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Wednesday
28/12/2011 8PM GMT 9PM CET
Were
now getting out of holiday mode now and seeing the markets come back
to life and today the Euro has broken 1.30 and a close below this
level is highly bearish. At this time of year between now and around
January the 5th most currency pairs make there highs or
lows for the year and we see the safe haven currencies as the ones to
buy.
We
are long the dollar, have been for months made good profits and
expect more to come and our logic is simple:
The
global economy continues to slow and the Euro zone crisis is simply
going to get worse and we will see it continue until, we see a
country go bust or Euro zone slims down in size. Before we look at
the news lets look at our positions.
Position
Summary
The
Dollar is moving up today and while we will see some short sharp
rallies against it particularly in the Euro where we have a huge
amount of speculators short, we don't expect the rallies to last –
they will just be weak speculators taken out on stop.
AUD
USD:
We have been bearish since the pop up to 1.080 and saw 1.020 as good
resistance to sell into and prices have fallen back from this level
and we want to now see a close below the 1.000 level to cement the
down trend. Long term, we see the Aussie dollar going to 80.00 and
see it as one of the best trades on the board in terms of long term
potential.
GBP
USD:
We have been bearish since the pop up above 1.61 and saw 1.58 as good
near term resistance it was tested and now the Pound has taken out
1.54 and looks to be heading down to 1.50.
CAD
USD:
We are bearish of the CAD and have been since the pop up to 1.010 and
our latest trade is short on the break of 97.00 and we are trading up
to where our stop is behind 98.00 and we see this level as holding
and it's just below this level – look to sell weakness if not short
for a low risk entry point.
EUR
USD: We
have been bearish the Euro and trading the short side since the pop
up to 1.42 and prices have plunged, making this a great trade for
trend followers. The Euro managed a dead cat rally but the 1.32 level
is stern resistance at the gap and this level look unlikely to be
broken and if we hold below 1.30, the next leg of the down trend to
1.20 will unfold.
USD
JYP:
77.50 is good support for the dollar and we have bought into this
level and want to see a strong break above 78.00 on increased
volatility to indicate a dollar bull trend is in motion.
Euro
– Break 1.30 Far Lower Prices Ahead
The
Italian auction everyone is talking about on the news wires is of no
real relevance in terms of the big long term trend – the Euro is
going down and nothing short term can stop it unless the ECB were
play a greater role but so far they are just adding liquidity to the
banking system but there is a problem with this.
balance
sheet soared to a record 2.73 trillion Euros ($3.55 trillion) after
it lent financial institutions last week. Lending to euro-area banks
was up 214 billion Euros to 879 billion Euros for the week ended Dec.
23, the Frankfurt-based ECB said today. The balance sheet increased
by 239 billion Euros in the week and was 553 billion Euros higher
than three months ago so what actually is this lending doing – will
it stimulate growth? The answer is no it won't.
The
ECB's mid-week provision of cheap longer-term cash was the largest
ever amount of liquidity realized into the global financial system.
The problem is
regional banks are using liquidity to build reserves instead of
lending. As we said last week there would be a reluctance among
European banks to lend to each other or invest in Euro zone sovereign
debt, as banks will look after there balance sheets first.
So
we have countries mired in debt, no confidence in policy making and
talk of austerity and closer fiscal union in the future is no
solution for the crisis we see unfolding now. With no confidence in
policy making, debts rising and interest rates on the way down, the
Euro will continue to trend lower. Rallies will be short, sharp and
brief and simply be selling opportunities.
Comment
At
present we see no solution to the problems of debt in Euro zone and
see it as a sell on any rally back to the 1.32 level and now we are
taking out the 1.30 level a close below it could easily see the Euro
tumble to 1.20 or lower quickly.
Where
the Good News?
I
don't see much good news all the major economies are now struggling
and even the ones that have held up well over the last few years such
as China, India and Brazil, are all showing signs of slower growth
and in the background looms the euro zone crisis which is not going
to have a happy ending.
We
remain in favour of safe havens and will continue to buy the dollar
on dips which has served us well over the last few months and we see
more profits to come.
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