Forex Trgovanje

Deepening Global Recession
This week was very much a continuation of last week and really
just another step in the worsening global recession. Last week
saw the US DJIA fall below a critical support at 8000. This week
saw the index remain below this mark. Also to start the week,
Eastern European bank losses stirred risk aversion, which was
reflected by European stock market declines. Although safe haven
demand increased, the greenback outperformed the yen. The
Japanese currency is being weigned down by Japan’s own
fundmantals, with the GDP contracting 12.7% annually in 4Q, the
worst quarter since the 1974 oil shock.

To deal with the current conditions, both BoJ and BoE are
utilizing all the tools they can, meaning there will be
quantitative easing now that interest rates cuts are no longer
effective at their low levels of 0.10% and 1.00% respectively.
The US government is also taking steps, by passing a $800B
stimulus bill proposed by President Obama. He also proposed a
$75B plan to help homeowners with their mortgages. These actions
has yet to convince the market to be optimistic. Instead, much
of the same continued from last week, dollar and yen gained
(although the yen showed some weakness as well), and commodity
currencies such as the AUD, NZD, and CAD declined. The Euro also
was pressured in the same vein but recovered to end the week.

EUR/USD Making 100% Retracement
The correction from the rally in Dec. ‘08 has extended and hit
100% retracement if you start the rally in the December bottom.
We had mentioned in a previous report that the EUR/USD looked
vulnerable and may reach the 1.2550 - 2.2500 area as support.
The pair has labored to this area in the past month in a wedge
pattern. Eastern European bank exposure was a major catalyst at
the beginning of this week. However, the pair rebounded from the
support zone and is now testing 1.2800 as resistance after it
broke as support. Coinciding with this level is a downtrending
wedge resistance. A break on the upside here may target 1.3000-1
.3100. On the other hand, if price action rejects this area, the
1.2500 level may be a rundown target.

USD/CAD Rallies to Our Anticipation Level
The 78.6% retracement level was seen as possible resistance. This
week, the pair climbed to this area and broke it, only to be
reigned back into the triangle pattern. A second attempt to
rally failed to reach the high of the first attempt and is
suggesting a chance for a reversal. Conservative entry signals
for this reversal may be a clean break of the 1.2480 area as
this is minor support. Continuing with last week’s look at this
pair, the target remains at 1.2350, and a more aggressive one at
1.2100. Planning for alternative scenario, traders may want to
also anticipate support at that 1.2480 area, with a target back
to 1.2650. This case would begin a new sideways range. Note that
a strong rejection of 1.2480 breakdown could signal short-term
bullish bias. This Friday’s price action began to show this case.

Looking Ahead
Fundamental outlooks have been removed to focus purely on the
technicals.

GBP/JPY Another Pair Sees Possible Head and Shoulders
Technial Setup:
In the past few weeks, we have detected several inverse Head and
Shoulder Patterns, namely for the EUR/GBP, and EUR/CHF. Although
Head and Shoulder patterns suggest reversal, this did not follow
. Instead, those pairs are continuing their consolidate mode. The
GBP/JPY is in a similar predicament, attempting to rally and
complete its second shoulder in the pattern. The neckline is
heavy resistance, so we should monitor the price action as it
tests the 138.00-140.00 area. If this area is broken cleanly, a
rally may have a target at 148.00 - a previous minor resistance.
A more aggressive target may be 163.00, a powerline that has
been support before it turned resistance. This development may
take several weeks, since no rallies have yet sustained for more
than 2 weeks since last summer.

AUD/USD Revisits Channel Support
Technical Setup:
In a previous edition of the IB Insider, we have monitored the
AUD/USD as it landed at channel support and made a rebound.
However, this rebound was cut short at the 61.8% retracement
level before heading back to support. There are two clues to why
this support has now been weakened significantly. First of all,
the inability to return to resistance shows unsustainable
bullish momentum. Second, the timing between this and the last
test of support was relatively shorter than before. Therefore,
for those playing the bounce from support, you may want to scale
back position, and/or expect a target at the 0.6800 powerline
area instead of resistance.

USD/CHF Approaching 78.6% Retracement Level
Technical Setup:
We have been monitoring this labored retracement for several
weeks now, and the pair is now almost at the 78.6% level, where
there is major resistance. The analysis remains the same, with a
bearish bias at the 1.1900 area and possible targets at 1.0900-1
.0700 (the subsequent 61.8% - 78.6% retracement zone). A trigger
for the short signal may be the break of the flag support with
clearly bearish candles. An aggressive entrance may be a bullish
candle to extend to or pass the 78.6% (1.1900) level.