Weekend Thoughts and Some Setups

“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have” - Paul Tudor Jones

Hello. I hope you are having a great weekend. It’s been an interesting week in the Forex market, with some large movements on both sides across the board. Let’s look at the euro and dollar charts, then step forward and check some other interesting swing setups, including those I shared last week.

EURUSD

Interim support of 1.3530 highlighted in my Friday report was tested, as reaction to the NFP – coming at at 36K, lower than the expected 140K and Unemployment Rate which somehow fell by 0.4 percentage point to 9.0% in January – thus the largest two month decline in unemployment rate since 1958. Is the decline in unemployment a sign that the economy is recovering? Well, if you ask me – unfortunately I don’t have a crystal ball to ask what is the real unemployment rate but I can tell you that the first thing coming to my mind after the data release was something Mark Twain said: “There are lies, damned lies and statistics.”

Given current conditions, I think there’s some more downside to be tested next week and the daily charts will turn fully bearish if price breaks below 1.3450/00. To the upside we have the same 1.3750 level providing resistance, followed by last week’s top side at 1.3860 and 1.400.

If the daily chart above still looks bullish and won’t be a surprise if price resumes the uptrend – things are different on the weekly chart below. I don’t know about you – but when I’m on the bull side and see such candles forming, my second personality, who is a very careful trader :) – tells me to grab any profit and run!

Every trading week is interesting in its own way. Buying the euro at any level in the last 3 weeks was the best thing to do but the bears woke up, thanks to Mr. Trichet.

The USD Index chart is also very interesting as the support trendline that connects some of the higher lows since 2008 was tested. Resistance is currently formed around 79, which was a notable bottom breached in the 2nd half of January. Since the USD Index and EURUSD are inversely correlated – a break below the longer term trend line below should correspond to EURUSD resuming uptrend – overcoming resistance around 1.38. Therefore, if you like trading breakouts – keep an eye on 77, $1.38 respectively.

Metals gained on Bernanke’s comments last Thursday, as he suggested the Fed will continue its $600 billion Treasury bond-buying program.

So let’s take a look at Silver

Silver breached above 28.40 since my last update and currently trades around 29 – bringing 30 on the radar. That’s the first resistance, followed by the 31.20 top. Short term studies are suggesting that the uptrend resumes and first support layer stands into the 28-28.40 zone.

GBPUSD

Resistance at 1.6300 which I compared to a magnet was tested on Thursday, when the GBP reached a session high at 1.6275, before reversing. Support at 1.6030 (January’s top) is still intact and if it holds, there’s a good chance to break above last year highs.

NZDUSD

That resistance point at .7800 is strong, indeed. Although the Australian dollar has gained against the US dollar in the last days, the NZ dollar didn’t follow the same path. The correlation between the AUD and NZD remains high, around 90% on the long term basis,  they decoupled (temporarily) on short-term basis, as the AUD surged on hawkish statement from the RBA last week while the NZD declined on worst than expected Unemployment (6.8% Vs. 6.5% expected).

As both NZD and AUD are likely to benefit from rising commodity prices – I remain bullish on both but will consider buying NZDUSD only if .7800 will be challenged again.

USDPLN

It’s probably a good idea to wait and see if price will stabilize back above support trendline. Around 2.9100 there’s resistance formed by a previous lower high, followed by a falling trendline. Looking for selling opportunities is still a viable plan.

EURGBP

The potential range pattern I highlighted is still in play and the recent break below .8490 supports the bear case.

CHFJPY

Selling around range top – at 87.70 was a good idea, 85.80 was tested but the failure to close below said support, thus forming a reversal candle is a warning sign. If I were to pick a bottom, I would do it now. But I rather look for a new selling opportunity on potential break below 85.80.

This is all for now, have a wonderful sunday evening!

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