Market Volatility 2

Written by Research | 07 July 2010

UPDATE:

The Non farm payrolls mix reports combined with an overall negative sentiments have made the markets uncertain of the US recovery and stalled most stock lower in the Asia and European markets. Trending lower for the US dollar with the index falling below the significant support level of 85.20 will have difficulty to call the rest of the coming weeks bullish.

AUDUSD Upward Trend
YouTube URL: http://www.youtube.com/watch?v=loiY0nGkY-o 

Some corrective actions may be seen as the week progresses simply because of lackluster volumes waiting for some fresh incentives coming from the US rate decision, Consumer Price Index and the Michigan consumer report coming this week that would make the market a little more volatile. However, we still expect an overall bearish sentiment contrary to the daily movements of the majors.

EURUSD

An upside bias remains favored as the short-term charts are bullish since breaking above 1.2150 and a potential pullback from current levels will probably find solid bids around 1.2400, which is more or less the median retracement of last upleg (last week’s full move). Resistance is seen not far from here, around 1.2600 then a bit higher – at 1.2670, top of May 21. While short-term studies are positive, favoring long positions with targets above $1.2650keep in mind that longer term sentiment is highly bearish and current move from below $1.2250 to $1.2520-1.2610 could be part of a corrective cycle. Current quote is 1.2575 as of this writing.

Support: 1.2500/20, 1.2465, 1.2400, 1.2350 and 1.2200
Resistance:1.2600, 1.2660/70 and 1.2700

The Euro against the USD has more encouraging technical outlook as mentioned in our earlier blog and market view. On top of the monthly price reversal bar from its low of 1.1875 the weekly formation do indicate that a technically sound inverted head and shoulder's formation with significant fresh VOI will push it higher. Contrary to our opinion are the analysts who happen to maintain their outlook for a parity for the Euro against the US dollar.

The fresh start of the week would be at a slower pace since traders are feeling each other as the opening days of the 3rd quarter of the year would be a corrective for the USDX, still working below the 84.60 opening for the month of July spot and the EURUSD at the 1.2590 with an initial objective at 1.2820-50 range.

GBPUSD: Bullish Momentum

GBPUSD: As a sharp rally saw the pair wiping out its corrective weakness from the 1.5127 level to close higher at 1.5161 on Thursday, risk of further strength is now set to extend towards the 1.5308 level, its May’10 high. This price action has resumed GBP’s nearer term uptrend started from its 2010 low at 1.4226 and paved the way for a run to the upside.

Beyond the 1.5308 level will call for further strength towards its April 30’10 high/falling trendline at 1.5365/89 and then its April 15’10 high at 1.5521. Its daily RSI has turned higher supporting this view. Alternatively, on any pullback from the current price levels, we expect the 1.5127 level to serve as the initial support where a reversal of roles is expected to turn the pair higher again. Below there if seen will activate further weakness towards the 1.4872 level, its July 01’10 low followed by the 1.4685 level, its Jun 22’10 high

Cable lost some ground after reaching 1.5225 on Friday but the uptrend is still very strong on a short-term basis – as we can see on the daily charts. While the uptrend remains intact and price doesn’t break below recent lows around 1.4880 – buying dips seems a good plan. Such levels where to look for potential buying opportunities are 1.5000 – rising trend line providing support – and 1.4950. Current quote is 1.5143

Support: 1.5100, 1.5000, 1.4950 and 1.4850/80
Resistance: 1.5200/25, 1.5250/70 and 1.5300

Meanwhile a more positive outlook for the GBPUSD sustaining at today's prices above the 1.5080 - 1.5195 trading range. With the austerity plans set to help the Pound maintain these levels. Basically looking at he price targets of 1.5275-1.5350 range for the week.

The Aussie is showing some promising signs of a recovery and still holds an average support price of 0.8285-0.8350 as entry levels for long trade positions as the weekly chart may hold its true levels supportive of this positions. Bias as it may seem but we shall hold this stand for a mid-term trade; as we do expect the corrective for the USD to be covered by this quarter.

USD/JPY :

Despite the US dollar's strong retreat from yesterday's 87.98 high to 87.35 (NY), as renewed buying above the previous support and currently a resistance at 87.33 suggesting further volatile trading above last week's low at 86.96 would continue with mild upside bias but 87.98 should hold.Strategic long positions on dips for short-term trades, stop as indicated but only below 86.96 would extend downtrend to 86.60/65.

Resistance/Support
R: 87.88 / 87.98 / 88.22
S: 87.33 / 86.96 / 86.61

For the time being the expected reports this week will provide some market volatility that may be favorable for short term scalpers and day traders.

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