Forex Trend Following in 2012 - EURO & USD
| 29 December 2011
Ripple effects on EURO -GBP & Cross rates: Update
Without having to report a blow by blow account of the Foreign currency prices, the established trend from this trading year of 2011 would be a clear Trend Following in the opening trading year of 2012.
Until such time that both sides of the continent's economies as well as political situations would realistically improve. However, there are mix of signals for an improving US economy somehow, the uncertain of contagion is still in the air as major markets ripples its effects in the global arena.
With the ECB's balance sheet of over 2.73trn , the adverse price reaction of the EURUSD in itself has triggered a massive 200 pips move and a build-up of this momentum towards the end of the year's trading that rippled across the board of the forex market. Although, regardless of these events or a lack of one from a thinly traded market is still a signal that the bias negative and bearish sentiments are present in the market.
True enough, easier said when prices has moved; but the overwhelmingly bearish Trend for the European majors and the continuing strength that the USD is making just proves that this would spill over towards the new trading weeks of the coming year 2012. As we called the USDX to close the year 2011 above the 80.00 basis point levels.
The psychological support of the EURUSD at 1.2880 (refer to Euro & USD Behavioral Analysis) dated Dec. 14'11 seemingly looks weak with probable extensions at the 1.2560-1.2680 price levels. When these prices would be achieved would be towards the opening trading weeks ahead in January 2012. However, an orderly manner of depreciation would be seen with prices having a wider fluctuation on both directions.A word of caution should be exercised as the Euro prices heads lower; a technical corrective divergence is being created. Pls. stay clear when such build-up of volumes with a lowering of open interest for the Euro futures would serve as a temporary corrective price reversal due to position adjustments and year end book-squaring from a thinly traded market condition on the last trading day and opening weeks of January 2012.
Update: The end-result affecting the EURGBP cross rate have triggered an early technical corrective move higher just within its 21 day MA of 0.8418 after touching a Fibonacci rising Fan support at 61.8%. This coincides with the Euro's divergence created as prices moved lower on a daily basis. (Pls. refer to chart below) For that matter, with the GBPUSD falling to a low 1.5360; initially breaking a trading range support with a slight closing recovery at the 1.5410. This is the 1st weekly support level which somehow have influenced the initial recovery for the EURGBP cross rate closing at 0.8400. Thus, signaling a pause and probable recovery is being set-up for a temporary correction for the coming week after the season holidays. In addition, this set-up could be a preparatory strategy for the new trading week ahead in line with the corrective daily moves of the US Dollar index.
EURGBP WEEKLY GBPUSD WEEKLY
With that said, the correlation with the USDX currently at 80.63 as of this writing; would have to go higher and hurdle the first resistance area of 81.38bp towards with its Elliot wave extension targets of 83.30 basis point. And continue just above that extension nearing the major monthly trend line resistance levels of 85.50 basis point on the high. And the USDX would close above the 80.00 levels at the year's end. Pls. refer to our marketview report AUDUSD & USDX dated Dec. 09, 2011
To date, it would be quite difficult to have projected time-line as to when these technical objectives & price levels can be achieve. This can only be speculated on by viewing the charts through the course of the coming weeks ahead together with the considerable fundamental conditions on both sides of the globe.
For now, Have a great New Year for 2012 and as always only the best for all your trades!
