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Stocks Looking to Fall After 5 Day Rally

Wed, Sep 9 2009, 10:14 GMT
by Matt James

Advanced Currency FX

Stocks in Asia fell overnight across the board following on to the European session this morning as reports that earnings growth have outpaced equity prices over the 6 month rally. Greenspan ( the former FED reserve chairman who acts as an informal advisor to the UK government) stated that the 'economy will be slow to rebound from the worst contraction in a generation'. The general consensus is that the stocks have been overbought and the risk aversion trades have run out of steam turning our attention back to the dollar along with the continuation of Yen strength. The BoE rate decision tomorrow will also be an influencing factor for the European equities along with the inevitable sell off of cable over the next 24 hours. The US stock equity futures are heading for a lower open at time of writing indicating a sell off today during this afternoons session. Gold has broken below the $1000 per once figure seen over the last two days albeit oil is higher, now above $71 per barrel.

Cable trading for today coming off the highs seen in early European trading at 1.6565, coming of some 100 points to 1.6454 before retracing back to 1.65 figure. The next support level is 1.6480 ahead of the 38.2% fib ret level of 1.6410 for the weeks trading. Below here, the next heavy support is back at 1.6340/50. Resistance at 1.6540/45 (which if reaches and retraces will be the right hand side of a head and shoulders pattern indicating further downside pressure for cable) ahead of the highs for the week at 1.6595. Favouring downside pressure during US trading session this afternoon taking a sell position should we not break 1.6545/50, looking to exit at 1.6480. Trail the stop beyond this point heading towards 1.6420. Euro pound trading higher adding weight to the further southside momentum.

Eurodollar finding it difficult to break the key resistance of 1.4518/20 ( now having had 3 attempts) trading at 1.4495 at time of writing. Should stocks continue to fall during the European session and into the US, expect further downside pressure towards the lows of today at 1.4466 which if breaks and holds, furthering downside momentum towards 1.4450 and 1.4410 (38.2% fib ret level for the weeks trading). The same pattern can be seen against the Yen having now reached 13415/20 on 3 consecutive occasions today. Resistance at 1.4520 which if breaks will see a return back to the highs for the week at 1.4535/40. Further downside pressure favoured.

The Yen weakened against the dollar through the Asian session now trading back at the lows against the dollar of 92.55/60 at time of writing. As the Yen has fallen against the EUR, GBP and the CHF over the last weeks trading expect a retracement during today's trade, specifically should the stocks fall in the US session along with oil and gold, expect a move back towards 92.30 ahead of the weeks lows at 92.05. As the pound weakens over the next 24 hours, expect the Yen to benefit coming back down to 152.20 ahead of the next major support of 151.70 (38.2% fib ret level for the weeks trading).

Published on  Wed, Sep 9 2009, 10:15 GMT