Forex Prices Stalls..

Written by MegaTrade101 | 11 January 2012

UPDATE: A very Classic example of the currency market that stalls after a wide daily price move.
For a better understanding let us review the most recent market action in comparison with price alignments of the USDX. 

After achieving its objective above the 81.10 with a high at 81.45 bp; with the USDCHF at 0.9550 and the EURUSD's opening price extension levels at the 1.2660/80, this combined price adjustment has made it possible for a daily corrective move for the 2nd trading week for January.This is also discussed in our recent educational Forex article on 'Market Timing in FX Trading'

The corrective move for the EURUSD at 1.2818 was an initial attempt for the start of the week where the 1st resistance price of 1.2880 will be tested as the current price level serves as a wide spread price differential from its 21 day MA of 1.2930. Currently the EURUSD is at 1.2737 pullback price from its high and relatively feeling the pressure for its weakness has caused the same price swing with the EURGBP from a high at 0.8286 and is at 0.8240 as of this writing. A contrary swing would not be discounted as net overly bias-bearish positions outweigh long outstanding positions versus the GBPUSD currency pair. Thus pushing the pressure favorable for shorts in the EURGBP cross rate within the mid-term downward trend. However, with any positive reports across the wire in Europe might create some unexpected short-covering rush that may well trigger an overwhelmingly bearish Euro market investor's sentiments. Some cautionay strategies would be appropriate specially for those who are in the EURUSD.
 
A Tight range and lackluster trading across the board in forex market have lessened the activity as it comes mid-week in between the US Dec Retail sales, ECB rate decision and the University of Michigan Confidence figures. Meanwhile, the AUDUSD & Kiwi has maintained their current status as currency leaders along side with the continued strength of the Japanese Yen. Although,traders and investors reluctant to take any further speculative positions with the Yen and the USDCHF is due to the probability of intervention by central banks and moreover the Euro's price vulnerability from the current meetings in Europe by Sarkozy & Merkel to finally try to resolve the crisis.

As of January 09, 2012

Trading Price Gaps in Asia / European Sessions

Although, the American trading session on the NFP and Jobs figures were the catalyst for fueling the USD rally; the Asian opening trading have resulted with price gaps particularly for the EURUSD, USDCHF, USDJPY and a couple of crosses the likes of GBPJPY including the EURGBP. The USDX is no exemption as this would tapper-off some daily gains from the previous closing last Friday.  

Daily corrective pullbacks are expected between trading sessions. The backdrop of market sentiments between the US and the European markets would still remain subdued and negative bias for the Euro until such time in the 1st quarter of the year. As for the EURUSD touching its inital support extension at 1.2660/80 the normal 1st reaction for a self-corrective price to go higher is being set-up at the Asian opening towards the European trading sessions. This goes the same with the EURGBP cross and the GBPUSD. Meanwhile, North American traders would wait-it-out for further price action before making any market move at the start of the week where an expected spill over from last week's USD rally would pick-up.

In comparison with price alignments; the USDX achieving its objective above the 81.10 bp corresponding to the 0.9550 for the USDCHF and the EURUSD's opening price extension levels at the 1.2660/80 makes it possible that the corrective daily moves for the 2nd week is currently being set-up at the Asian & European trading sessions. As of this writing, EURUSD is at 1.2753; USDCHF at 0.9529 and USDX at 81.11 respectively.

The US dollar index, which tracks the dollar's movement versus a basket of major currencies, have paused its earlier rally seen last week to touch a low of 80.95 compared with the day's starting level of 81.40 with an initial high at 81.45 before it started its correction. Meanwhile, the fundamental side of the story, where the Swiss franc stopped its advance over the past trading sessions to trade at 0.9513, where the Swiss data gave strong support for the swiss Franc. Other reports on unemployment came in at 3.1% last year in comparison with 3.9% in 2010, with the franc's appreciation. In addition, Swiss retail sales climbed 1.8% in the year ended November, exceeding both expectations of 0.2% and the revised 0.1%. And this prompted the corrective move lower for the USDCHF which is currently at 0.9530 as of this writing.

The EURGBP cross rate heading north for now is at 0.8260 gaining momentum for the European session keyturn over of price correction.  The reluctance of speculative traders to go net long can be seen continuing contrary to profit-taking gains from previous short-sellers on the EURGBP; as price moves higher with increasing momentum. This can only be confirmed with open interest lower from last weeks closing report.

Moving forward, we do expect increase trading volatility and market action towards the 3rd trading week of this month. The continuation of the rally would have to start building-up after such corrective move alongside the European majors. Foreseen to be short lived would really depend on the follow through volumes of market sentiments by major institutions. As retail speculative trades will always be out-paced by major forex hedgers and speculative institutional bank players in terms of volume transactions.