Psychology & Analysis 2

Written by JS T Alexander | 20 May 2010

Update: Follow-up on Market View dated the 19th of May 2010
Market Psychology & Analysis

The recent report on Germany's ban on naked short-selling European Bonds and Stocks signaled a impending disaster as most traders and institutional investors viewed on this report. This obviously was a catalyst and just one of the speculated results that spooked the markets as we have reported on our market view.

Likewise, the build up of institutionals in their market exposure has led to scrambling positions in both directions which prompted the EURUSD and the GBPUSD to make its anticipated move upwards. A key element that drives a price reversal but not necessarily a trend reversal.

The USDX has made its corrective move lower after touching a high of 87.60 for the June contract month in the futures market coinciding with Gold prices Wednesday were falling as investors sold gold for cash to cover losses as Germany's ban on naked short-selling. Currently the USDX working at the 86.42 levels supported the EURUSD and GBPUSD recovery from their low of 1.2143 slightly off our target of 1.2180. Modesty aside how close can you get in speculative targets is what Megatrade101 aims to achieve. And the currently the EURUSD and the GBPUSD is working at the 1.2340 and 1.4380 respectively. Even without seeing the volume and open interest for today's movement it would be quite obvious that it has exceeded its average daily volume turnover. As the Commitment of Traders for the end of this week would see an increase for today's movement on the low price levels on both majors.

Meanwhile the directional trend for the USDCHF back to it high of 1.1555 has boosted the USD in spite of the corrective move and clearly shows its contrary movement vs. the USDJPY from a low of 90.94 and currently at the 91.55 correction influenced more by the EURJPY on a daily basis. Be watchful of the USDCHF on the last two trading sessions as sustaining these current daily trend may find some difficulty to end on their extended price levels and a probable correction would occur. These goes the same way with the Aussie and the Kiwi making their continued weakness contrary tot he USD slight correction. Making its recent low for the Kiwi at 0.6657 which may limit is downward movement for the time being since a corrective weekly technical divergence would occur below these prices which already has a 400pip trading range for the week at current levels. With the Aussie 0.8853 high compared to its low of 0.8356 making a 497 pip trading range. Expect some mid-range corrective move but to encourage scalping within these ranges is not advisable. Those who would may well be in deeper trouble as going against its reinforced trend may also be called suicidal. Remember, keep whatever profitable trades made from the previous weeks as the market will always be there for the taking. but not be taken from whenever enticed to trade.

Gold for June contract was down $6.80 to $1,207.80/oz at the New York Mercantile Exchange. The gold price Wednesday has traded as high as $1,228.20 and as low as $1,202. The U.S. dollar index was slipping 0.73% to $86.74 as the euro rallied slightly rising 0.97% to $1.2330 against the dollar, which some experts consider fair value for the currency. The gold spot price Wednesday was sinking over $19.00/oz. When gold prices popped in early trading to almost $1,230 an ounce as euro instability triggered safe-haven buying as most investors were profit-taking in exchange for the need for cash as fear of equity losses due to the ban on short-selling.

Germany's sudden ban on naked short-selling was weighing on the euro was also a signal that most major banks and institutions are indeed rumping up trade positions and adjusting them accordingly where risk appetite and aversion could somehow balance their portfolio in the event of a continued downturn for the Euro and the Pound. And to follow it scenario the European Commission reportedly wants all European Union nations to follow Germany and restrict naked short-selling of certain assets. Any unilateral move could put continued pressure on the euro and support higher gold prices over the long term which most analyst predict unanimously at the $1250.00/oz.

Expect some bargain-hunting and profit-taking to continue to tug on gold prices and the major currencies with continued volatility in both directions. For those with only a limited fund account on retail trading, we would caution that this may be a quite interesting stage of trading activity, but if and whenever one does not have the heart for such dramatic and exuberant price swings; pls. wait it out and stay sidelined. Major players and institutions are currently in the market obviously! Losses can be extremely bigger than normal markets and of course vise verse.

If not then pls. choose wisely and accordingly! Only the Best for your trades!