’s focus, we cannot really establish a new trend.

…..a nice co-ordinated intervention from the central banks? That would be ideal as it would give the market the perfect shorting opportunity for everything that benefits from the intervention

The fact that the EUR didn’t benefit much from this weeks rally in equities suggests weakness to me. The last time S&P 500 saw a daily close above 1,350 the pair was knocking on 1.4800′s door. now almost 500 pips down at 1.4370 we have a bullish hammer candle in extremely volatile markets. So the weekly candle could be more important and clearly, if the daily chop is going to be so severe, that could be an indication that a top is forming. For now, if the market is willing to build on yesterday’s turnaround ahead of the NFP (and why not, after all NFP day is all about volatility and absurd moves) then the next obstacle is at the falling daily trendline at 1.4560 – coincidentally also the top of the daily Bollinger Band. S&P 500 could be capped by the rising and once broken daily trendline, now at 1,383, with Bollinger Bands expanding both ways - so could exceed this year’s high or form at least a double top. RSI divergence can be seen so I cautiously expect a failure near this trendline.

What is also on my mind that the rally that we saw over the last year in the majors against the USD still didn’t have at least a minimum Fibonacci retracement – not to mention it’s been a monster cycle spanning 13 months since 8 June 2010. So how come we still weren’t able to challenge 1.3750 -, the 0.382 Fibo level? Apparently it’s China, right? They are keeping the EUR on life support, and reach in their deep pocket every time the market wants to sell. But hang on….China is also part of the market! AND a very big part of it. And if they are not  happy to own US debt anymore, well, they will hold EU debt if so they wish….

So it seems like even if the USD finally gets some reprieve and manages to bounce, how long that cycle can last? Somehow I doubt it will be another 13 month cycle…more like 3? Even the old traders mantra :”sell in May and go away….” was a bummer this year.

Today’s close could be crucial if we are going to see a trend change at all. The market has received a shot in the arm with the surprisingly high ADP jobs number – however I think the ADP data is quite notorious for being inaccurate or a poor indicator for the real NFP number so we might see some surprises tonight.

On another note: I’ve started this blog about 18 months ago to assist myself in the quest for the ONE HOUR WORK WEEK as I honestly believe I work (and trade) too much. I think I am finally getting close to identifying the ONE HOUR per week that I want to invest in my trading. More about this in the following posts.

Like I said yesterday, the upper Bollinger band did not stop the advance in US stocks but we are now stalled under the falling daily trendline ahead of this year’s highs. A failure here could be a much awaited relief for USD bulls, while a decisive bullish break could set us on course to 1.5000 in EUR/USD. It could turn out to be a very interesting holiday weekend. For now,  overbought AUD/USD, NZD/USD and even EUR/USD and S&P 500 broke the hourly uptrend line but price action is very subdued, or should I say eerily quiet as the market holds its breath….Quite often the first day of the month also means the highest EUR/USD, well, this is the first of July, first day of the quarter too.

As stocks stage a sharp rally to hit 1310, the Aussie did it again….about the third time in less than a year after it broke key support against the USD it staged a relentless rally to make new highs. This time it was aided by end of month/end of quarter and financial year flows and of course the ever helpful “positive” news from Europe regarding the Greek drama.

It seems like the volatility in the forex market is indeed on the rise and yet it can get worse. Only two days ago the AUD was second worst performing currency so I wouldn’t get all that surprised if this powerful rally would end with a mighty crash. One scenario could be AUD/JPY losing its footing first but that’s just my instinct and it could be wrong. The other thing that rings the alarm bells is that this rally broke out of a triangle of the daily trendlines to the upside and often that proves to be a false break followed by a more powerful break in the other direction.

Otherwise stocks might still have some steam left in them although the upper Bollinger band has been reached. Definitely EUR/USD seems like it can go higher still, at least to 1.4600 or even higher. I’m not surprised that cable also managed to break 1.6100 and it can also continue higher if the EUR train keeps going for a while. With the ECB meeting and NFP coming up it can turn out to be a very volatile period especially if you mix in Greece…