20June A slowing of the recent downward bias in the US Dollar was featured today. The foreign economic calendar ramps up again tonight with Chinese and European manufacturing data on deck, then UK Retail Sales. Small improvements over negative numbers last month are forecast. Any misses may recharge the US Dollar… similar to what was seen after the April FOMC meeting.
Aussie: 20June The Aussie remains inside its rising channel, bound by 1.0050 to 1.0270, that has been in place since the 01June lows at 0.9564. It also leads our inventory of Overbought markets.
We remind readers that even with the Fed move, there is recent precedent for topping action near the Fed meetings. Additionally, be aware that the recent rally, with the less than compelling volume, shows up near the 50% retracement of the early March through early June sell-off. If this plays out as a bearish rising wedge pattern, look for an additional extended move to lows that measures to near .9000.
That said, all our technicals point to higher levels from here with all four of our directional indicators positively biased.
In what is becoming bigger picture, the recent lows (0.9565 on 01June) lie in a zone that traces back to support from last November. If it the previous negative tone reinstates itself, look for a sustained move lower on stronger Volume to break this major support area and target the 0.9000 level.
Seasonal Snapshot (cash): The 5-year pattern’s upward bias extends until the end of July.
The 15&30yr patterns chop much higher until 20June, and then both fall out of bed throughout the rest of the month.
British: 20June We reshorted the British Pound today just above 1.570 with a stop above the day’s high (1.5773).
Now with the Fed “out of the way”, the Sterling’s attention can turn back to the affairs of Europe. To that end, a look at the BOE minutes shows some divide over restarting asset purchases and a “wait and see” attitude about European risks:
The U.K. Labour market was weaker than forecast in May:
The Sterling is still struggling with the declining 200-day moving average (1.5754).We see further resistance at near 1.5800, both a psychological level and support from late March through mid-April. This is also near the 50% retracement of the late April thorough late May sell-off. An additional risk here is the volume has been anemic during the June rally.
We see support from 1.5630 to 1.5635. This was support in late May, initial resistance on 6/7, and support yesterday and today.
Our directional technicals are all positively biased. Again, the last topping action, in late April occurred right near the FOMC meeting
The currency remains largely inside a rising channel. A break below rising trend line support (1.5535) that extends from the recent low (1.5267 on 01June) that forms the lower end of what may be a pennant, may kick off another large move to the downside, perhaps as low as 1.4600. We are watching our Rate of Change indicator closely.
Seasonal Snapshot (cash): The5&30yr patterns consolidate and the 15yr tracks lower until an upward bias imposes itself on 05July and lasts until 25July.
Canadian: 20June The recent rally has been put on hold with the FOMC lowering its economic growth forecasts. All of our directional indicators are still pointing to higher levels, but we caution our readers to pay attention to the chart near the last FOMC meeting, where it topped out. Also, like our other FX contracts, volume has been disappointing on this rally.
WE can also make the case for chart developing a bearish rising wedge pattern since failing to reverse higher on 5/30. We believe a move lower would project to prices near .9200. If this market breaks down after the FOMC meeting, look for an RSI shift negatively followed by a shift lower in our Rate of Change (not yet). Tomorrow morning’s Retail Sales, forecast to be modestly lower, should be watched.
Support is seen at .9700, a psychological level and the late May support before the lows were put in on 6/4. Resistance is seen at .9720, just above today's high of .9718.
Seasonal Snapshot (cash): All three patterns consolidate wildly until the end of June.
Dollar Index: 20June Today’s wide Doji Candle indicates the indecision surrounding the FOMC decision to continue its Operation Twist. A look at shorter-term charts shows us that Volume was stronger on the surge after the announcement, then receded along with the index. Action is still inside our noted developing bull flag bound by 81.25-82.40. A break out above reveals two potential outcomes:
1. The shorter-term rally from 81.025 (21May) may continue to 83.70.
2. The longer-term rally from 78.685 (30Apr) may continue to 87.70.
Our RSI indicator, which tends to be our most sensitive directional indicator, shows signs of having bottomed, bouncing out of the Oversold column from Friday.
We are seeing similar action as the last FOMC meeting in April. At that time, the DX bottomed after bumping along in range-bound sideways action from late January. The recent decline has brought its level back to the zone around the early January highs. If this level serves as a launching pad for another surge higher, look for new highs all the way up through 86.00.
Look for initial resistance at 81.70, which serves as support on 5/23 and 6/11.
We remind readers that downside risks include plenty of gaps to fill all the way down to 79.615 (04May).
Seasonal Snapshot: The 5yr’s weakness until early Aug is much more pronounced than the 15&30yr’s consolidation with a downward bias.
Euro-FX: 20June A pause in the action as the markets sort out the Fed’s extension of Operation Twist and attention returns to the issues in Europe, itself:
The European economic calendar ramps back up tonight with manufacturing data. We still think the fundamentals and eventual technical over-extension higher will portend another move lower. We're looking for a spot to short this market in the September contract. Watch the gently falling 21-day moving average (1.2547). The 2STD Bollinger Bands are contracting and have offered solid support/resistance for recent action: +2STD 1.2721; -2STD 1.2373.
A break out below the lows (1.2288 on 01June) should target psychological support at the round pennies down to 1.2000. The June 2010 low was 1.1874 and the lower boundary of the falling channel that has been in place since May 2011 is at 1.1770.
Seasonal Snapshot: The 5&15yr patterns consolidate and the 30yr pushes lower until the end of June.
Yen: 20June The flat lining 200-day moving average (1.2712) still shows as the overhead resistance from Friday’s rally.
Below, the falling 21-day moving average (1.2640), support lies at the recent consolidation lows (1.2540), then near the 12465 level, which was resistance going back to late February.
Our technicals are now a mixed bag, Trend positive and Momentum still negative. However, the shift to a more positive profile is underway.
Seasonal Snapshot: All three patterns consolidate with an upward bias until 20uly.
Disclaimer: The information presented in this report is taken from sources we believe to be reliable and accurate. This information is not guaranteed as to accuracy or completeness. The opinions expressed are based on our best judgment at the time of writing and are subject to change without notice. These opinions should not be construed as an inducement or advice to enter into any Futures or Options on Futures transaction except where explicitly stated. There is risk of substantial loss in trading futures and options. One's financial suitability should be considered carefully before placing any trades. Past performance is not indicative of future results.
This post has been edited by providiotrading: Jun 21 2012, 03:08 AM