Poslano Sobota, 4th April 2009 od admin
Risk Appetite Extended after G-20 Summit
Stocks worldwide started the week on a bad note, but didn’t take
long to revive last week’s risk appetite. There is a growing
sense that the recession bottom is nearing. Also, the G-20
summit brought a joint resolution to create a $1 trillion fund
for the IMF, which would give emerging economies a booster shot
against the global recession. The Dollar lost to its rivals, but
the Yen lost more. Commodity pairs rose, along with a resurgence
in oil prices. The Euro gained on the dollar, but the Pound was
the big winner among the European majors.
EUR/GBP Retracement to 50%
The EUR/GBP is testing an important support, which would either
reaffirm the current uptrend, or a signal for further
consolidation/retracement. The 0.9100 support was pierced Friday
and is threatening to break it. This rundown came even though
the ECB cut rates by less than expected. However, this can be a
clear-out action, so the beginning-of-next-week price action
deserves close attention. At the moment, the 4-HR RSI shows a
bullish divergence. An entry with a fairly close stop can be
made if the down sloping resistance is broken, as this would
complete a “abc” retracement. However a more conservative entry
would wait until a break of the 0.9170 minor resistance.
CHF/JPY Breaks out and Completes “W” Pattern aka. Double Bottom
Last week, we saw the CHF/JPY retrace on Friday after
intermediate/consolidation resistance. The market retested this
as support while it penetrated on Monday the up-sloping support
held up. This provided bullish “force” and the pair broke back
up through the intermediate resistance. Those were aggressive
(at support) and conservative (breakout) entries. Finally
Wednesday price action provided a counter-trend which was broken
, giving another conservative entry. This break effectively
completes the “W” pattern (not shown here, but on Daily or
Weekly Charts), which is a double bottom. These formations are
rare and signal an ensuing major rally.
USD/CHF: Resistance Holds Up, Further Consolidation
The USD/CHF rallied to resistance last week. This Monday saw a
slight breakout, but that proved to be a clear-out action. The
resistance held and the market traded this pair in ranging
action through the week, ending at previous minor resistance,
which is now acting as support (1.1340).
USD/CAD: Seeing Support and Sets up Countertrend Resistance
Technical Setup:
The USD/CAD has been in a 4-month consolidation which is looking
to be an ascending triangle with a flat top at 1.3000. Market
price tested support and rallied last week, only to stop at 1
.2700 before returning towards support. The price action to end
the week brought the pair back to retest this support at around
the 1.2300 area. One can use an aggressive triangle pattern
entry at this support, with confirming signals of oscillators
(oversold). For a more conservative long entry, one approach is
to wait for a counter-trend breakout.
GBP/JPY: Rounded Bottom Signals a Bout of Risk Appetite
Technical Setup:
In previous issues we have spotted the GBP/JPY in a reverse head
and shoulder. It is apparent now that more time was needed for
the current consolidation. Eventually as we see this week, the
pattern has successfully completed as a complex reverse head and
shoulders, which some chartists also call “rounded bottoms”.
This basically signals a bottom of a decline as minor bottoms
fail to make new lows after January’s low. The break of
“neckline” at 142.00 was the first major indicator that a bottom
could have been established. The subsequent break of 147.00 adds
more weight to the bullish bias. An intermediate target is at
165.00, with 2-3 expected retracement periods. This pair is
correlated with risk appetite, and thus reflects the current
feeling that the recession bottom may be nearing. If this is to
be the case, we can note that this recession was truly one a
recession of “confidence”, being that GBP/JPY is a measure of
this factor, and that it bottomed in January. It could then be
debated that this return in confidence was what prevented the
world economy from sinking deeper.
