EUR-GBP-USDX

Written by JS T Alexander | 31 January 2012

Market Analysis SRO 131

Supporting Video analysis: http://youtu.be/T-tIP4DbPNw

The general sentiments for most investors across the board have started the year 2012 in a good footing. With the stock market increasing in Asia particularly in China including Australia's business confidence improving nearing its highest levels in 7 months prompting the Aussie dollar working above the 1.0610 versus the US Dollar. Refer to page 2 of Market view dated Jan. 26 AUDUSD extension targets.

It has kept it pace moving higher alongside with the NZDUSD at 0.8212 after a daily corrective move yesterday. While the USDJPY expecting some reports today has been performing positively nearing its intervention levels and currently at 76.13. With a more positive tone coming from the Euro zone, the EURUSD have made its daily corrective move moving lower for the start of the trading day with a low at 1.3075 and worked its way back higher to the current 1.3160 as of this writing.

In turn, the spill over in the EURGBP cross have also been positive maintaing above its weekly Pivotal price level of 0.8330 from the previous daily price break of 0.8290 registered last January 23, 2012.  The daily candle formation from therefrom have showed the tug of war and increase volatility reflected with long wicks with an average HI/LO range of 80-100 pips in between trading & daily session where it would easily trigger stoploss amongst day traders if placed on the wrong side of the trade.

The EURGBP cross close relation with the GBPUSD intrinsic behavior (Fig.2 below) with this candle formation and steadier prices tend to move higher with daily negative signals. Currently, at the 0.8380 levels, still within the rising channel  would continue above these levels towards the North American trading session. Likewise, it would maintain prices as long as the Euro moves steady with the GBPUSD making its corrective daily move moving higher behind the EURUSD.

The basic strategy of taking a position on the way higher has been proven to be effective and any additional moves or decision to add would increase some risk unless well defined in the trading plan. As mentioned, although the major trend is still bearish a major correction within a major trend can still occur! The 21 day moving average in fig.1 of the EURGBP cross is way above and moving back above the triangle formation indicates the renewed interest for the cross. There are no guarantees as other factors may arise towards the closing of the week while the closing of the month again falls within the week's trading. These are the critical times where markets do move with force once it decides to do so with heavy volumes. Extensions would be above the 0.8440-0.8505 trading range as long as momentum increases alongside the volumes.

GBPUSD WEEKLY

However, placing trail orders to settle these positions on the way down above its average price would likewise be a smart move. There are several other options while equally important is to stay ahead of the market price on both directions. The extensions for the GBPUSD while the USDX moves lower would be at the price levels nearing the 1.5880-1.5920 trading range. Such moves would be determined with the intial target of the USDX  at the 78.05 basis point. Although, the trend line resistance R2 at the 1.5910/20 would meet some liquidations and pullbacks whenever this would be accomplished. This is expected  within the next two trading days towards the end of the month and the remainding trading days of the week hereof. This would coincide with the time frame for the end of the week's trading. Likewise we, call this move as an 'overlay price directional move' prior to the end of the month and the start of the new month of February. Monitoring the price behavior of the three correlated pairs versus the USD is critical since the closing of the month's trading is at hand with position adjustments being considered.

The USD still under pressure would have to continue lower searching for some technical support before a real resumption can be re-establish. As the Gold prices weigh more heavily versus the USD due to inflationary pressure has indeed been making some impressive higher prices currently at the USD1736.90 and would continue to do so. We see no real negative influence for now and that this would continue to dampen USD sentiment as cash flows to the metals market. On the Techncial perspective, it would take time for the USDX to move higher as it re-established a daily basin like formation while re-testing below the support range of 78.05-78.85 in the near term. Currently, it is at a session correction of 79.15 from an inital low of 78.77 where it met some short-covering in the Asian trading session. The FIB time interval levels have indicted another near term lower direction in the weeks ahead.

 Important Calendar of Events

Wednesday & Thursday February 01, 2011

 Friday February 03, 2012