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Pairs to Range Trade

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EURGBP Offers A Range Only For The Most Risk Tolerant

Thu, Apr 2 2009, 06:02 GMT
by John Kicklighter

The clock is counting down to tomorrow’s heavy round of event risk and the market is clearly cautious of the potential for volatility. Realistically, there is no pair in the market that can claim to be immune to the G 20 meeting’s potential outcome; and therefore, range trades should be avoided unless there is a fundamental bias to go along with a technical setup. Our setup for EURGBP is based predominantly on (conspicuous) technicals and should only be followed by those that have a high tolerance for risk.

Why Would EURGBP Hold a Range?

Levels to Watch:
-Range Top: 0.9500 (Double Top)
-Range Bottom: 0.9150 (Fib, Triple Bottom)

It is necessary to find some kind of safety from the volatility the G 20 meeting may supply in Thursday’s session. EURGBP has a modest buffer to this event risk as both economies’ economic pace is generally dependent on one another. On the other hand, the UK has considerable exposure to the outcome of the meeting as it is expected to be the worst performing economy of the industrialized world through 2009. What’s more, we also have the ECB rate decision tomorrow – a variable that is bound to drive price.

Since marking a double top around 0.95 two weeks ago, EURGBP has turned to congestion. Though despite the horizontal floor set in at 0.9150, it is hard to miss the potential for this chart setup to confirm a descending wedge and/or head-and-shoulders formation with a bearish breakout.

Suggested Strategy

Long: Half sized (or smaller) entry orders will be placed at 0.9180 - notably above spot.

Stop: Our initial stop will be set at 0.9120 to cover the triple bottom but not rising trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (60) at 1.0.9240 while the second target will be 0.9385.

Trading Tip – The clock is counting down to tomorrow’s heavy round of event risk and the market is clearly cautious of the potential for volatility. Realistically, there is no pair in the market that can claim to be immune to the G 20 meeting’s potential outcome; and therefore, range trades should be avoided unless there is a fundamental bias to go along with a technical setup.
Our setup for EURGBP is based predominantly on (conspicuous) technicals and should only be followed by those that have a high tolerance for risk. A rational consideration of this pair’s exposure to upcoming event risk leads us to believe that there is a significant chance for a breakout. The UK and Euro Zone have different stakes in the gathering of the global policy makers.
What’s more, there is an ECB rate decision scheduled for release just before the US session open (and likely before official G 20 commentary starts to leak over the wires). Clearly this kind of event risk requires speculation on the outcome of these events and how the market will react to them. For our strategy, we have set entry above spot (this may help should volatility vanish before the event risk decides direction for us) and the stop just below the range low. As this is such a dangerous setup, it is best to minimize position size such that any losses taken will be considered acceptable. This setup will only be valid over through Thursday’s US Session.

Event Risk for Euro Zone and UK

Euro Zone – Euro traders are looking attwo major fundamental accelerants over the next 24 hours. The impact the G 20 meeting may have on the currency is vague but has nearly unlimited potential. Euro Zone policy makers have shown resistance recently to calls by other world leaders to increase their fiscal stimulus and bailout their neighbors. So far, the region has been able to avoid much of the heavy costs incurred by the US and UK with taking on massive amounts of debt to try and spend their way out of recession. Should the those members of the European community represented at the meeting finally acquiesce to these demands, it would be treated as confirmation that conditions in the Euro Zone are as bad as they are in other economies and that growth and returns are going to suffer for far longer than many investors were hoping. A more definable threat to price action tomorrow is the ECB rate decision. The central bank is fully expected to cut its benchmark another 50 basis points to 1.00. This brings their target rate within the same realm as so many other rates that are hovering just above zero. On the other hand, the market’s forecasts may alter the dynamics of the reaction.

UK – Forecasted to be the worst performing, industrialized economy this year, the United Kingdom is heavily vested in a more liberal outcome for the G 20 summit. A coordinated effort made by the world’s largest economies could more surely revive global growth and encourage a recovery from this hard hit nation (as opposed to momentum behind the global slump overwhelming the UK’s efforts to recharge their own economy). However, this isn’t the only fundamental concern for the sterling. Looking beyond this release, we have top tier releases dotting the calendar; but it is next Thursday’s BoE rate decision that can really present a problem.


	Data for April 2 – April 9		Data for April 2 – April 9
Date (GMT)	Euro Zone Economic Data	Date (GMT)	UK Economic Data
Apr 2	G20 Summit in London	Apr 2	G20 Summit in London
Apr 2	ECB Rate Decision	Apr 3	PMI Services (MAR)
Apr 6	Euro Zone Retail Sales (FEB)	Apr 7	Industrial Production (FEB)
Apr 9	German Industrial Production (FEB)	Apr 9	BoE Rate Decision

Published on Thu, Apr 2 2009, 06:02 GMT

A Tight Range And The Approaching G20 Meeting May Offer A Quick GBPCHF Range

Wed, Apr 1 2009, 06:16 GMT
by John Kicklighter

DailyFX

Time is winding down to the G20 meeting on Thursday; so those risk-sensitive currency pairs that have fallen to congestion recently should be examined critically. The potential for volatility, breakouts and renewed trends induced by this single event is far too high to lapsidasically trade through. However, considering there are serious time constraints and technical formations need to be clearly defined, GBPCHF may offer one of the best setups under the circumstances.

Why Would GBPCHF Hold a Range?

Levels to Watch:
-Range Top: 1.6450 (Triple Top, Fibs)
-Range Bottom: 1.6225 (Trend, Fib)

Major fundamental risk lies just below the surface for GBPCHF; and any number of events could catalyze a sudden surge in volatility. The biggest threat to stable a market is Thursday’s G20 meeting. Global policy makers, ailing consumers and investors expect a lot from the gathering; but the probability of developing a true fix to the world’s ills is very low. Filling the time before and after this key event, we also have a significant round of timely data from the UK and constant threat of SNB intervention.

Congestion is clearly defined between 1.6450 and 1.6225. A series of daily highs and lows has confirmed the presence of a confluence of many different Fib series at both the highs and lows. A look at the higher time frame outlines a wedge formation with a dominant bear trend behind it.

Suggested Strategy

Short: Entry orders will be placed at 1.6420 – aggressive but necessary for the tight range.

Stop: Our initial stop will be set at 1.6475 a tight stop, but outside our range top nonetheless. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (55) at 1.6365 and the second target will be 1.6300.

Trading Tip – Time is winding down to the G20 meeting on Thursday; so those risk-sensitive currency pairs that have fallen to congestion recently should be examined critically. The potential for volatility, breakouts and renewed trends induced by this single event is far too high to lapsidasically trade through. However, considering there are serious time constraints and technical formations need to be clearly defined, GBPCHF may offer one of the best setups under the circumstances. Our strategy looks to exploit a congestion pattern that is little more than 200 points wide, has very clear boundaries and is amply supported by different technical points. The width of this band is very important. Typically when a pair this volatile is stuck within such a tight range, it typically leverages the potential for a breakout. In this case though the presence of Thursday’s event risk could actually prevent the market from producing a significant breakout as market participants are unwilling to speculate on direction before a surge in activity. What’s more, we have the added benefit of clear levels to place stops and targets that are notionally tight. Our primary bias is for a short position (as it holds with the dominant trend), but we would be open to both sides of this range. The most important condition for this setup is timing. We cancel all open orders before the start of the London session on Thursday or move stops up to breakeven for open positions.

Event Risk for UK and Switzerland

UK – It is perhaps appropriate that London will host the G 20 summit on April 2nd as the UK has been pegged by many to be the worst performing industrialized economy in 2009. This means that the British economy and its currency stand to benefit the most from a proactive outcome that spreads the burden and responsibility of a financial rescue evenly across the major economic players. Coming to such an agreement will be very difficult however. Tangible policy points that point to a coordinated effort would beat the odds and give the sterling a fundamental boost. Otherwise, hope for a near-term recovery from the nation’s deep recession will be put off. Looking at outside of the G20 meeting, there will further be a substantial round of event risk to cross the wires throughout the week – though its impact on price action will be skewed by the presence of the summit. Of note over the coming week, we have the nationwide consumer confidence figure to gauge consumer health. For the best measure of growth though, the PMI service, manufacturing and construction numbers will give a broad view of growth.

Switzerland – Like the rest of the currency market, the Swiss franc has a primary, fundamental focus for the week: the G 20 meeting. While the Swissie may not see the kind of reaction that the dollar and yen may experience; as a key risk aversion currency, the franc may see a dramatic increase in volatility regardless of whether policy authorities produce a coordinated rescue effort or not. What’s more, recent commentary from global leaders has suggested the group will take a hard stance against protectionism (like harboring funds and currency manipulation). Outside the orbit of the policy meeting; the PMI and CPI data will likely offer little for price action.


	Data for April 1 – April 8		Data for April 1 – April 8
Date (GMT)	UK Economic Data	Date (GMT)	Swiss Economic Data
Apr 1	PMI Manufacturing (MAR)	Apr 1	SVME – PMI (MAR)
Apr 2	G20 Summit in London	Apr 3	CPI (MAR)
Apr 3	PMI Services (MAR)
Apr 7	Industrial Production (FEB)

Published on Wed, Apr 1 2009, 06:16 GMT

High Volatility And Event Risk Should Define A Quick GBPJPY Range

Tue, Mar 31 2009, 05:37 GMT
by John Kicklighter

DailyFX

As a pair that is renowned for its volatility and sensitivity to risk trends, GBPJPY must be treated carefully when setting up a range scenario. This is particularly the case this week with event risk as prominent as the G20 summit scheduled on Thursday. This event will likely define price action before, during and after comments trickle out of the meeting.

Why Would GBPJPY Hold a Range?

Levels to Watch:
-Range Top: 145.00 (Trend, SMA)
-Range Bottom: 135.00 (Trend, Fib, SMA)

The currency market is in the calm before the fundamental storm. Major event risk is scheduled for the latter half of the week with Thursday’s G20 summit in London holding the greatest potential for volatility. Given this pair’s correlation to risk appetite, this meeting’s focus on a possible coordinated response to the global financial and economic crisis could amplify shockwaves in through this pair. Outside of this single event, we will also see substantial data from each economic docket.

Short-term charts show extreme volatility and long-term offers a choppy attempt at a potential reversal. However, our time frame offers a rising trend channel with enough technical support and resistance to offer a reasonable range setup. A floor is set up by a rising trend, 50-day SMA and Fib.

Suggested Strategy

Long: Half-size (or smaller) entry orders will be placed at 135.60 – below today’s intraday low.

Stop: Our initial stop will be set at 134 covering the confluence of support, but not volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (160) at 137.20 and the second target will be 140.60.

Trading Tip – As a pair that is renowned for its volatility and sensitivity to risk trends, GBPJPY must be treated carefully when setting up a range scenario. This is particularly the case this week with event risk as prominent as the G20 summit scheduled on Thursday. This event will likely define price action before, during and after comments trickle out of the meeting. Beforehand, price action is likely to settle and congestion will be favored over breakouts (as traders will want to avoid undue risk). This is the best scenario for our GBPJPY range. A rising trend channel that has been in place since the late-January reversal, this formation does not have an aggressive slope and is backed by qualifying technical indicators. Nonetheless, this is a dangerous pair to trade even on normal days; so our strategy must reduce risk. Our first step is to lower notional risk by cutting position size at least in half. Furthermore, stops have been placed well below the trend, but not wide enough to hold up to a volatile false break like the one back on March 12th. We will close all pending orders before the start of the London session on Thursday. Furthermore, for existing positions, we will move stops up to lower risk (pushing the cutout point to breakeven should the pair be in significant profit by that time). This is a strategy only for the risk tolerant.

Event Risk for UK and Japan

UK – It is perhaps appropriate that London will host the G 20 summit on April 2nd as the UK has been pegged by many to be the worst performing industrialized economy in 2009. This means that the British economy and its currency stand to benefit the most from a proactive outcome that spreads the burden and responsibility of a financial rescue evenly across the major economic players. Coming to such an agreement will be very difficult however. Tangible policy points that point to a coordinated effort would beat the odds and give the sterling a fundamental boost. Otherwise, hope for a near-term recovery from the nation’s deep recession will be put off. Looking at outside of the G20 meeting, there will further be a substantial round of event risk to cross the wires throughout the week – though its impact on price action will be skewed by the presence of the summit. Of note over the coming week, we have the GfK and nationwide consumer confidence figures to gauge consumer health. Mortgage approvals and lending data will measure credit activity. For the best measure of growth though, the PMI service, manufacturing and construction numbers will give a broad view of growth.

Japan – The Japanese economic docket typically saves most of its market moving data to be released over one or two sessions. We will see this heavy round come over the next 48 hours. Notable indicators will include housing spending, housing starts, income and employment numbers. However, even though there is a greater focus on the health of the Japanese economy (as it can redefine this currency’s safe haven status), its market moving potential is still doubtful.
The round of first quarter Tankan data, on the other hand, could end up supplying us with a considerable reaction as activity in Japan has a clear correlation to export activity. A key driver itself, the G20 summit will also rouse risk aversion or appetite – with clear implications to the now-questionable safe haven yen.


	Data for March 31 – April 7		Data for March 31 – April 7
Date (GMT)	UK Economic Data	Date (GMT)	Japanese Economic Data
Mar 30	GfK Consumer Confidence (MAR)	Mar 30	Household Spending (FEB)
Apr 1	PMI Manufacturing (MAR)	Mar 31	Housing Starts (FEB)
Apr 2	G20 Summit in London	Mar 31	Tankan Large Manufacturing Outlook (1Q)
Apr 7	Industrial Production (FEB)	Apr 7	BoJ Rate Decision

Published on Tue, Mar 31 2009, 05:37 GMT

A Choice of Risk Appetite Must Be Made For An AUDCAD Range Trade

Mon, Mar 30 2009, 05:45 GMT
by John Kicklighter

DailyFX

Though congestion is a common attribute for the broader currency market at the moment, there are few ranges that offer clear levels and a reasonable risk profile. AUDCAD offers one of the few appealing setups; but the risk is significant.

Why Would AUDCAD Hold a Range?

Levels to Watch:
-Range Top: 0.8650 (Fib, Double Top)
-Range Bottom: 0.8000 (Pivot)

Checking over the economic calendars for both Australia and Canada, there is significant event risk from both sides of the market; however, whether they are actual market movers or not is another issue. From Australia, housing, credit, consumer spending, trade and PMI numbers give a rounded view of the economy’s health. Canada, on the other hand, has only its monthly GDP report to worry about. And, though there is no direct exposure, G20 volatility will be fully expected.

Like a few other notable pairs in the market, AUDCAD is developing a very wide range but is at the same time backed by a clear tide of momentum. There is a notable 50% Fib level that confirms the double top at 0.8650. On the way down there are many, ill-defined levels to trip up a pull back.

Suggested Strategy

Short: Half-size entry orders will be placed at 0.8635 to account the past week’s range.

Stop: Our initial stop will be set at 0.8720 which is wide enough to cover the double top. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (85) at 0.8550 and the second target will be 0.8400.

Trading Tip – Though congestion is a common attribute for the broader currency market at the moment, there are few ranges that offer clear levels and a reasonable risk profile. AUDCAD offers one of the few appealing setups; but the risk is significant.
Since anything can happen over the weekend and there is substantial event risk scheduled for the latter half of next week, we will layout both an aggressive and cautious approach to attempting a range with this pair. However, regardless if we take the ‘safer’ route or not; there is breakout risk to this setup. With so much bullish momentum behind the past month’s trend, a breech above 0.8650 would not be too difficult to force. Therefore, we have decided to use half size orders and set stops relatively wide for both cases. Our suggested strategy is actually the more risky setup. An aggressive entry at 0.8635 will require a bounce that puts us very close to resistance (a level that if tested too many times is likely to break). The stop is easy enough to set; and our first target covers risk and falls within the rising trend channel that has developed since Feb 27. Our cautious setup would be to wait for the rising trend channel to break. This should be through a confirmed close of a medium time frame bar (60, 240-minute bars) below support in this formation now around 0.8540. A stop should follow any natural slow developing, the first target set equal to risk and the second can be far more aggressive due to its breakout nature. With regards to the G20 meeting on Thursday, we will make sure to close all open orders by Wednesday night to avoid this.

Event Risk for Australia and Canada

Australia – There is an over abundance of scheduled event risk on the Australian docket next week; but there is some doubt as to whether it can genuinely move the market. Starting off immediately on Monday morning in Sydney, the HIA new home sales report will offer a fresh reading on the so-far still strong housing market in Australia. This will be further confirmed by the building approvals due Wednesday and AiG construction activity report released the following Monday. Taking a read on the business sector, the trade balance and AiG factory and service activity numbers will offer a broad snapshot for price action.
Finally, we will follow the consumer through private sector credit and retail sales. Altogether this can curb or support recent speculation that the Aussie economy is perhaps the strongest in the industrialized (a title that would be made all the more impressive considering the country’s benchmark lending rate).

Canada – The economic winds will die down for Canada next week. The only notable economic report due for release is the monthly gross domestic product number for January. Recent data and forecasts from policy officials has weighed the potential for output from Canada substantially; but such dour forecasts are still not directly reflected in the objective data. Should this figure disappoint, it would be another notch against the loonie. Looking at Canada’s entire risk dossier, data isn’t the only concern next week. In the countdown to the G 20 summit meeting in London, Finance Minister Jim Flaherty and Prime Minister Stephen Harper have been especially vocal about what needs to come out of the meeting of leaders. We will see if their presence on the newswires translates into action.


	Data for March 29 – April 5		Data for March 29 – April 5
Date (GMT)	Australian Economic Data	Date (GMT)	Canadian Economic Data
Mar 30	HIA New Home Sales (FEB)	Mar 31	Gross Domestic Product (JAN)
Mar 31	Private Sector Credit (FEB)
Apr 1	Retail Sales (FEB)
Apr 2	Trade Balance (FEB)

Published on Mon, Mar 30 2009, 05:45 GMT

Timing Critical To Tight USDCHF Range

Fri, Mar 27 2009, 05:59 GMT
by John Kicklighter

DailyFX

The USDCHF’s tight range has grown to be impressively stable over the past few weeks; but it should still be considered a highly risk setup. At a little more than 150 points wide, this congestion band is extremely tight; and the fact that it has setup following an aggressive reversal suggests a breakout could develop rapidly.

Why Would USDCHF Hold a Range?

Levels to Watch:
-Range Top: 1.1330 (Fib)
-Range Bottom: 1.1175 (Fib, SMA)

While there is a considerable level of event risk on both sides of the market, it isn’t the brand of data that could easily threaten a breakout from significant technical levels. From the US docket, consumer confidence and spending figures are the pinnacle of the calendar through the first half of next week and the Swiss range of data has a very feeble history for market impact. However, the presence of the G-20 meeting and Friday NFP release can certainly spark activity; but beforehand they could quiet the market.

Congestion has been clear and consistent for USDCHF price action over the past week. However, this stable pattern falls within a larger, precarious trend reversal that still demands resolution. A major Fib carves a tidy range between the 38.2 level at 1.1330 level and 50.0 percent figure at 1.1175.

Suggested Strategy

Long: Entry orders will be placed at 1.1195 to put us on the edge of the relatively tight range.

Stop: Our initial stop will be set at 1.1135 is just below the range low to develop risk/reward. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (60) at 1.1255 and the second target will be 1.1315.

Trading Tip – The USDCHF’s tight range has grown to be impressively stable over the past few weeks; but it should still be considered a highly risk setup. At a little more than 150 points wide, this congestion band is extremely tight; and the fact that it has setup following an aggressive reversal suggests a breakout could develop rapidly. Therefore, we have to have a strategy that is flexible and has a streamline risk profile. Our layout is for full-sized positions; but the notional risk and consistency of recent price action warrants it. The stop is set just outside the range and both targets are achievable considering the average daily range we have seen this past week. It is imperative to considering timing with this setup. We want to avoid the potential for a major reversal over the weekend; so we will close any pending orders before Friday’s close. What’s more, even if we have a live position going into next week, this tension in this tight range will eventually encourage a breakout even if the presence of major event risk (like Thursday’s G20 meeting and Friday’s NFPs) is anchoring price action; so we will look to square our books by Wednesday. Our primary interest is for the long side – due to the potential for a relief retracement and developing trend – but we will also consider a short entry near 1.1315 with equivalent stop and targets.

Event Risk for US and Switzerland

US – The US docket maintains its consistent pace through the coming week. There are a range of economic releases on deck – and they may actually have greater consequence on long-term growth than the indicators released over the past week – but their influence on actual market activity is still likely to be played down by a preoccupied fundamental trader. Nonetheless, we will be watching the data for any unwanted influences on volatility near range boundaries. Friday holds the personal income and spending numbers to gauge the consumers influence on growth through the first quarter, while Tuesday’s consumer sentiment report will gauge willingness to spend and borrow in the current month. Factory activity comes into focus in the latter half of the week with Wednesday’s ISM manufacturing report and Thursday’s Factory orders report. However, despite this data, we need to be mindful of the dollar’s fight to maintain its safe haven and reserve currency status. This is a vague and highly disputed argument; but we may see some conclusiveness on the subject with Thursday’s G-20 meeting and Friday’s non-farm payroll numbers.

Switzerland – Data from the Swiss docket is heavy compared to its average set of releases. Before the weekend, the KOF leading economic composite report will give a loose benchmark for growth forecasts that round out the first quarter. This indicator however does not provide a historically accurate forecast to true GDP; so its market impact will likely be controlled. Heading into next week, the UBS consumption survey and SMVE PMI will offer a good, timely reading on spending from the consumer and business sectors – two of the primary components of Swiss GDP (along with exports). However, just like the rest of the market, franc traders will be tuned in to the G-20 meeting on Thursday. Switzerland’s role as a tax shelter and other protectionist musings could come to a head in this forum.


	Data for March 27 – April 2		Data for March 27 – April 2
Date (GMT)	US Economic Data	Date (GMT)	Swiss Economic Data
Mar 27	Personal Spending (FEB)	Mar 27	KOF Swiss Leading Indicator (MAR)
Mar 31	Consumer Confidence (MAR)	Mar 31	UBS Consumption Indicator (FEB)
Apr 1	ISM Manufacturing (MAR)	Apr 1	SVME PMI (MAR)
Apr 2	Factory Orders (FEB)

Published on Fri, Mar 27 2009, 05:59 GMT

NZDUSD Offers a Volatile, Risky and Lucrative Range Setup

Thu, Mar 26 2009, 05:45 GMT
by John Kicklighter

DailyFX

The NZDUSD range that we have set up is not for the faint of heart. Not only is this pair just coming off its most aggressive rally in years; but there is significant event risk on deck that could produce dramatic volatility over the next 36 hours. However, with a reasonable time frame and the right trade setup, risk can be minimized leaving us with a very appealing range trade.

Why Would NZDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.5750 (Trend, Fib)
-Range Bottom: 0.4900 (Major Swing Low)

There are both long- and short-term drivers developing behind the scenes for NZDUSD over the coming days and weeks. Immediate risk comes through the economic docket which will release the 4Q New Zealand current account and GDP numbers. Both are expected to deteriorate significantly. The US docket is comparatively light for the rest of the week but fills out after the weekend. In the meantime, this pair’s correlation to risk trends will exert a constant pressure on action.

Looking at NZDUSD price action over the past few weeks, it may seem ludicrous to suggest we are seeing range development. Indeed, the pair was just recently put off its strongest rally in years; but this stall corresponds to a falling trend from the Oct 14th high and a long-term 38.2% Fib retracement.

Suggested Strategy

Short: Half-size entry orders will be placed at 0.5695 well below the recent high yet a buffer.

Stop: Our initial stop will be set at 0.5750 set well above the high and the falling trendline. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (100) at 0.5595 and the second is much further at 0.5355.

Trading Tip – The NZDUSD range that we have set up is not for the faint of heart. Not only is this pair just coming off its most aggressive rally in years; but there is significant event risk on deck that could produce dramatic volatility over the next 36 hours. However, with a reasonable time frame and the right trade setup, risk can be minimized leaving us with a very appealing range trade. To set the scene, we first have to take measure of the recent upswing which tallied 10 consecutive daily advances. More often than not, an advance of this magnitude will develop at least a moderate retracement. What’s more, looking at the bigger picture, we can see that the rally stalled at the top of a descending trend channel that begins in October. This is the symbolic boundary of the long-term bear trend (a year in development). A push through this ceiling would likely reflect a fundamental shift and trend change in this pair – something like the US dollar losing its reserve status at the G20 meeting next week. At the same time, the New Zealand GDP figure is a loaded release of its own. Due tomorrow though, we currently have enough room for the release to impact volatility without forcing a breakout. As this is a long-term channel, that is picking a top on the lower time frame, we will cancel open orders by week end or should spot hit 0.55 before our entry.

Event Risk for New Zealand and US

New Zealand – Currently the New Zealand dollar is caught between conflicting, fundamental forces. On the one hand, there are the bulls that consider the currency to have fully priced in the worst of the dour forecasts that have developed over the past 12 to 18 months. If this is indeed the case, the kiwi could be considered oversold – especially if the RBNZ decides to take the lead of its Australian counterpart and hold the target cash rate at 3.00 percent. However, New Zealand is not Australia; and the impetus for steady rate cuts is justifiable through data. This very argument will come into sharp focus Thursday afternoon when the government releases its GDP figures for the 4Q. Expected to print a 2.0 percent contraction through the year, this would seriously undermine expectations that the kiwi would stand as one of the best currencies in the event of a slow global rebound in the near future.

US – Data scheduled for release from the US docket is historically noteworthy; but its potential in current market conditions is far reduced. From the laundry list of indicators scheduled for release over the coming week, we will see indicators that will cover housing activity, consumer spending, factory activity, employment and long-term growth.
However, it is prudent to realistically project the kind of reaction each of these indicators could have on price action.
The general consensus of the US economy is a deep recession that is still on pace to further slow to its worst pace in decades. It stands to reason that market participants have priced in much of the worst for the US economy such that ongoing declines will have little net impact on overall price action. Alternatively, a modest uptick in data will not easily revive sentiment as the global downturn has turned most traders into pessimists and skeptics. The real fundamental action will follow the discussion behind the dollar’s safe haven status and the potential for the world to change its long-held reserve currency.


	Data for March 26 – April 1		Data for March 26 – April 1
Date (GMT)	New Zealand Economic Data	Date (GMT)	US Economic Data
25-Mar	Current Account Balance (4Q)	26-Mar	GDP (4Q F)
26-Mar	GDP (4Q F)	27-Mar	Personal Spending (FEB)
26-Mar	Trade Balance (FEB)	31-Mar	Consumer Confidence (MAR)
30-Mar	NBNZ Business Confidence (MAR)	1- Apl	ISM Manufacturing (MAR)

Published on Thu, Mar 26 2009, 05:45 GMT

A Stalled Dollar Still Requires a Quick Range Setup for USDCHF

Wed, Mar 25 2009, 05:46 GMT
by John Kicklighter

DailyFX

Like we said yesterday, the bearish wave in the dollar has been sidelined; and many of the majors are threatening at least modest retracements. USDCHF has some of the most encouraging technical and fundamental buffers to generate range conditions; but the risk taken with such a setup is substantial.

Why Would USDCHF Hold a Range?

Levels to Watch:
-Range Top: 1.1355 (Fib, Pivot)
-Range Bottom: 1.1165 (Fib, SMA)

The fundamental back and forth behind USDCHF is largely the product of the dollar’s future. There are considerable safe-haven considerations for both the US and Swiss currencies; but this over-bearing driver has dissipated for both as risk in general has deflated. With USDCHF reestablishing its correlation to EURUSD price action, it is safe to assume that the greenback is taking control of price action. Data fills out this week; but the real market moving potential is in debate over the dollars reserve status.

For a range, USDCHF’s congestion is limited and rather risky. However, aligning ourselves with the probable breakout would help to stabilize the potential for loss. After the 800 pip plunge in this pair over the past week, we have seen a major 50% Fib and 100-day SMA step in as support for a reversal.

Suggested Strategy

Long: Half-size entry orders will be placed at 1.1190 well below spot; but certainly necessary.

Stop: Our initial stop will be set at 1.1115 is set purposely well below the confluence of support. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (75) at 1.1265 and the second is aggressive at 1.1335.

Trading Tip – Like we said yesterday, the bearish wave in the dollar has been sidelined; and many of the majors are threatening at least modest retracements. USDCHF has some of the most encouraging technical and fundamental buffers to generate range conditions; but the risk taken with such a setup is substantial. Before even discussing the potential in such a setup; it is important to acknowledge that recent price action (and the basis for our congestive trade) is so far just a stalled bear trend. Our strategy must take into account this danger; so we have lowered our position size (to a very low level of nominal risk) and set the initial stop just below recent congestion. What’s more, our setup has to be able to take profit in two out of three scenarios to compensate for the potential of a recharged bear trend. Therefore, we are calling for an aggressive entry and targets that fall within the range of the past 48-hours – meaning it should be easy to take profit in a timely manner. This is a short-lived setup; so we will cancel any open orders by Thursday or should spot hit 1.1375 before we are entered.

Event Risk for US and Switzerland

Switzerland – Like the Japanese yen and US dollar, the Swiss franc’s tectonic fundamental driver will be its status as a safe haven. All three currencies have recently seen their ability to offer harbor to panicky markets wane due to unique considerations. For the Swissie, policy officials forecasts for a deepening recession, European leaders accusations that the country should be sanctioned as a tax shelter and the SNB’s use of intervention to prevent further appreciation in the exchange rate have put the safe haven policy into question. It is difficult to foresee the catalysts for a shift in this market driver; so range traders will have to worry about the scheduled event risk on the Swiss docket in the meantime. Looking at the calendar, there are no releases due over the term of our open orders; but data could factor in for a live position. Friday will bring the KOF leading growth reading for March. However, this indicator’s reliability is circumspect and the market frequently ignores a release that contradicts the general mood of the market. The same can be said about next Tuesday’s consumption report – even though the indicator is a good gauge for the consumer sectors contribution to growth.


	Data for March 24 – March 31		Data for March 24 – March 31
Date (GMT)	US Economic Data	Date (GMT)	Swiss Economic Data
25-Mar	Durable Goods Orders (FEB)	27-Mar	KOF Swiss Leading Indicator (MAR)
26-Mar	GDP (4Q F)	31-Mar	UBS Consumption Indicator (FEB)
27-Mar	Personal Spending (FEB)
31-Mar	ISM Manufacturing (MAR)

Published on Wed, Mar 25 2009, 05:46 GMT

Broader Technicals Look To Shore Up USDCAD Range

Tue, Mar 24 2009, 05:40 GMT
by John Kicklighter

DailyFX

The dollar-based majors are still cooling from momentous volatility that was catalyzed over this past week. Many of these pairs have stalled ahead of significant technical levels; but none of these liquid pairs have the major technical backing that USDCAD is currently enjoying.

Why Would USDCAD Hold a Range?

Levels to Watch:
-Range Top: 1.3000 (Major Range High)
-Range Bottom: 1.2180 (Trend, Fib)

Through the near future, macro-dollar themes will likely decide the direction of USDCAD. Looking at scheduled event risk on both sides of this pair, only the US docket has anything resembling notable market moving releases. However, while these are remarkable indicators that will offer cues on the health of the US economy – it all boils down either to a more severe recession or a passing break in the same plunge. Instead, talk about the dollar’s safe haven and reserve status will likely take over.

Despite the momentum behind USDCAD’s plunge over the past week, the pair is bordered by a wide wedge formation. This long-term congestion pattern will take considerable conviction from the market to overcome. There is considerable selling pressure behind the dollar, but most of the majors are stalling.

Suggested Strategy

Long: Half-size (or smaller) entry orders will be placed at 1.2240 – above current spot.

Stop: Our initial stop will be set at 1.2115, gives considerable buffer area beyond the trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (125) at 1.2365 and the second is aggressive at 1.2600.

Trading Tip – The dollar-based majors are still cooling from momentous volatility that was catalyzed over this past week. Many of these pairs have stalled ahead of significant technical levels; but none of these liquid pairs have the major technical backing that USDCAD is currently enjoying. While momentum over the past few weeks has been solidly in the bears’ corner, this plunge nonetheless fits within a larger state of congestion. Though there has been some semblance of direction over the past months, the sometimes quick and sometimes gradual reversals have all taken place within the parameters of an ascending wedge. Our strategy is developed around this bigger technical pattern; and the initial double bottom that has been made above 1.2200 helps to provide some grounding from a pause in short-term momentum. However, follow through is still a very real concern with so many of the majors sitting on the edge of anti-dollar breakouts. Therefore, we are approaching this setup with a further reduced risk profile. First and foremost, the position size must be well below the normal layout for risk. Our stops and targets help to take advantage of any short-term volatility. Regardless, we will take off any open orders by Wednesday - as a position that does not play out by then could be building pressure behind a breakout.

Event Risk for US and Canada

Canada – There are no notable market moving economic indicators scheduled to cross the wires over the coming week.
Instead, traders will have to gauge their impressions for the long-term health of the Canadian dollar through comparisons and contrasts to its US counterpart. Personal spending and durable goods orders data scheduled for release will be of particular interest considering American consumption accounts for more than three-quarters of Canadian exports. However, so far, this link has been a very lagging (if not sometimes completely absent) relationship for USDCAD price action. Another unknown is commentary from Canadian Finance Minister Flaherty and Bank of Canada Governor Carney leading into the G-20 summit next week. They have warned of a significant market and economic problems later down the line for the economy – in fact some of their commentary has gone beyond what data has projected.


	Data for March 23 – March 30		Data for March 23 – March 30
Date (GMT)	US Economic Data	Date (GMT)	Canadian Economic Data
Mar 25	Durable Goods Orders (FEB)	-	-
Mar 26	GDP (4Q F)
Mar 27	Personal Spending (FEB)

Published on Tue, Mar 24 2009, 05:40 GMT

Long Term Congestion Stabalizes The Fundamental Debate Behind CHFJPY

Mon, Mar 23 2009, 05:46 GMT
by John Kicklighter

DailyFX

Mid-week momentum that sent so many currency pairs to major breakouts seems to have settled into the weekend. In the aftermath of all the action, there are many new short-term congestion opportunities; but their stability is highly circumspect. Therefore, we will fall back on an appealing CHFJPY setup with established technicals and some level of fundamental stability.

Why Would CHFJPY Hold a Range?

Levels to Watch:
-Range Top: 86.00 (Trend, Fib)
-Range Bottom: 82.00 (Trend, Fib, Pivot)

The Swiss franc and Japanese yen were the FX market’s top safe haven currencies just a year ago. However, fundamentals – as they are apt to do – are changing. With both economies suffering major recessions and investors’ definition of safety becoming more critical, these traditional go-to currencies have seen their primary economic foundation shaken. Going forward, traders will have to gauge which currency is losing its correlation fastest and the general direction of risk sentiment.

CHFJPY has cut a ‘W’ pattern (double bottom with a falling trend made of three swing highs) since late October. Today’s rally is driving spot back for its fourth test of that trendline – which further acts as a potential double top with Mar 10th that is accompanied by a long-term 38.2 percent Fib.

Suggested Strategy

Short: Half-size entry orders will be placed at 85.55 on Monday to avoid the weekend.

Stop: Our initial stop will be set at 86.75, which does not cover the December swing high. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (120) at 84.35 and the second is set to 83.15.

Trading Tip – Mid-week momentum that sent so many currency pairs to major breakouts seems to have settled into the weekend. In the aftermath of all the action, there are many new short-term congestion opportunities; but their stability is highly circumspect. Therefore, we will fall back on an appealing CHFJPY setup with established technicals and some level of fundamental stability. Gauging the threat of breakout, we have to balance the strength of congestion against the potential shift in major economic drivers. Currently, stability in CHFJPY is based on the proposition that both the franc and yen are safe haven currencies that are loosing their appeal as a harbor in rough financial seas. This is clearly a precarious position as sentiment has the tendency to change quickly and safety is inherently an impression of the crowd. On the other hand, the formation in historical charts shows a very sturdy period of congestion that began after the October panic that has produced very clear boundaries that have curbed clear trends. At the same time, a steady rising trend and today’s momentum still threatens a breakout; so we have to be cautious. We will not place our orders until after the weekend as unforeseen events could dramatically change market conditions. Acknowledging breakout risk, we will cancel open orders by Wednesday.

Event Risk for Switzerland and Japan

Switzerland – Swiss economic data has taken a greater role in guiding the franc’s price action; but traders are still more interested in the currencies primary role as a shelter from economic uncertainty and taxes in the global marketplace.
Over the past few weeks, European Leaders have demanded Switzerland offer greater transparency on foreign national funds entering the economy to avoid their native taxes and further exacerbate the lack of money in their markets. The Swiss authorities have placated the crowd somewhat; but as conditions worsen, desperate leaders will demand more.
As for scheduled economic event risk, there are only two remarkable indicators scheduled for release: the money supply figures and KOF leading indicators composite. Their impact is relatively minor; but an intensified focus on economic and financial health may leverage more of a reaction from the market.

Japan – Is the Japanese yen still the safe haven of choice for international investors? Is it a safe haven at all? This is the trend-defining question that yen traders will be debating for weeks to come. In the past, the currency’s link to protection was unquestioned by speculators. However, when market participants started to see that even sound investments were succumbing to dire conditions, a critical eye was turned on the Japanese currency. What was seen was the worst recession in decades, growing capital deficits and a government that was struggling to pass necessary legislation to stabilize the economy. This is still a fundamental consideration in development; so debate will rage. In the mean time, we should also keep tabs on the economic docket. Starting immediately next week is the first quarter Business Sentiment Index report. This is followed latter on by inflation, retail consumption and factory activity figures – a broad look at recent activity and the pace of the now indisputable recession.


	Data for March 22 – March 29		Data for March 22 – March 29
Date (GMT)	Swiss Economic Data	Date (GMT)	Japanese Economic Data
Mar 23	Money Supply M3 (YoY) (FEB)	Mar 22	BSI Large All Industry (1Q)
Mar 27	KOF Swiss Leading Indicator (MAR)	Mar 26	National CPI (FEB)
		Mar 26	Large Retailers’ Sales (FEB)
		Mar 29	Industrial Production (FEB P)

Published on Mon, Mar 23 2009, 05:46 GMT

EURAUD: One of the Few Viable Ranges Left in the Currency Market

Fri, Mar 20 2009, 05:43 GMT
by John Kicklighter

DailyFX

After the surge in volatility across the currency market over the past 36 hours, there are very few viable range trades to be found. However, with a quickly depleting fundamental cushion, we have seen EURAUD maintain its dangerously consistent congestion band.

Why Would EURAUD Hold a Range?

Levels to Watch:
-Range Top: 2.0000 (Range Trend, Fib)
-Range Bottom: 1.9425 (Trend, Fib, Pivot)

Economic stability is the single most prized fundamental trait for the currency market at this point in the global financial crisis. Both the Euro Zone and Australian currencies maintain some semblance of safety; but the future is shaky and the balance between the two won’t last for long. For the Euro Zone, financial strains have grown as leaders take a wait-and-see approach as Eastern Europe inches towards default. Australia has suffered seen less trouble, but a recession is inevitable.

There is little doubt about the presence of the EURAUD’s range. There is surprisingly stable band of congestion between 2.00 and 1.9425 hemmed in by Fib retracements and long-term pivots. This could go on forever if not for a closing wedge that began Dec 29 for resistance and Jan 6 calling support.

Suggested Strategy

Short: Half-size entry orders will be placed at 1.9950 which is well below the hard ceiling.

Stop: Our initial stop will be set at 2.0060, which relies on consistency even though it is close. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (110) at 1.9840 and the second is set to 1.9710.

Trading Tip – After the surge in volatility across the currency market over the past 36 hours, there are very few viable range trades to be found. However, with a quickly depleting fundamental cushion, we have seen EURAUD maintain its dangerously consistent congestion band. Yesterday’s volatility did encourage significant price action; the tides ended up breaking at the top of the now popular range. Always on the look out for risk, the biggest threat to this technical constancy is the range itself. When there is so much speculative interest in a formation like this, it takes only a modest push to trigger a slew of stops and entry orders and turn what would have otherwise a swing high or low into a genuine breakout. That is the risk we run with here. However, it is unnecessary to widen stops to counter this threat because a push is likely to end up as a genuine break. Therefore, we have placed the stop on our suggested strategy just above the range of highs in the pivot we have seen since February. As this is still a notionally wide cutting point, we have lowered position size to lower risk. Another important component of this layout is reasonable targets. Looking at the five weeks of tight chop that has developed, it is clear that there is an unspoken mean around 1.96 to 1.97. Therefore, a pull back will naturally gravitate to a point below our second target. To avoid a shift in market sentiment, we will cancel open order by Friday’s close or should spot hit 1.9750 first.

Event Risk for Euro Zone and Australia

Euro Zone – Scheduled event risk poses little threat to the euro’s immediate future. The only indicator to fall within our open order time frame is the Euro Zone industrial production report for January. As a composite indicator for January, it is lagging and provides little additional guidance on growth forecasts. Looking beyond the weekend, volatility could rise (if we are in an active position) thanks to more influential data crossing the wires. On Tuesday, the German and Euro Zone PMI data will give the most up to date measure of economic activity for the region. The following day sees the IFO business sentiment survey for March – an interesting indicator after European leaders denied region-wide bailout plan and the lack of a G20 plan. The GfK confidence report will be more tuned to more objective growth forecasts.

Australia – The Australian dollar may end up being not only the most fundamentally sound economy of the Far East, it cold possibly be the best harbor for capital (in good and bad times) for the entire currency world. While the rest of the world is suffering dire economic recessions and financial crises, Australia has been able to whether the worst of it while maintaining a relatively high yield. This is a fact that has been marred by sentiment however (the US, Japan and Euro Zone have all been treated as safe havens and invariably lost their status over the 18 months). Despite the RBA’s decision to hold the nation’s benchmark rate at 3.25 percent at its last meeting, there is still uncertainty surrounding the ultimate pace of the economies dip into recession. Investors will be looking for clear cues from economic data, but there is little on the docket. The best compass will come from next week’s RBA financial stability review.


	Data for March 19 – March 26		Data for March 19 – March 26
Date (GMT)	Euro Zone Economic Data	Date (GMT)	Australian Economic Data
Mar 20	EZ Industrial Production (JAN)	Mar 25	Conference Board Leading Index (JAN)
Mar 24	EZ PMI Composite (MAR A)	Mar 25	RBA Financial Stability Review
Mar 25	German IFO – Expectations (MAR)
Mar 26	German GfK Consumer Confidence (APR)

Published on Fri, Mar 20 2009, 05:43 GMT

USDCAD Range A Quick Setup With High Risk And High Reward

Wed, Mar 18 2009, 05:46 GMT
by John Kicklighter

DailyFX

Much of the currency market has supplanted trends with broad congestion. However, this has not translated into clear ranges; but rather frustrating chop with minor breakouts. USDCAD personifies these conditions with a forceful, rising trend channel that is putting pressure on a much larger technical formation.

Why Would USDCAD Hold a Range?

Levels to Watch:
-Range Top: 1.3000 (Range High, Fib)
-Range Bottom: 1.2670 (Trend, Fib, Pivot)
It is sound, fundamental reasoning to expect the currencies for two economies whom are each other’s largest trade partners to find a natural buffer to volatility. However, this is only true to a point. In the past, USDCAD price action has seen periods of clear trend and tremendous breakouts. Such conditions may be an issue for this pair going forward as the market weighs the health of risk appetite (and the dollars correlation to such trends) and the presence of event risk from both sides.
USDCAD has been developing a very wide, ascending triangle formation since October. This pattern produces little pressure of its own; but a rising trend channel starting in January is putting pressure on the need for direction. The rising trend puts a relatively modest floor in around 1.2670.

Suggested Strategy

Long: Entry orders will be placed at 1.2690 which is follows the rising trend very closely.
Stop: Our initial stop will be set at 1.2620, which is otherwise tight, but it would confirm a turn. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (70) at 1.2760 and the second is set to 1.2890.

Trading Tip – Much of the currency market has supplanted trends with broad congestion. However, this has not translated into clear ranges; but rather frustrating chop with minor breakouts. USDCAD personifies these conditions with a forceful, rising trend channel that is putting pressure on a much larger technical formation. A breakout is inevitable; but the direction and timing of such a shift is a question that range traders are very interested in. Our strategy for a USDCAD range trade is very risky considering the series of lower highs the market has produced since the unsuccessful push above 1.30 last week. For those with a strong stomach for risk, our strategy looks to control the potential for loss and compensate with the promise of significant return. Our stop is set just below last Friday’s swing low, which is all we need to confirm the pair has broken its consistent, rising trend. Furthermore, this allows for our first target to be set relatively close; and move our cost basis to net profit quickly even in the event of a temporary rebound. The entry on this position should trigger soon as breakout pressure grows with each day; so we will cancel all pending orders by Thursday or should spot hit 1.2775 before our orders are hit.

Event Risk for US and Norway

US – Event risk from the US docket is set with historical market movers; but these are not the indicators of 18 months ago. With the US recession already well-underway and the market actively pricing in much worse to come, the housing and manufacturing indicators that are scheduled for release over the coming days offer little to fundamentally alter the future of the world’s largest economy. Tuesday’s housing starts and next Monday’s existing home sales figures will update market participants on the level of the industry’s recession; but even a notable rebound will be met by skeptical investors as a major turn will be needed before activity in this industry once again contributes to expansion.
The Wednesday’s CPI numbers will have their influence on speculation; but not for rate decisions (as the benchmark is already close enough to prevent further easing). Inflation will now be a defining component of a potential stagflation economy which could fundamentally undermine the economy’s eventual recovery. Finally, Wednesday’s FOMC meeting will be monitored not for rate changes but for announcements of additional and unique efforts aimed at stabilizing the financial sector.

Canada – In an interesting turn of events, the Canadian economic docket is the more market moving for USDCAD – though this potential will manifest itself more in short-term volatility rather than fueling larger fundamental trends.
From the economic docket, the most threatening economic release is Friday’s retail sales report. This indicator has long been a lever for price action; but considering the speculation surrounding the relative economic strength of the Canadian economy (real GDP was still positive year over year through the fourth quarter), a key measure of domestic consumption trends will play a bigger role in the bigger fundamental scheme. Other indicators will tout less importance.
Wholesale sales will be used as a benchmark for retail activity and international capital flows is largely known through market operations. CPI has lost its interest rate influence; but it could nonetheless guide long-term growth.


	Data for March 18 – March 25		Data for March 18 – March 25
Date (GMT)	US Economic Data	Date (GMT)	Canadian Economic Data
Mar 18	CPI (FEB)	Mar 18	Wholesale Sales (JAN)
18-Mar	FOMC Rate Decision	Mar 19	Consumer Price Index (FEB)
23-Mar	Existing Home Sales (FEB)	Mar 19	Int’l Securities Transactions (JAN)
Mar 25	Durable Goods Orders (FEB)	Mar 20	Retail Sales (JAN)

Published on Wed, Mar 18 2009, 05:46 GMT

A Clear Range Sets Up A Good Opportunity For The Exotic USDNOK

Tue, Mar 17 2009, 05:53 GMT
by John Kicklighter

DailyFX

One word can describe USDNOK price action over the past five months: consistency. Traders may shy away from this exotic pair with its seemingly high level of volatility; but pip cost and perspective reveal one of the best range setups so far this year.

Why Would USDNOK Hold a Range?

Levels to Watch:
-Range Top: 7.2850 (Trend, Fib)
-Range Bottom: 6.6850 (Fib, SMAs, Pivot)
Indicator-based event risk is relatively lax for the USDNOK pair over the coming week. However, larger fundamental themes are on the move – producing a very real threat to the congestion this pair has been carving since November – a mature range indeed. Global policy makers’ efforts to revive growth and stabilize the banking system is topping the list of concerns for this low liquidity pair. The slow rebound in crude prices is also a direct interest to the oil-dependent Norwegian economy.
It is impossible to miss the mild-mannered, ascending wedge that has developed for USDNOK over the past five months. Resistance is more precise with six unique swing highs that set a range around 7.2850. However, the bullish bias backs support with a key trend and recent triple bottom.

Suggested Strategy

Long: Half-sized entry orders will be placed at 6.7250 which is well above the rising trend.
Stop: Our initial stop will be set at 6.60, which is well below the trend and Feb. swing low. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (1250) at 6.8500 and the second is set to 7.0100.

Trading Tip – One word can describe USDNOK price action over the past five months: consistency. Traders may shy away from this exotic pair with its seemingly high level of volatility; but pip cost and perspective reveal one of the best range setups so far this year. From a technical perspective, this is the ideal congestion trade. The market has developed a very blatant zone of price action with a wide berth and a gentle rising trend for support, which puts next-to-no breakout pressure behind this pair. However, there is certainly trouble brewing behind fundamentals.
Considering the dollar’s correlation to risk trends with the krone’s link to crude prices and need for general market liquidity, the lack of headway made at this past weekend’s G20 meeting presents the kind of uncertainty that could topple such a prevalent period of price stability. Our strategy looks to compensate for the risk. First and foremost, the prospect of a 1,250 point loss is daunting, but this is equivalent to only 125 points on a standard pair (like EURUSD). This makes the setup seem much more manageable. With half size positions and a stop that is set below the trend and last major swing low, the risk profile is low and well-defined. To limit our exposure to changes in market temperament, we will cancel any open orders by Wednesday or should spot hit 6.90 first.

Event Risk for US and Norway

Norway – Global growth and financial stability are key drivers for any currency; but they are particularly important to the Norwegian krone. As an exotic European currency; the krone is often exposed to liquidity problems as investors pull their money out of Norway to relative safe havens like the dollar and euro. After the G20 failed to produce any noteworthy policy from its meeting this past weekend; the market was once again left to its own devises for gauging the reliability of the banking system. This is further linked to growth forecasts, which drive projections for oil and natural resource consumption. However, with OPEC holding back from a production cut and global output not expected to rebound anytime soon, further reductions in crude prices mean reduced income for Norway.


	Data for March 17 – March 24		Data for March 17 – March 24
Date (GMT)	US Economic Data	Date (GMT)	Norwegian Economic Data
17-Mar	Housing Starts (FEB)	-	-
18-Mar	CPI (FEB)
18-Mar	FOMC Rate Decision
23-Mar	Existing Home Sales (FEB)

Published on Tue, Mar 17 2009, 05:53 GMT

Placing A AUDJPY Range Trade Around the Weekend is a Matter of Risk Appetite

Mon, Mar 16 2009, 05:54 GMT
by John Kicklighter

DailyFX

As the week draws to a close, many of the young trends that were developed over the past few sessions have started to pull back from their respective highs and lows to ease technical pressure into the weekend. However, the potential for these trends to be revived or new breakouts to develop is high; so our AUDJPY setup comes with considerable risk.

Why Would AUDJPY Hold a Range?

Levels to Watch:
-Range Top: 64.75 (Trend, Fib)
-Range Bottom: 61.25 (Fib, SMAs, Pivot)
The trends that have developed in the currency over the past week are all pulling back heading into the weekend. For AUDJPY, there has been no clear burgeoning trend – but volatility has been a big player. Scheduled event risk from either side of the market is very low. From the docket, there is a modest threat from the RBA minutes and BoJ rate decision, but they will likely offer little of value. The real concern with this pair is risk trends. And, with the Group of 20 meeting, Monday could be active.
With the weekend volatility drain approaching, we will see better definition in the AUDJPY’s range. This pair has enjoyed a consistent but choppy advance since Feb 2nd, but yesterday’s spike low has tripped bulls up. The real block though is the 50% Fib and five-month trendline sitting at 64.75.

Suggested Strategy

Short: Half-sized entry orders (or smaller) will be placed at 64.35, well below resistance.
Stop: Our initial stop will be set at 65.75, which is wide enough for substantial volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (140) at 62.95 and the second is set to 61.95.

Trading Tip – As the week draws to a close, many of the young trends that were developed over the past few sessions have started to pull back from their respective highs and lows to ease technical pressure into the weekend. However, the potential for these trends to be revived or new breakouts to develop is high; so our AUDJPY setup comes with considerable risk. This pair, however, is helped along by a stable range that has prevented the pair from developing a pressing bias with this week’s price action. What’s more, yesterday’s deep plunge and reversal has broken the stride of clearly developed momentum in the rising trend from February. Our interest in the short side of the market is consistent with the dominant trend and rests on strong resistance. Entry should be determined by one’s appetite for risk. Taking a position before the weekend opens up the possibility of a weekend breakout; but waiting until after the weekend could mean missing a trade. Regardless of the means of entry, risk needs to be further reduced. The suggested strategy looks for a halved position size (or less) while using wide stops. The wide stop necessitates a distant first target and the range culls the potential for the second half; but high volatility could move our position to its objectives quickly. Timing is critical considering the narrow range and high level of activity. We will cancel any open orders by Tuesday’s Asian session or should spot hit 62 before we are entered.

Event Risk for Australia and Japan

Australia – The Australian dollar’s fundamental future is highly uncertain; but not from the regular economic indicators that usually threaten short-term volatility. Global investors are singularly focused on the health of the world’s economy and ongoing financial crisis. The IMF has forecasted the first contraction in world-wide growth since WWII, while Japan, the United Kingdom and US are all pricing in disturbing extensions to their respective recessions for the first half of 2009. This has led traders to sacrifice the potential for yield in return for safety of funds. However, with a general consensus that the Aussie economy will retain its high interest rate and its own slump will be relatively reserved, many believe the country’s currency and assets offer the best of both worlds. This is a fragile hope though. Depending on the severity of fear in the market, a relative lack of liquidity in the Aussie dollar can draw interest away. What’s more, there will be a greater sensitivity to data that comes off the docket.
Top event risk next week will be 1Q factory activity and 4Q housing construction.

Japan – In the past few weeks, the Japanese yen has seen its safe haven status come into question as a sharp contraction in 4Q GDP raised criticism as to the viability of protection in its long-struggling markets. Recently, the sense of uncertainty has been leveraged by the SNB’s plans to intervene in the currency market to halt the painful appreciation of the Swiss franc. Since this announcement, speculation that Japan will adopt a similar approach to bolster exports has grown. For short-term spikes in volatility, there are a few threats to volatility. The BoJ rate decision may usher new, unusual policy approaches; and the BSI will show the pain in factory activity.


	Data for March 15 – March 22		Data for March 15 – March 22
Date (GMT)	Australian Economic Data	Date (GMT)	Japanese Economic Data
Mar 16	RBA Minutes (MAR)	Mar 16	Tertiary Industry Index (JAN)
Mar 17	Westpac Leading Index (JAN)	Mar 18	BoJ Rate Decision
Mar 18	Westpac-ACCI Industrial Trends (1Q)	Mar 18	All Industry Activity Index (JAN)
Mar 18	Dwelling Starts (4Q)	Mar 22	BSI Large Manufacturing (1Q)

Published on Mon, Mar 16 2009, 05:54 GMT

Event Risk Requires a Quick and Clear USDCAD Range Trade

Fri, Mar 13 2009, 05:38 GMT
by John Kicklighter

DailyFX

There are few viable ranges across the currency market as risk trends shift and fundamentals dive. USDCAD presents a potential congestion setup; but it is fraught with danger and therefore must be tailored to a very specific strategy.

Why Would USDCAD Hold a Range?

Levels to Watch:
-Range Top: 1.3015 (Range High)
-Range Bottom: 1.2725 (Fibs, Pivot, Trend, SMA)

After a plunge in the Swiss currency this morning leveraged a surge in USDCHF and USDCHF, we can see that the US dollar is pulling back against most of its other, major counterparts. This is largely a move driven by a rebound in risk appetite; but whether this pick up in sentiment is destined to last is questionable. For USDCAD, the trade ties help smooth out any major fluctuations. However, risk trends are difficult to forecast. The heavy Canadian docket on the other hand can be prepared for.

Technically, USDCAD is set between a rock and a hard place; but this actually heightens the potential for a breakout rather than lowering it. For levels, resistance in the very public 1.30 level was pushed, but not broken. Support has many points of authority but they don’t hold the same prominence.

Suggested Strategy

Long: Half-sized entry orders will be placed at 1.2755, below today’s lows yet necessarily so.
Stop: Our initial stop will be set at 1.2655 to cover the range, but it doesn’t hold to volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 1.2855 and the second is set to 1.2955.

Trading Tip – There are few viable ranges across the currency market as risk trends shift and fundamentals dive. USDCAD presents a potential congestion setup; but it is fraught with danger and therefore must be tailored to a very specific strategy.
Though this pair has a relatively clear zone of congestion to work with; there is significant event risk beginning Friday and continuing into next week. Therefore, our first concern is timing. We will remove any open orders before Friday’s event risk at 11:00 GMT and tighten stops for active positions. Regardless of the direction of the data, we will prepare for high volatility. This is an issue in our tight range; so we have cut our planned position size in half and set stops relatively wide as a cushion. If the market volatility is favorable, our targets are tight enough that they can both be executed before the weekend drains liquidity.
Overall though, this is a risky position and should only be taken by those that are tolerant of such risks.

Event Risk for US and Canada

US – The US docket is populated with a few notable economic releases for the coming week; and most of these figures will feed into speculation of whether the US dollar can support its status as a growth leader and safe haven for global capital. Since the October shock to financial markets, the greenback has rose steadily as investors transfer their ailing account balances into US Treasuries. Further in the past few weeks, the world’s most liquid currency has even overtaken is Japanese counterpart as the top harbor to the rough seas of the global markets thanks to the island nation’s plunge into a severe recession and a lack of policy response from the government. However, the market is also beginning to question safety of funds with the US. Data is pointing to an accelerated recession through the first half of 2009 – and policy so far seems to be changing little. Thursday’s retail sales and Friday’s confidence figures will take vital readings of consumer activity. Next week, factory activity and inflation data will fill out the first half of the week.

Canada – While many other currencies are finding guidance from bigger economic themes, the Canadian dollar traders will be focusing on short-term volatility from an otherwise packed economic docket for the coming week. For the time frame of our pending orders, we are concerned first and foremost with the February statistics for the national employment data. This indicator has long been a top market mover for the currency; but now it is taking the role as the leading indicator for economic activity.
With skeptics of a considerable Canadian recession still lingering in the market; this data will ground expectations in reality. Also scheduled for the same day is the January trade numbers. Whereas the employment data is a sign of domestic (and broader) growth, the trade report is a gauge of health for the vital export sector. Looking beyond the weekend, the focus on growth will increase. The CPI data will lose its inflation correlation and instead be used to monitor the threat of deflation – a common concern for the world’s policy makers now. The retail sales figure is a blatant consumer spending number that will be used to confirm policy officials claims that consumption will cool significantly this year.


	Data for March 13 – March 20		Data for March 13 – March 20
Date (GMT)	US Economic Data	Date (GMT)	Canada Economic Data
Mar 13	U. of Michigan Confidence (MAR P)	Mar 13	Net Change In Employment (FEB)
Mar 16	Industrial Production (FEB)	Mar 13	Int’l Merchandise Trade (JAN)
Mar 18	Consumer Price Index (FEB)	Mar 19	Consumer Price Index (FEB)
Mar 18	FOMC Rate Decision	Mar 20	Retail Sales (JAN)

Published on Fri, Mar 13 2009, 05:38 GMT

A Quick Range Setup On the Opposite Side Of AUDUSD Congestion

Thu, Mar 12 2009, 05:48 GMT
by John Kicklighter

DailyFX

The Australian dollar crosses have offered the best range scenarios for the better part of a week; and the AUDUSD setup we see today is the opposite side the congestion zone we were following at the start of this week.

Why Would AUDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.6525 (Trend, Fib, Range)
-Range Bottom: 0.6285 (Triple Bottom)

As with all Aussie dollar pairs, AUDUSD is imbued with direct link to risk sentiment. However, the fundamental engine behind this pair is a little different than it is with the crosses. The Australian dollar is the prime magnet for risk appetite considering it is the highest yield of the majors at 3.25 percent after the RBA held at its last meeting. And, though the Aussie economy is the strongest among its peers, recent data is testing it. The US on the other hand is seeing its safe have status fade.

Congestion for AUDUSD is choppy. The long-term triple bottom down around 0.6275 is a general level that covers the closes of three prominent lows; but large wicks in the area denote volatility. Resistance is equally choppy but a general range of highs around 0.6525 is reasonable with the right stop.

Suggested Strategy

Long: Entry orders will be placed at 0.6510 for an aggressive entry on a blurred range.

Stop: Our initial stop will be set at 0.6580 which should be wide enough to cover tails in the area. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (70) at 0.6440 and the second is set to 0.6370.

Trading Tip – The Australian dollar crosses have offered the best range scenarios for the better part of a week; and the AUDUSD setup we see today is the opposite side the congestion zone we were following at the start of this week. However, this range and the relatively tight trading bands across most of the crosses have become quite mature - meaning breakout potential is building.
The previous approach to this pair was working with a support that was far stronger (with a significant triple bottom) even if it was less defined. Resistance is called upon a choppy range of highs that has been in place for nearly four weeks. The dominant trend is still in the bear trend’s favor; but we are still exposed to a reversal and more importantly a false break. We need a stop that is wide enough to cover a shock in volatility that isn’t a true break. A cut off point at 0.6580 is set well above the recent range of highs; so it should hold up until the market develops a genuine trend. On the flip side of the coin, our objectives are well within reach and should take no longer than a few days to play out. Therefore, we will cancel any open orders by tomorrow and close out any open positions before Friday’s close.

Event Risk Australia and US

Australia – The Australian dollar is heading into a relatively quiet week – in comparison to the heavy data that has crossed the wires in the previous week. However, the rate decision and growth figures that did cross the wires will nonetheless have a lasting impact on price action. After the RBA decided to hold rates last Wednesday, there was a significant pressure placed on the Australian currency to stand as the first G10 economy to pull out of the severe global recession. As this is an unlikely outcome – especially following the unexpected contraction in the fourth quarter GDP numbers – the market will be on pins and needles as they look for confirmation either way from forthcoming data, unscheduled event risk and the general state of risk trends. From the economic docket, there are a few notables to follow. Tuesday’s Westpac consumer sentiment survey is notable but ultimately has little influence. Next Monday’s RBA minutes are beyond the natural time frame of our position. The jobs figures hold significant tout though as a key gauge of health.


	Data for March 12 – March 19		Data for March 12 – March 19
Date (GMT)	Australian Economic Data	Date (GMT)	US Economic Data
Mar 11	Consumer Inflation Expectation (MAR)	Mar 12	Advanced Retail Sales (FEB)
Mar 11	Employment Change (FEB)	Mar 13	U. of Michigan Confidence (MAR P)
Mar 16	Reserve Bank’s Board Minutes (MAR)	Mar 16	Industrial Production (FEB)
Mar 18	Dwelling Starts (4Q)	Mar 18	FOMC Rate Decision

Published on Thu, Mar 12 2009, 05:48 GMT

A Clear EURAUD Range Must Manage High Volatility and Building Breakout Pressure

Wed, Mar 11 2009, 05:48 GMT
by John Kicklighter

DailyFX

There have been few ranges over the past few months that have been as explicit as the one EURAUD has been carving. However, strong technical congestion often comes hand in hand with substantial breakout potential – and this is an adage that certainly carries over to this pair.

Why Would EURAUD Hold a Range?

Levels to Watch:
-Range Top: 2.0000 (Pivot, Trend)
-Range Bottom: 1.9425 (Trend, Fib, Pivot)

The European and Australian economic dockets are relatively light over the next week. With no major market moving indicators that seem to threaten the bigger themes behind the market, EURAUD traders will turn to broader market news to garner direction on this frequently volatile pair. Risk appetite will likely be a trend defining market driver. However, with the weakening growth fighting the RBA’s decision to hold and the ECB’s cut shirking speculation, the dynamics can be skewed.

The EURAUD range is one of the strongest the currency market has produced in some time. There are horizontal pivots at 2.0000 and 1.9425. The support level is further backed by a notable 38.2% Fib. There is also breakout pressure in a symmetrical wedge formation that backs both sides.

Suggested Strategy

Long: Reduced size entry orders will be placed at 1.9500 to offer a reasonable risk profile.
Stop: Our initial stop will be set at 1.9300, which notionally wide, but technical tight for volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (200) at 1.9700 and the second is set to 1.9900.

Trading Tip – There have been few ranges over the past few months that have been as explicit as the one EURAUD has been carving. However, strong technical congestion often comes hand in hand with substantial breakout potential – and this is an adage that certainly carries over to this pair. To trade this range, positioning and timing are essential components to a successful strategy. For our setup, we are concentrating on the asymmetrical wedge formation that has been in development since December. While this formation alone with suggest equal breakout pressure on both sides of the market; an eventual upside resolution has the advantage thanks to a trend that has been in place since July/August. It is important to focus on the closing wedge formation rather than just the horizontal levels at 2.0000 and 1.9425. This will increase breakout potential with time. What’s more, considering the volatility that this pair is prone to, we need to adjust the positioning and timing to guard against a fast break. Our entry is aggressive and follows the dominant trend. The stop is notionally wide, so position size should be half or a quarter our usual entry. Adjusted for volatility though, our stop is relatively very tight. With the range closing each day and breakout potential building, we will cancel any open orders by Friday or should spot hit 2.0100 first.

Event Risk Euro Zone and Australia

Euro Zone – Event risk from the Euro Zone docket is fundamentally important; but its market-influence is relatively restrained. Euro traders are concerned with two things: the potential for ongoing troubles in Eastern European countries to balloon into a financial crisis for the broader Euro Zone; and the likelihood that the ECB will maintain its pace of easing until they fall in line with their global counterparts that are now between zero and 0.50 percent. The former driver is the more virulent and it could be catalyzed with news that comes out of the blue. For the interest rate speculation, financial health will be a key component as will general growth figures. Data that comes out over the coming week will add to the debate; but it is for the Euro Zone and generally lags the German numbers. Retail sales, fourth quarter employment and inflation are all key economic indicators. The ZEW survey is more for the ECB.


	Data for March 11 – March 18		Data for March 11 – March 18
Date (GMT)	Euro Zone Economic Data	Date (GMT)	Australian Economic Data
13-Mar	Euro Zone Retail Sales (JAN)	10-Mar	Westpac Consumer Confidence (MAR)
16-Mar	Euro Zone CPI (FEB)	11-Mar	Consumer Inflation Expectation (MAR)
16-Mar	Euro Zone Employment (4Q)	11-Mar	Employment Change (FEB)
17-Mar	German ZEW Survey (MAR)	16-Mar	Reserve Bank’s Board Minutes (MAR)

Published on Wed, Mar 11 2009, 05:48 GMT

Building Technical Pressure Necessitates A Quick AUDUSD Range Trade

Tue, Mar 10 2009, 10:17 GMT
by John Kicklighter

DailyFX

Risk is high and technical support is lacking for a short-term AUDUSD reversal to hold the pair within its range; but the alternative would be a major trend change for this pair which doesn’t have much fundamental backing. Therefore, with enough room to sustain its range and without immediate breakout pressure, we will follow the path of least resistance.

Why Would AUDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.6850 (Fib, Double Top)
-Range Bottom: 0.6285 (Trend, Range Low)
Will the Australian economy be the first among the G10 to see a genuine rebound in activity? Can US fundamentals support the dollar’s position as a safe haven for the currency market? Where is the next wave in risk appetite going? These are the prominent themes at work behind AUDUSD. These are long-term issues; and there is little in the way of scheduled event risk that can promise a straightforward answer to any of them. However, the market can make its break at any time.
There are a series of trends building a case against for a bearish break of AUDUSD congestion. The falling trend from the Jan. 7th swing high is putting pressure behind a bias. Alternatively, the steady and gentle rising trend from the October swing low is working with a horizontal range low at 0.6285.

Suggested Strategy

Long: Half-size entry orders will be placed at 0.6325 to account for the rising trend.
Stop: Our initial stop will be set at 0.6205, which is relatively tight, but covers the rising trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 0.6445 and the second is set to 0.6525.

Trading Tip – Risk is high and technical support is lacking for a short-term AUDUSD reversal to hold the pair within its range; but the alternative would be a major trend change for this pair which doesn’t have much fundamental backing. Therefore, with enough room to sustain its range and without immediate breakout pressure, we will follow the path of least resistance. However, it is important to prepare for the worst. Realizing that the dominant trend is still bearish and there has been a notable drift in lower highs since the beginning of the year, we will reduce size on the orders to half to lower the risk profile of the setup.
Considering the rising trend that calls up support has a very mild slope and lines up with a loose triple bottom around 0.6285, a break should be relatively clean (no false moves to whip us in and out). Our first target equals risk as usual and the second is set below the mid-point of our predefined range. This setup should play out as expected or be negated relatively soon, so we will cancel any open orders by Wednesday or should spot hit 0.6450 before we are entered.

Event Risk Australia and US

Australia – The Australian dollar is heading into a relatively quiet week – in comparison to the heavy data that has crossed the wires in the previous week. However, the rate decision and growth figures that did cross the wires will nonetheless have a lasting impact on price action. After the RBA decided to hold rates last Wednesday, there was a significant pressure placed on the Australian currency to stand as the first G10 economy to pull out of the severe global recession. As this is an unlikely outcome – especially following the unexpected contraction in the fourth quarter GDP numbers – the market will be on pins and needles as they look for confirmation either way from forthcoming data, unscheduled event risk and the general state of risk trends. From the economic docket, there are a few notables to follow. Tuesday’s Westpac consumer sentiment survey is notable but ultimately has little influence. Next Monday’s RBA minutes are beyond the natural time frame of our position. The jobs figures hold significant tout though as a key gauge of health.

US – A round of important economic data has been released from the US docket and it has anchored the economy firmly to its recessionary title. However, this is less of a concern for investors that have grown tolerant owing to the global slump. Going forward though, traders will have to evaluate whether the greenback can stand as a safe haven and economic leader as government efforts to turn economic activity around and stabilize the flow of capital have so far failed. Considering the data from the US coffers is consistently disappointing, this will have to be a relative value. With the UK and Japan falling into deeper recessions with broader financial troubles while the Euro Zone is threatened by the potential collapse of Eastern European countries, the dollar still has the advantage in terms of safety. For tangible and scheduled event risk, the US docket is far lighter this week than the past one has been. The highlights will be this Thursday’s retail sales report and the following Monday’s consumer sentiment survey – offering a general read on consumer health – the best hope for a broad economic recovery later down the line.


	Data for March 10 – March 17		Data for March 10 – March 17
Date (GMT)	Australian Economic Data	Date (GMT)	US Economic Data
Mar 10	Westpac Consumer Confidence (MAR)	Mar 11	Bloomberg Global Confidence (MAR)
Mar 11	Consumer Inflation Expectation (MAR)	Mar 12	Advanced Retail Sales (FEB)
Mar 11	Employment Change (FEB)	Mar 13	U. of Michigan Confidence (MAR P)
Mar 16	Reserve Bank’s Board Minutes (MAR)	Mar 17	Housing Starts (FEB)

Published on Tue, Mar 10 2009, 10:17 GMT

A Resistance To Risk Trends May Serve The USDCHF Range Well

Mon, Mar 9 2009, 06:27 GMT
by John Kicklighter

DailyFX

Most of the most liquid majors and crosses are teetering on the edge of a major trend revival; but constant threats of reversals have kept the market from making its move. Any number of fundamental drivers can ultimately decide the break; but general risk sentiment is the most probable catalyst. From this perspective, USDCHF is perhaps the best the best equipped range-based pairs in the market to hold out should economics act up.

Why Would USDCHF Hold a Range?

Levels to Watch:
-Range Top: 1.1800 (Fib, Range High)
-Range Bottom: 1.1500 (Fibs, Trend, SMA)

There is a fundamental ambiguity to USDCHF. Both economies are suffering from economic recessions and have interest rates that are hovering as close to zero as their respective central banks are likely to allow the targets to go. However, these conditions don’t seem to be as important as perceived safety. Switzerland has long been known as the world’s bank. However, with European officials looking to crack down on tax havens, this traditional cove for funds may bow to the liquidity of the US Treasuries.

Congestion has been indelible to USDCHF price action since the end of January. However, the pair’s chop has offered little rhythm for an honest range trade. Within the constraints of a general, rising trend channel, we see today’s sharp drop testing a loose rising trend, SMA and Fib around 1.15.

Suggested Strategy

Long: Half-size entry orders will be placed at 1.1530 which is just above the range of support.

Stop: Our initial stop will be set at 1.1430, which is tight and can’t withstand a surge in volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (100) at 1.1630 and the second is set to 1.1730.

Trading Tip – Most of the most liquid majors and crosses are teetering on the edge of a major trend revival; but constant threats of reversals have kept the market from making its move. Any number of fundamental drivers can ultimately decide the break; but general risk sentiment is the most probable catalyst. From this perspective, USDCHF is perhaps the best the best equipped range-based pairs in the market to hold out should economics act up. While the US and Swiss economy have vastly different growth potential and exposure to further financial troubles, each is considered a safe haven. This negated exposure should help to buffer USDCHF to much of the volatility and momentum that builds through a shift in risk appetite that could send other pairs rallying. From a technical perspective, we are looking for a congestion setup after a very aggressive decline. This is a dodgy prospect; but we will rest on the strength of the rising trend channel. Stops have been set very close to support; but it is necessary given the risk/reward and profit potential. Though it is a risk, we will leave pending orders open until Monday – though it is imperative to follow weekend even risk and watch price action on the open.

Event Risk US and Switzerland

US – A round of important economic data has been released from the US docket and it has anchored the economy firmly to its recessionary title. However, this is less of a concern for investors that have grown tolerant owing to the global slump. Going forward though, traders will have to evaluate whether the greenback can stand as a safe haven and economic leader as government efforts to turn economic activity around and stabilize the flow of capital have so far failed. Considering the data from the US coffers is consistently disappointing, this will have to be a relative value. With the UK and Japan falling into deeper recessions with broader financial troubles while the Euro Zone is threatened by the potential collapse of Eastern European countries, the dollar still has the advantage in terms of safety. For tangible and scheduled event risk, the US docket is far lighter next week than the past one has been. The highlights will be next Thursday’s retail sales report and the following Monday’s consumer sentiment survey – offering a general read on consumer health – the best hope for a broad economic recovery later down the line.

Switzerland – For years, the Swiss franc was considered one of the market’s favored funding currencies to the carry trade. And, when crisis took over for the financial markets, the currency easily fell back into its roll as a safe haven.
With deleveraged carry trades, demand for robust banks and a need for a haven from rising taxes, Switzerland was an obvious choice for large traders and portfolio managers. However, the franc’s safe haven status has increasingly come under scrutiny over the past weeks. On the one hand, growth has stalled as the Euro Zone suffers and potential financial troubles with Eastern European countries threaten to undermine the safety in the region. On the other, European Community leaders have indirectly targeted Switzerland as a tax shelter for the region’s investors, which may encourage sanctions. From the economic docket, there are a few notable releases on deck; but their market moving influence is minor. Even the SNB rate decision has little potential as they are already on a range with a low at zero.


	Data for March 9 – March 16		Data for March 9 – March 16
Date (GMT)	US Economic Data	Date (GMT)	Swiss Economic Data
Mar 11	Bloomberg Global Confidence (MAR)	Mar 9	Unemployment Rate
Mar 12	Advanced Retail Sales (FEB)	Mar 12	SNB Rate Decision
Mar 16	U. of Michigan Confidence (MAR P)

Published on Mon, Mar 9 2009, 06:27 GMT

AUDCHF The Best Range Candidate Among Congestion Bound Australian Dollar Crosses

Fri, Mar 6 2009, 05:48 GMT
by John Kicklighter

DailyFX

Despite the top tier event risk that crossed the wires earlier this week, the Aussie dollar crosses have not ventured beyond the boundaries of their broad ranges. AUDCHF shares many of the appealing traits of its cross compatriots; but an active congestion band and fundamental edge make this perhaps the best candidate for a range setup.

Why Would AUDCHF Hold a Range?

Levels to Watch:
-Range Top: 0.7650 (Fib, SMA, Range)
-Range Bottom: 0.7400 (Fibs, Trend)

The Australian docket has already dropped most of its major event risk for the week – leaving AUDCHF to the bigger themes in the currency market to drive price action. For fundamental drivers, this pair is unusual. There is still a notable safe haven quality in the yield differential; but a focus on growth trends alters this quality. Recently, the RBA held its benchmark lending rate, spurring speculation that economic activity will rebound soon. In contrast, the cracks in the European region are growing.

AUDCHF is carving a congestion pattern within a broader congestion pattern. This pair has established a wide and gradual ascending wedge pattern since early October. Recently, the rising trend in this formation has confirmed support on tighter congestion with Fibs at 0.7400.

Suggested Strategy

Long: Entry orders will be placed at 0.7430 which is reasonable with the rising floor.

Stop: Our initial stop will be set at 0.7350, which covers the rising trend and volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (80) at 0.7510 and the second is set to 0.7590.

Trading Tip – Despite the top tier event risk that crossed the wires earlier this week, the Aussie dollar crosses have not ventured beyond the boundaries of their broad ranges. AUDCHF shares many of the appealing traits of its cross compatriots; but an active congestion band and fundamental edge make this perhaps the best candidate for a range setup. From a fundamental perspective, there is little scheduled event risk that could directly drive this pair any time soon. For the more traditional risk appetite correlation, the RBA’s recent decision to hold the benchmark lending rate unchanged and Switzerland’s burgeoning economic troubles helps to dampen this frequently volatile fundamental driver. For the range itself, we are positioned on the floor of a broader wedge formation which coincides with the base of a recent congestion zone. We are still well above the bottom of this formation; but it is essential to let the trade come to us – and frequent swings within these bounds make it very likely that our suggested entry orders will be hit.
Our stop is relatively tight, but this is reasonable for a strong risk/reward scenario and our time frame. To avoid undue risk, we will cancel any open orders by Friday’s close.

Event Risk Australia and Switzerland

Australia – Sentiment surrounding the Australian dollar and its economy has changed dramatically this week. Before the heavy-hitting economic data scheduled through the first half of this week crossed the wires, FX traders treated the Aussie dollar as a high-yielder with one of the best performing economies in its region. However, optimism was restrained. In a global recession, these advantages can quickly turn into burdens when the former leader is forced down to the same level of its peers (much like the pound). On Tuesday morning, market participants were offered something tangible when the RBA decided to keep rates unchanged at 3.25 percent. This fed speculation that the currency would not only retain its yield advantage until risk appetite turned around; but that it would also lead the recovery from the global recession. This last consideration was sidelined though by a weaker-than-expected 4Q GDP report; but it has not completely discouraged bulls. Over the coming week, only next Thursday’s employment data can truly add to this sentiment.


	Data for March 6 – March 13		Data for March 6 – March 13
Date (GMT)	Australian Economic Data	Date (GMT)	Swiss Economic Data
Mar 9	NAB Business Confidence (FEB)	Mar 6	Consumer Price Index (FEB)
Mar 10	Westpac Consumer Confidence (MAR)	Mar 9	Unemployment Rate
Mar 11	Employment Change (FEB)	Mar 12	SNB Rate Decision

Published on Fri, Mar 6 2009, 05:48 GMT

GBPAUD Range Looks To High Risk, High Reward and a Fast Pace

Thu, Mar 5 2009, 05:56 GMT
by John Kicklighter

DailyFX

The best range trades are placed on low volatility pairs that are set within a clear channel and are clear of notable event risk. By this crude definition, GBPAUD doesn’t seem to present a good candidate. However, the current setup behind this pair offers a better opportunity than what would be considered text book.

Why Would GBPAUD Hold a Range?

Levels to Watch:
-Range Top: 2.2650 (Range, SMA, Fib)
-Range Bottom: 2.1725 (SMA, Fibs, Trend)

The fundamental trade off between the pound and Aussie dollar is considerable. Market participants have aggressively priced in the worse for the UK in terms of growth and expected rate of return; and now traders are wondering whether an equilibrium has been met where negative indicators no longer have a significant impact on price action – an important considerable for Thursdays’ BoE decision. Confidence in a quick Aussie recovery was driven by the RBA hold, but questioned by GDP figures.

Ranges conditions are not the norm for GBPAUD. However, the congestion developed between SMAs is well defended. Support is our primary concern with a trend, 50-day SMA, Fib retracement and range low all around 1.1725. With the medium-term rising trend, we further have momentum behind us.

Suggested Strategy

Long: Half-size entry orders will be placed at 2.1800 to give enough room over recent lows.
Stop: Our initial stop will be set at 2.1625. This is a notionally wide stop, but not for volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (175) at 2.1975 and the second is set to 2.2175.

Trading Tip – The best range trades are placed on low volatility pairs that are set within a clear channel and are clear of notable event risk. By this crude definition, GBPAUD doesn’t seem to present a good candidate. However, the current setup behind this pair offers a better opportunity than what would be considered text book. For one thing, the technical range that has developed around GBPAUD comes with far greater support than many of the viable channel trades out there. What’s more, a medium term, bullish bias that has developed since the turn of the year leverages the probability of a turn on range support. For event risk, the critical Australian data has already crossed the wires and left its significant impact on price action. The UK docket is still a genuine risk with the MPC expected to deliver its rate decision tomorrow; but since the market has long priced in near-zero interest rates, there is little room for surprise.
Volatility is the true challenge. It will test the technical boundaries of our range; and it creates an issue with trying to limit risk. Our strategy halves position size on orders, widens stops and sets targets at a reasonable level. However, an ill-timed surge spike in volatility could still knock us out.

Event Risk UK And Australia

UK – The United Kingdom is the fundamental laggard of the world economy. Traders wrung the pound for all the bullish sentiment that it carried through the high liquidity and leveraged years that preceded the current financial crisis; and when most of the devaluation was complete, economists and other market participants pegged the currency and its economy as the worst positioned for 2009. However, there is always a point of equilibrium when the negative forecasts are fully priced in. We may have already passed this point with the pound. Already pulling back from record lows, we have seen the pound gain ground as its global counterparts tumbled to meet it. Thursday’s rate cut is already fully priced in (a move down to zero by next month would not surprise). What’s more a deepening contraction is expected.
Therefore, the pound will likely be buffered to negative data and surprised by any positive outcomes.


	Data for March 5 – March 12		Data for March 5 – March 12
Date (GMT)	UK Economic Data	Date (GMT)	Australian Economic Data
5-Mar	BoE Rate Decision	4-Mar	Trade Balance
6-Mar	BoE Housing Equity Withdrawal (4Q)	9-Mar	NAB Business Confidence (FEB)
10-Mar	Industrial Production (JAN)	10-Mar	Westpac Consumer Confidence (MAR)
		11-Mar	Employment Change (FEB)

Published on Thu, Mar 5 2009, 05:56 GMT

Approaching BoE And ECB Rate Decisions Require A Flexible EURGBP Range Setup

Wed, Mar 4 2009, 05:58 GMT
by John Kicklighter

DailyFX

Technical congestion in EURGBP makes for an attractive range trade; but the fundamental threat to this setup is considerable. Therefore, to make this a viable play, we have to develop a strategy that limits risk and works within a strict time frame.

Why Would EURGBP Hold a Range?

Levels to Watch:
-Range Top: 0.9000 (Trend, Fibs)
-Range Bottom: 0.8750 (Trend, SMA, Fib)

The fundamental background behind EURGBP is intricate and the potential for volatility is particular high this weak. This pair is comprised of two major trade partners with speculation underlying growth and interest rate forecasts are polar opposites of each other. The Euro Zone is still treated as one of the best situated economies with rates that will keep a consistent advantage. The UK is looking at the worst recession and rates at zero. Sentiment is changing though and Thursday’s data will amplify it.

Congestion has been a common sight over the past two weeks – but the quiet has been interspersed with sharp and decisive moves. Currently, the market is carving a dwindling range with a confluence of technicals topping off 0.90 and a rising trend threatening to force a break out soon.

Suggested Strategy

Short: Entry orders will be placed at 0.8975, within recent daily highs.
Stop: Our initial stop will be set at 0.9050. This is a tight stop; but necessary for our time frame. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (75) at 0.8900 and the second is set to 0.8825.

Trading Tip – Technical congestion in EURGBP makes for an attractive range trade; but the fundamental threat to this setup is considerable. Therefore, to make this a viable play, we have to develop a strategy that limits risk and works within a strict time frame. Looking at the congestion that has developed recently, we can see that the market is naturally heading into a terminal wedge pattern that will likely require resolution rather soon. With both the ECB and BoE expected to hand down rate decisions on Thursday, this makes for the perfect catalyst for an already pressing setup. There is significant uncertainty surrounding both decisions; but speculation may be working in our favor. With the BoE clearing the way to a zero benchmark lending rate through commentary, a deeper than expected cut does not pose much threat to volatility. However, the ECB has left traders wondering after deciding to pass over a change in February – meaning a cut will likely be treated to a bearish reaction regardless. This aligns the probability of a breakout in our favor; but we don’t necessarily want to expose ourselves to this risk. We will cancel all pending orders before the central banks announce. If we are still in a position when the vote crosses the wires, our nearby targets and tight stop should work well for us.

Event Risk Euro Zone And UK

Euro Zone – Can the Euro Zone support bullish forecasts for growth and interest rates even as an economic recession and financial crisis mature? For some time, we have seen the euro treated as an economic stalwart – a carry over from a few years ago when interest in the currency led many to believe it would replace the dollar as the market’s primary safe haven. However, conditions have changed and all economies are at one point or another on the recession curve. And, considering the acceleration in its evolving slump as well as the troubles that are emanating out of Eastern Europe, the Euro Zone may actually be behind the curve. This is a big theme fundamental driver, and will likely take considerable time to evolve through price action. On the other hand, there is also the potential for a quick catalyst in this Thursday’s ECB rate decision. At its last meeting in February, the central bank held its primary cash target at 2.00 percent. This was taken as a cue that the central bank was near the end; but such optimism in gloomy times can easily crush.

UK – The United Kingdom is the fundamental laggard of the world economy. Traders wrung the pound for all the bullish sentiment that it carried through the high liquidity and leveraged years that preceded the current financial crisis; and when most of the devaluation was complete, economists and other market participants pegged the currency and its economy as the worst positioned for 2009. However, there is always a point of equilibrium when the negative forecasts are fully priced in. We may have already passed this point with the pound. Already pulling back from record lows, we have seen the pound gain ground as its global counterparts tumbled to meet it. Thursday’s rate cut is already fully priced in (a move down to zero by next month would not surprise). What’s more a deepening contraction is expected. Therefore, the pound will likely be buffered to negative data and surprised by any positive outcomes.


	Data for March 4 – March 11		Data for March 4 – March 11
Date (GMT)	Euro Zone Economic Data	Date (GMT)	UK Economic Data
5-Mar	German Retail Sales (JAN)	4-Mar	PMI Services (FEB)
5-Mar	Euro Zone GDP (4Q P)	5-Mar	BoE Rate Decision
5-Mar	ECB Rate Decision	6-Mar	BoE Housing Equity Withdrawal (4Q)
		10-Mar	Industrial Production (JAN)

Published on Wed, Mar 4 2009, 05:58 GMT

Momentum and Event Risk Require a Strong CADJPY Range Setup

Tue, Mar 3 2009, 05:42 GMT
by John Kicklighter

DailyFX

Stalwart dollar and yen-based ranges are under pressure, imparting a heightened sense of risk for all congestion-based positions in the currency market. CADJPY is no exception; but with a demanding setup, we can avoid risk and potentially take advantage of a spike in volatility that follows notable event risk.

Why Would CADJPY Hold a Range?

Levels to Watch:
-Range Top: 79.40 (Range High)
-Range Bottom: 75.50 (Pivot, Fibs, Trend, SMA)

Over the past few weeks, serious doubts over the Japanese yen’s role as a safe haven currency have arisen. An oppressive recession, the potential loss of stability in its markets and a vanishing capital reserve has fundamentally undermined the currency’s role in the FX market. For its own part, the Canadian dollar has retained some of its own leader-of-the pack position in its region – though much of it has faded. The real threat to our range and trend is the looming Canadian event risk.

There is a broad, yet tentative, CADJPY range that has developed with the pair’s sharp bearish reversal over the past two active sessions. Momentum in the bearish turn is significant, so support will have to work hard. However, multiple Fibs, moving averages, and long-term pivot should hold well.

Suggested Strategy

Long: Half-sized entry orders will be placed at 75.75, which is just above the notable pivot.
Stop: Our initial stop will be set at 74.55. This covers the broad confluence and rising trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 76.95 and the second is set to 78.15.

Trading Tip – Stalwart dollar and yen-based ranges are under pressure, imparting a heightened sense of risk for all congestion-based positions in the currency market. CADJPY is no exception; but with a demanding setup, we can avoid risk and potentially take advantage of a spike in volatility that follows notable event risk. First of all, it is important to note that there is substantial risk for this pair from both a technical and fundamental perspective. Looking at price action over the past 48 hours of active trade, we have seen momentum build into a sharp bear wave. Add to this the presence of the Bank of Canada’s rate decision tomorrow; and there is considerable risk of a deeper retracement. However, our entry is above spot, which means we would have to be entered on a reversal from lows. Our position size is halved to allow for a wider stop below the rising trend which allows for volatility. Our primary concern for event risk is the policy decision tomorrow; so a position would ideally make profit before the data hits – but that is highly unlikely. Instead we will cancel any open orders on Thursday or should spot hit 74.50 or 77.50 before we are entered.

Event Risk Australian And Canada

Canada – Policy makers’ and traders’ outlooks for the Canadian economy seem to differ considerably. Government officials have suggested the world’s eighth largest economy was on pace to suffer a significant contract with the potential for significant financial disruptions. However, skeptical investors have held back from pricing in the same pessimism as they draw complimentary comparisons to Canada’s largest trade partner – the US. The sharp drop in 4Q GDP has grounded the loonie somewhat today. At 3.4 percent, the year-over-year contraction in activity is the biggest since the beginning of 1991. This puts Canada closer in line to its global counterparts from a growth standpoint; but what about interest rates? Can the Canadian economy retain a yield advantage for investors to jump on when conditions finally improve? That will be a question that will be fully answered tomorrow with the BoC’s rate decision. Currently, the nation’s benchmark lending rate is a mere 1.00 percent.
Policy officials will have to at least slow the pace of their cuts going forward to support speculation of a positive differential later down the line.

Japan – There are bigger themes at work for the Japanese yen than just a few pieces of scheduled event risk. Over the past few weeks we have seen the foundation of the yen’s role in the market crumble. With the economy contracting at a quick pace and the security of the financial markets under direct scrutiny, we have seen the formerly unquestionable role of the yen as a safe haven taken to task. This is an ongoing process however with many different facets guiding its development. In the meantime, we can prepare for a wave of more mundane event risk. Early Thursday morning in Tokyo, the 4Q capital spending numbers will cross the wires. As an export economy that has long-struggled with consumer spending, this data will be treated as a primary gauge for broader growth trends through the first half of 2009. Other data is of lesser importance and will struggle to rouse the markets.


	Data for March 2 – March 9		Data for March 2 – March 9
Date (GMT)	Canadian Economic Data	Date (GMT)	Japanese Economic Data
Mar 3	Bank of Canada Rate Decision	Mar 4	Capital Spending (4Q)
Mar 5	Ivey PMI (FEB)	Mar 8	Current Account Total (JAN)
Mar 9	Housing Starts (FEB)	Mar 9	Eco Watchers Survey (FEB)

Published on Tue, Mar 3 2009, 05:42 GMT

A Quick AUDCAD Range Setup Before Heavy Event Risk

Mon, Mar 2 2009, 05:55 GMT
by John Kicklighter

DailyFX

Technicals highlight a strong AUDCAD range setup; but fundamentals can be used to argue just the opposite. With a significant round of market-moving event risk on the docket, this pair may be looking at a breakout next week; but with the proper strategy, we can be in and out with a range swing before the market’s boundaries are tested.

Why Would AUDCAD Hold a Range?

Levels to Watch:
-Range Top: 0.8200 (Trend, Fibs, SMAs)
-Range Bottom: 0.8000 (Fib, Pivot, Range Low)

For AUDCAD we have to fall back on long-term trends and fundamental drivers. Both currencies back one of the strongest economies in their respective regions. Further helping to manage risk trends, interest rate forecasts for both are starting to take a neutral tinge after a period of significant cuts. However, long-term considerations will certainly be tested by major scheduled event risk. Both Canada and Australia are scheduled to report 4Q GDP numbers and announce interest rate decisions.

The range we are looking at is very narrow. A 0.82 to 0.80 congestion band encourages volatility and thereby threatens a potential breakout. However, our short interest comes with sound technicals. Not only is a collection of Fibs and SMAs above, but there is also a loose, seven month trend.

Suggested Strategy

Short: Entry orders will be placed at 0.8170 after liquidity returns next week.

Stop: Our initial stop will be set at 0.8245. This covers the immediate resistance and trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (75) at 0.8095 and the second is set to 0.8045.

Trading Tip – Technicals highlight a strong AUDCAD range setup; but fundamentals can be used to argue just the opposite. With a significant round of market-moving event risk on the docket, this pair may be looking at a breakout next week; but with the proper strategy, we can be in and out with a range swing before the market’s boundaries are tested. First and foremost, we need to note the major market movers on both the Australian and Canadian economic dockets. The fireworks begin on Tuesday during the US session when Canada releases its December GDP numbers to round out the fourth quarter. This is followed quickly by the Australian rate decision, Canadian rate decision and Australian GDP numbers – all within a 24 hour period. This is a dangerous situation for a range that is essentially 170 points wide. For this reason we will look for the position to play out before the data flow starts (and we will cancel any open orders before the first report). To further reduce risk of a breakout around weekend liquidity, we will hold off on placing any orders until the market fills back out on Monday. To further accommodate the trade, we have pulled the second target within the range so that it can take profit quickly.

Event Risk Australian And Canada

Australian – Is the Australian economy one of the strongest in the east? Will the RBA hold its benchmark lending rate at a relatively high level long enough for growth to rebound and draw risk-takers back into the market? The economic docket will shed some light on both of these primary fundamental questions next week. A stocked docket is dominated by two pieces of event risk. The RBA rate decision is the first of the heavy-hitting market movers to cross the wires early Tuesday morning in Sydney.
Recently, speculation has taken a decidedly neutral stance on its forecasts even though commentary and data does little to offset the central bank’s steady pace of rate cuts. The bigger surprise considering expectations would be a bigger-than-expected cut or commentary that clues the market into further reductions, which would work in our positions favor. On the follow day, the 4Q GDP numbers will print. Despite the global recession, the Australian economy is expected to expand at a rather hearty clip through the end of 2008. Strong growth in the face of a world-wide slump would imbue the Aussie dollar with an overwhelming bullish status; but now the bar is set high.

Canada – Policy makers’ and traders’ outlooks for the Canadian economy seem to differ considerably. Government officials have suggested the world’s eighth largest economy was on pace to suffer a significant contract with the potential for significant financial disruptions. However, skeptical investors have not seen the evidence in data; and the market’s stability has been a draw for capital. We may see this sentiment change somewhat and volatility pick up over the coming week though as the docket fills out. From the three pieces of event risk due next week due next week, each is a notable market mover. Both the Ivey and GDP numbers will be second class figures. The quarterly growth number is just rounding out monthly reads; and the business activity report is leading but highlights an already depressed sector. The rate decision holds real potential. Is the BoC done or will they follow the Fed closer to zero?


	Data for March 1 – March 8		Data for March 1 – March 8
Date (GMT)	Australian Economic Data	Date (GMT)	Canada Economic Data
Mar 1	AiG Performance of Manufacturing (FEB)	Mar 2	GDP Annualized (4Q)
Mar 2	RBA Rate Decision	Mar 3	Bank of Canada Rate Decision
Mar 3	Gross Domestic Product (4Q)	Mar 5	Ivey PMI (FEB)
Feb 4	Trade Balance (JAN)

Published on Mon, Mar 2 2009, 05:55 GMT

Taking A Short Term Range In Long Term USDCAD Congestion

Fri, Feb 27 2009, 05:49 GMT
by John Kicklighter

DailyFX

Congestion has been a common sight for the currency market; but few pairs have shown the consistency in its ranges that USDCAD has. This pair has cut a wide, ascending triangle for more than four months; but the chop within this broad pattern has made it difficult to trade. However, a recently derived ascending trend channel presents a far better setup for range trading.

Why Would USDCAD Hold a Range?

Levels to Watch:
-Range Top: 1.3000 (Triple Top)
-Range Bottom: 1.2400 (Fibs, Trend, SMAs)

Few pairs have seen the level of congestion that USDCAD has exuded over the past months. Ongoing congestion is certainly supported from a fundamental standpoint. The US and Canada are each others’ largest trade partners. This amplifies the axiom that “when the US catches a cold, the world sneezes.” However, there are still clear fundamental disparities between the two. Safe haven demand, potential for return, and demand for key good are just a few potential drivers.

We are looking at a congestion pattern within a congestion pattern. USDCAD has been carving an ascending wedge on a hard 1.30 resistance since October. More recently however, we have seen an ascending trend channel take charge. With fibs, a rising trend and SMAs around 1.24, a floor is set.

Suggested Strategy

Long: Half-size entry orders will be placed at 1.2425 – well enough above recent lows.

Stop: Our initial stop will be set at 1.2305. This will cover the channel and confluence support. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (120) at 1.2545 and the second is 1.2725.

Trading Tip – Congestion has been a common sight for the currency market; but few pairs have shown the consistency in its ranges that USDCAD has. This pair has cut a wide, ascending triangle for more than four months; but the chop within this broad pattern has made it difficult to trade. However, a recently derived ascending trend channel presents a far better setup for range trading. This formation offers far more precise levels to work around while also using volatility to produce swings that can produce profit potential over a reasonable time frame. The true potential for a good setup in this pair comes from a well-thought out strategy as much as the technicals we are working with. Our suggested approach takes advantage of the steady chop and ascending trend channel through a general bullish bias with a stop that is well below the moving support in the rising trendline. At the same time, the 120 points of risk per lot is significant, so we have reduced position size to lower the notional, potential loss. Beyond a first target that matches risk, our second objective is set above the recent swing high to account for the bullish grade behind technicals. To avoid a sudden shift in market conditions, we will cut any open orders by Friday’s close or should spot hit 1.2650 before we are entered.

Event Risk US And Canada

US – Is the US dollar a safe haven and a future growth leader? This is a question fundamental traders will have to ask going forward as risk trends settle and the demand for yield turns investors back on the path for economic expansion and growing returns. When cashing in on Treasuries, investors will look for growth to precede a rebound in expected returns as competition for funds rises. A look at the US balance sheet now would be discouraging as the economy is accelerating into its slump with ongoing pain in housing, business activity and now especially consumer spending.
However, traders are speculators and look to the future. While US growth is weak, it isn’t necessarily weaker than its global counterparts. With the government introducing a suite of aid to the economy and markets, expectations are growing for the US to recover more quickly than some of its struggling trade partners. Evidence is still a necessary though. Scheduled event risk will play a part in building up forecasts. Tomorrow’s second GDP reading will be a notable report for its components. Next week, consumer spending and income data; employment and business activity will give a broad and timely picture.


	Data for February 27 – March 5		Data for February 27 – March 5
Date (GMT)	US Economic Data	Date (GMT)	Canada Economic Data
Feb 27	GDP Annualized (4Q P)	Feb 27	Current Account (4Q)
Mar 2	Personal Spending (JAN)	Mar 2	GDP Annualized (4Q)
Mar 2	ISM Manufacturing (FEB)	Mar 3	Bank of Canada Rate Decision
Feb 4	ISM Services (FEB)	Mar 5	Ivey PMI (FEB)

Published on Fri, Feb 27 2009, 05:49 GMT

GBPCHF A Riskier Range Alternative To Its Euro Counterpart

Thu, Feb 26 2009, 06:05 GMT
by John Kicklighter

DailyFX

High volatility and event risk is naturally something to avoid when looking for range trades; so our interest in GBPCHF is aggressive. However, a sound strategy is still necessary to make this a reasonable position with acceptable risks rather than just a gamble.

Why Would GBPCHF Hold a Range?

Levels to Watch:
-Range Top: 1.7500 (Pivot, SMA, Fib)
-Range Bottom: 1.6525 (Fibs, Trend, Range Low)

The correlation between GBPCHF and general risk trends has faded with time. With interest rates from both quickly approaching zero and recession a common factor, the lines between risky and less risky is blurred. What’s more, we have seen the franc’s position as a long-term safe haven through its banking system come under scrutiny with the EU threatening sanctions on international tax havens. On the other hand, scheduled event risk is quite substantial for a pair that is highly volatile.

Congestion has been a common state for GBPCHF for a couple months, but this pair’s chop is still highly volatile and prone to short bursts of clear direction. Support is our immediate concern. There is a confluence of technicals in this area including trendlines and various Fibs.

Suggested Strategy

Long: Entry on reduced sized orders will be placed at 1.6575 which is very close to support.

Stop: Our initial stop will be set at 1.6415. This will cover the low of the recent downswing. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (160) at 1.6735 and the second is 1.6895.

Trading Tip – High volatility and event risk is naturally something to avoid when looking for range trades; so our interest in GBPCHF is aggressive. However, a sound strategy is still necessary to make this a reasonable position with acceptable risks rather than just a gamble. First and foremost, it is important to highlight that this position is highly correlated to yesterday’s EURCHF setup. Therefore, one or the other should be avoided to ensure that there is not double the risk. Comparing this pair’s range setup to its euro counterpart’s: volatility is much higher, scheduled event risk is deeper and GBPCHF’s sensitivity to risk trends can make it a breakout risk should global interests change. To buffer these issues, we will reduce our positions size to at least half normal to ensure that the notional value of a loss will be limited. From the actual setup itself, we have put in for an aggressive entry that is still reasonable given the repeated tests of the range low. The stop covers the recent swing low with wide enough room for a significant tail. At the same time are targets are set within the range of the past week rather than the past month – making it much more likely to book profit and quickly. To further reduce risk, we will close all open orders by Friday or should spot hit 1.7050 before we are entered.

Event Risk UK And Switzerland

UK – Speculators always look to the future when valuing currencies; but there is a point when sentiment goes awry of fundamentals. The pound may have reached that point over the past few months. The sterling was pushed to multi-year and record lows against it counterparts as the fundamentally inclined realized the UK economy was on pace to see the worst economic slump among its industrialized peers. This would be a dramatic departure from the high-yield, high-growth days of only two years ago. However, there is a point of equilibrium where the British slump is priced in and growth from the other side of the pair starts to have its impact on the spot rate. The IMF has already pegged the UK as the likely worst performer of 2009, but we have seen Japan and US forecasts come under further pressure recently. Going forward, each sector of the UK economy will be closely monitored for the intensity of ifs slump. The consumer will be of utmost importance. Lending figures and sentiment reports will offer insight into their consumption capabilities. Also important will be business and housing sector data. However, with the BoE decision also due next week, interest may be restrained.

Switzerland – The Swiss franc is a well-known safe haven for the world’s financiers; but this title has put the currency under the close scrutiny of European politicians who say the availability of the tax shelter is exacerbating economic and financial difficulties. If regulations and sanctions come out of this blame, it could fundamentally change the Swissie’s place in the FX market – and currency traders know it. For economic data, there are only a few readings scheduled for release; but they are all notable. The KOF and SVME PMI numbers are notable growth figures; but they can’t trump the 4Q GDP reading due next Tuesday for clout.


	Data for February 26 – March 4		Data for February 26 – March 4
Date (GMT)	UK Economic Data	Date (GMT)	Swiss Economic Data
Feb 26	GfK Consumer Confidence (FEB)	Feb 27	KOF Swiss Leading Indicator (FEB)
Mar 2	PMI Manufacturing (FEB)	Mar 2	SVME – PMI (FEB)
Mar 3	Nationwide Consumer Confidence (FEB)	Mar 3	GDP (4Q)
Feb 4	PMI Services (FEB)

Published on Thu, Feb 26 2009, 06:05 GMT

EURCHF Range May Survive Policy Shocks and Building Event Risk

Wed, Feb 25 2009, 05:56 GMT
by John Kicklighter

DailyFX

A heady mix of fundamental and technical pressure is building up behind the currency market; and any range trades should come with limited notional risk and exposure to unstable economic forecasts. Backed by a strong range as well as close trade ties and mirrored policy approaches, EURCHF is well positioned to absorb most unforeseen shocks.

Why Would EURCHF Hold a Range?

Levels to Watch:
-Range Top: 1.5150 (Range High, Fib, SMA)
-Range Bottom: 1.4750 (Trend, Pivot)

Potential, event risk is very high for the euro. Considering the high level of uncertainty surrounding the ECB’s policy stance going forward, growth trends, the possibility of a region-wide and coordinate response to Euro Zone’s economic slump, and the threat of further sovereign downgrades imbues the euro with the quality of being one of the most highly speculative currencies. However, EURCHF is somewhat buffered as the Swiss often try to mirror the Euro Zone’s efforts.

Congestion has been a dominant force for EURCHF for the past two months (like it has been for the rest of the currency market). Support is reasonably well defined with a notable pivot at 1.4750 and a rising trend only 35 points lowers. True resistance is a range high around 1.5150.

Suggested Strategy

Long: Half-size entry orders will be placed at 1.4780 which is well above the trend.

Stop: Our initial stop will be set at 1.4660. This covers the rising trend as well as the Feb 18 low. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (120) at 1.4900 and the second is 1.4950.

Trading Tip – A heady mix of fundamental and technical pressure is building up behind the currency market; and any range trades should come with limited notional risk and exposure to unstable economic forecasts. Backed by a strong range as well as close trade ties and mirrored policy approaches, EURCHF is well positioned to absorb most unforeseen shocks. For our suggested strategy, we have reduced position size and widened stops to allow for significant event risk on the economic docket that could push the market’s floor from the pivot, to the rising trend and then to the previous swing low. For targets, we set the standard first level equal to risk, while the second is set not much further – swapping outsized potential for a reasonable time frame and lower possibility of an untimely drawdown that cuts the second half off at breakeven. For those that are more risk tolerant, a trialed stop could be used on the second half and its target could be moved higher within the range or even beyond the range should they foresee a true trend change developing. There is substantial event risk on the docket, but there is enough cushion between current spot and support to weather these indicators. We will cancel any open orders by Friday or should spot hit 1.4975 before we are entered on the position.

Event Risk Euro Zone And Switzerland

Euro Zone – Just a few weeks ago, Greece, Italy and Spain received downgrades to their sovereign debt. Then last week, ratings agencies warned that banks in Eastern European countries were at risk of being downgraded. These strains in the financial system follow the tumble in growth; and unless they are answered in a coordinated response, conditions could become much worse. Taking the initiative, European leaders convened and vowed to come up with a policy initiative that was aimed at the region rather than just the individual member economies. The details or true scope of this plan are still up in the air; but it is a factor that no doubt carries the potential to dramatically alter the course of the euro. As for the more mundane scheduled event risk, there are plenty of indicators that could drive short-term volatility and alter growth and interest rate expectations. The second round reading on GDP figures from German and the Euro Zone will offer much-needed insight into the trends behind the various sectors that will guide speculation for activity through the first quarter and beyond. Other various readings will give a timelier look into activity including German consumer confidence, employment and Euro Zone retail sales. Inflation data still has its place as well as the ECB’s stance has been questioned.


	Data for February 25 – March 3		Data for February 25 – March 3
Date (GMT)	European Economic Data	Date (GMT)	Swiss Economic Data
Feb 25	German GDP (4Q F)	Feb 27	KOF Swiss Leading Indicator (FEB)
Feb 26	German GfK Consumer Confid. (MAR)	Mar 2	SVME – PMI (FEB)
Feb 26	Unemployment Change (FEB)	Mar 3	GDP (4Q)
Mar 2	Euro Zone CPI Estimate (FEB)

Published on Wed, Feb 25 2009, 05:56 GMT

The Dominant GBPUSD Trend Holds As Strong Resistance For Recent Range

Tue, Feb 24 2009, 05:42 GMT
by John Kicklighter

DailyFX

With fundamental headlines stoking concern over the economic health of major economies, protectionism, threats of broad nationalization and the possibility of another financial seizure, there is risk for range conditions at every corner of the currency market. However, can unsubstantiated speculation override dominate trends that are founded on confirmed data? That is the question we have to ask with GBPUSD.

Why Would GBPUSD Hold a Range?

Levels to Watch:
-Range Top: 1.4725 (Trend, Fib)
-Range Bottom: 1.4125 (Fib, Pivot)

A general fundamental comparison of the dollar and pound pits the currency that is considered to be furthest along the recession curve against the one that is furthest behind. This is a much simplified version of the GBPUSD’s fundamental scene, but they are the factors that could help define the dominant trend. Speculation of nationalization in the US and the efforts by policy officials to support their domestic economies are also considerable threats.

The dominant trend behind this pair is important as a short-term rebound has brought spot within range of a major falling trendline that began bank on Nov 5th. With time, this trendline will soon coincide with a notable 38.2 percent Fib. Today’s reversal does not preclude the pair from eventually hitting our entry; but momentum should be monitored closely.

Suggested Strategy

Short: Half-size entry orders will be placed at 1.4660 – aggressive but necessary.

Stop: Our initial stop will be set at 1.4820. This will cover the trend, but isn’t suited for volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (160) at 1.4500 and the second at 1.4320.

Trading Tip – With fundamental headlines stoking concern over the economic health of major economies, protectionism, threats of broad nationalization and the possibility of another financial seizure, there is risk for range conditions at every corner of the currency market. However, can unsubstantiated speculation override dominate trends that are founded on confirmed data? That is the question we have to ask with GBPUSD. The pair has developed a weak, bullish rebound and is now coming upon a clean trendline that been well-formed through nearly four months of price action (which could also stand in as the symbolic ‘line in the sand’ for the bear wave that began back in November of 2007. With today’s intraday reversal, this pair is already having trouble building the momentum needed to overtake such a clear formation. A side effect of this fading momentum though may be that this strategy may take some time to trigger. It is certainly preferable to have price come to us for a good risk/reward setup than chase a trade that would require an unrealistic set up. Nonetheless, with too much time, market conditions could change. Therefore, we will cancel any open orders by Thursday’s close or should spot hit 1.42 before entry.

Event Risk UK And US

UK – There is little in the UK’s economic dossier to be bullish about. The financial crisis has pushed many British banks to the edge of bankruptcy, the IMF has predicted the UK would suffer the worst economic recession of the major economies through 2009 and all the while the BoE is running out of options. However, there is also a point of equilibrium when comparing two currencies and the economies they represent. For the pound’s part, the pressure behind its status as the weakest currency among its peers will depend on how consistent its fundamental deterioration is. This means steady declines in credit conditions, housing, business investment, consumer spending and general growth. Over the coming week, we will see a number of indicators that will cover these fundamental angles. The most closely watched figures though will be the potential revisions to component GDP data.

US – The US dollar is in a unique position. Recently, we have seen the currency tighten its correlation to risk trends. With a benchmark lending rate essentially at zero and a laundry list of government initiatives aimed at revitalizing the economy; we have seen currency traders transfer their funds into US treasuries and other securities (even shunning the Japanese yen as the top safe haven). At the same time, we have also seen the dollar gain ground when general sentiment across the markets has improved. This is likely due to the economy’s forward position on the recession curve and the expectations that returns could be revived in the US before its major counterparts. From the calendar, we have a few volatility hurdles to be concerned with.
Consumer confidence is a key reading with policy makers and economists looking to see how Americans are responding to policy efforts to turn spending around. A surprise market mover may be the second reading on the 4Q GDP data. While this is a revision, it is open to a significant change, which could undermine the dollar’s new position as top safe haven.


	Data for February 24 – March 2		Data for February 24 – March 2
Date (GMT)	UK Economic Data	Date (GMT)	US Economic Data
Feb 24	Total Business Investment (4Q P)	Feb 24	Consumer Confidence (FEB)
Feb 25	GDP (4Q P)	Feb 24	Bernanke Report on Economy And Policy
Feb 26	GfK Consumer Confidence (FEB)	Feb 25	Existing Home Sales (JAN)
Mar 2	Net Consumer Credit (JAN)	Feb 27	GDP (QoQ) (Annualized)

Published on Tue, Feb 24 2009, 05:42 GMT

Broad AUDUSD Range Finds Fundamental and Technical Support

Mon, Feb 23 2009, 05:46 GMT
by John Kicklighter

DailyFX

There is still a lot of lingering fundamental risk and volatility in the market; but the threats to market-wide shifts seem to have settled. However, even if the winds pick up next week, the stability behind the AUDUSD’s fundamentals and range could still hold the market back.

Why Would AUDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.6580 (Pivot, Fib)
-Range Bottom: 0.6335 (Trend, Pivot)

Is there a fundamental driver scheduled for next week that can force a broad shift in risk sentiment or spark an unmatched surge for the dollar. This is the primary consideration for the AUDUSD range that has developed over the past four months. With the pair cutting a broad (and gentle) range, reversion to neutral ground should be a natural draw. What’s more, there is little top tier data and the dollar is responding to risk aversion and appetite.

Technically, the wedge that this pair has cut is the most stable kind. The rising trend has a very gentle slop so there is little need to force a breakout for retracements or relief. Furthermore, the formation is four months into development, with four unique tests of the trend and plenty of room to move. However, beyond trendlines, there is little else for definition.

Suggested Strategy

Buy: Half-size entry orders will be placed at 0.6370, which is well above this week’s lows.

Stop: Our initial stop will be set at 6230. This is a wide stop that covers the early Feb lows as well. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (140) at 0.6510 and the second at 0.6650.

Trading Tip – There is still a lot of lingering fundamental risk and volatility in the market; but the threats to market-wide shifts seem to have settled. However, even if the winds pick up next week, the stability behind the AUDUSD’s fundamentals and range could still hold the market back. Looking at this pair from both a fundamental and technical perspective, we still get the picture of stability. The most promising aspect of this general setup is the pair’s range. To be precise, AUDUSD has actually cut an ascending wedge for four months. This is known as a terminal formation (resulting in a break for direction); but at this point, the range is still very wide and the rising trend is still very gentle so the impetus for such a move is very low. From a fundamental angle, we do have the threat of a substantial shift in risk trends. The Aussie dollar is highly sensitive to risk appetite and the US dollar is arguably the top safe haven currency. However, the greenback has recently shown strength when sentiment has both risen and contracted. Our strategy looks to take advantage of the wide range with stops and targets that are set further out. To accommodate a cut out point that covers the previous swing low on the rising trend, we have also lowered our position size. We will cancel all open orders by next Thursday or should spot hit 0.6650 before our entry.

Event Risk Australia And US

Australia – Risk trends are still the primary driver for the Australian dollar. With the second highest benchmark lending rate among the majors and growth forecasts that have recently received significant downgrades, the health of investor sentiment has a clear influence on this currency’s future. From the dockets, the event risk is relatively heavy; but the overall market moving potential of the data is considered limited. Fourth quarter wage costs, construction activity and private capital expenditures are significant for growth and interest rate speculation; but they are generally lagging readings. Monthly data has already benchmarked most of this; yet it could still have its influence on speculation surrounding GDP.

US – The US dollar is in a unique position. Recently, we have seen the currency tighten its correlation to risk trends. With a benchmark lending rate essentially at zero and a laundry list of government initiatives aimed at revitalizing the economy; we have seen currency traders transfer their funds into US treasuries and other securities (even shunning the Japanese yen as the top safe haven). At the same time, we have also seen the dollar gain ground when general sentiment across the markets has improved. This is likely due to the economy’s forward position on the recession curve and the expectations that returns could return the US before its major counterparts. From the calendar, we have a few volatility hurdles to be concerned with. Consumer confidence is a key reading with policy makers and economists looking to see how Americans are responding to policy efforts to turn spending around. A surprise market mover may be the second reading on the 4Q GDP data. While this is a revision, it is open to a significant change, which could undermine the dollar’s new position as top safe haven.


	Data for February 22 – March 1		Data for February 22 – March 1
Date (GMT)	Australian Economic Data	Date (GMT)	US Economic Data
Feb 24	Wage Cost Index (4Q)	Feb 24	Consumer Confidence (FEB)
Feb 24	Construction Work Done (4Q)	Feb 24	Bernanke Report on Economy And Policy
Feb 25	Conference Board Leading Index (DEC)	Feb 25	Existing Home Sales (JAN)
Feb 25	Private Capital Expenditure (4Q)	Feb 27	GDP (QoQ) (Annualized)

Published on Mon, Feb 23 2009, 05:46 GMT

Congestion In The Yen Crosses Holds Up CADJPY Range

Fri, Feb 20 2009, 06:35 GMT
by John Kicklighter

DailyFX

Is risk appetite recovering? A rebound in the yen crosses would suggest just that; but constant pressure on equities and other financial assets argue the opposite. So, where does that leave CADJPY – perhaps securely in a range.

Why Would CADJPY Hold a Range?

Levels to Watch:
-Range Top: 75.50 (Pivot, Fibs, SMA)
-Range Bottom: 72.35 (Trend, Fib)
Risk sentiment well be the primary driver for CADJPY - and all of the yen crosses - as capital markets threaten new multi-year lows and global governments step up to try and wrestle control of the economy and markets from pessimistic consumers. Scheduled event risk could have its influence on volatility around notable technical levels. Friday brings both a BoJ economic report and Canadian CPI numbers – offering growth and rate implications.
The pattern in CADJPY price action is similar to the evolution of price action for many of the yen crosses. An ascending wedge formation has developed since the pair reversed from its recent record low. Resistance for this cross is built around 75.50 where a confluence of a pivot, fibs and an SMA are holding back a young trend.

Suggested Strategy

Short: Half-size entry orders will be placed at 75.30 to take advantage of the pivot level.
Stop: Our initial stop will be set at 76.30. This cut out point could withstand a notable false break. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 74.30 and the second at 73.30.

Trading Tip – Is risk appetite recovering? A rebound in the yen crosses would suggest just that; but constant pressure on equities and other financial assets argue the opposite. So, where does that leave CADJPY – perhaps in a range. When looking for a fundamental driver for this pair, there is little difficulty in coming to the conclusion that general investor sentiment is the primary engine for direction. However, recently, we have seen the yen losing its correlation to flight-to-safety flows (with the dollar perhaps overtaking the Japanese currency’s position as USDJPY steadily rallies to new highs). This could disrupt the clear fundamental speculation that has aided traders so well in the past; but it could also stabilize CADJPY price action as market participants search for a key driver. In the meantime, the long-term (months) dominant trend holds to the downside, which helps to rectify the short setup in the face of recent bullish momentum. Nonetheless, as our strategy counters this short-term direction (and considering the width of our stops) we have cut our position size. To further lower our risk of an unfavorable break, we will cancel all open orders before Friday’s close or should spot hit 73.75 before our entry.

Event Risk Canada And Japan

Canada – Fundamentals have had a limited impact on the Canadian dollar in recent weeks. From the risk angle, a benchmark interest rate of 1.00 percent and a financial market that has shown relatively little impact from the global, financial crisis has left the loonie right in the middle of the spectrum. Growth forecasts – the other prominent driver – gives traders a little more to work with as the economy has been relatively buoyant despite the condition of its American counterpart. Looking at the coming week’s docket, we will see data that clues the market into speculation for both growth and interest rates. Through our window for entry, we will see the release of January inflation figures. At this point, price growth is below target; so its contribution will maintain support for further cuts. However, with rates already close to zero, this figure may have a greater influence on growth speculation as a measure for cost of living. Live positions will find additional event risk after the weekend in retail sales and current account releases. Exports and domestic consumption are key readings for GDP forecasts.

Japan – Over the past weeks, we have seen the Japanese yen loosen its correlation to general risk trends. This leaves fundamental traders in an uncomfortable position as they will now have to derive the catalyst for price action rather than looking to the key gauges for risk sentiment. On the other hand, we could see that scheduled event risk will have a more defined impact on the market as investors look at the safety and potential for returns in the world’s second largest economy. For the remainder of this week, only the Bank of Japan’s monthly report holds any influence. Central bankers will offer their assessment of economic activity and financial health for policy officials to build legislation around and speculators to benchmark their own forecasts with. In the latter half of next week, the market movers pick up. The round of inflation, consumer spending, industrial production will be a good starting point for the 1Q.


	Data for February 20 – February 27		Data for February 20 – February 27
Date (GMT)	Canada Economic Data	Date (GMT)	Japan Economic Data
20-Feb	Consumer Price Index (JAN)	20-Feb	BoJ Monthly Report
23-Feb	Retail Sales (DEC)	26-Feb	Jobless Rate (JAN)
27-Feb	Current Account Balance (4Q)	27-Feb	Household Spending (JAN)
		27-Feb	Industrial Production (JAN P)

Published on Fri, Feb 20 2009, 06:35 GMT

AUDNZD Range Holding As FX Market Vies For Direction

Thu, Feb 19 2009, 06:48 GMT
by John Kicklighter

DailyFX

The dollar is threatening the calm that range traders have been taking advantage of recently by forging breakouts against the euro and yen among other pairings. With the crosses ready to follow any momentum that develops behind these majors, a congestion setup in AUDNZD represents one of the few places where range conditions are supported both fundamentally and technically.

Why Would AUDNZD Hold a Range?

Levels to Watch:
-Range Top: 1.2750 (Range High)
-Range Bottom: 1.2475 (Trend, Fibs)
General congestion has started to give way to direction for many of the FX market’s more liquid active currencies. Should the dollar and euro-based shifts gain momentum, the action could easily spill over to the rest of the market and put any range setups in jeopardy. As always, AUDNZD can somewhat curtail this threat naturally through its composition of two high yielders with commodity links. Intensity of these external rallies is vital key.
Taking a big-picture look at AUDNZD price action, we can see that the pair has been in a general advance since October. The most recent leg of this bias has developed on a rising trend that began with the Jan 16th low and has since produced a number of tests. However, a step down in congestion zones may point to a possible reversal pattern.

Suggested Strategy

Long: Half-size entry orders will be placed at 1.2490 for an aggressive, but necessary start.
Stop: Our initial stop will be set at 1.2390. This is wide enough to cover the former swing low. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 1.2590 and the second at 1.2690 (for 200 bps).

Trading Tip – The dollar is threatening the calm that range traders have been taking advantage of recently by forging breakouts against the euro and yen among other pairings. With the crosses ready to follow any momentum that develops behind these majors, a congestion setup in AUDNZD represents one of the few places where range conditions are supported both fundamentally and technically. From here on out, the potential for trend development amongst the majors - that then spills into the crosses - could redefine general market conditions. AUDNZD can buffer interest rate, risk trends and imbalanced growth forecast considerations to a point; but an aggressive rally in any of the individual currencies can still work on this narrow range. Therefore, a good strategy is an important component of a successful range setup. For our suggested layout, we have first cut our position size in half to accommodate a wide stop that buffers the short-term rising trendline and last week’s swing low. At the same time, our wide stop requires somewhat aggressive objectives from an otherwise narrow range. We will cancel any open orders before Friday’s close or should spot hit 1.2610 before we hit our entry.

Event Risk Australia And New Zealand

Australia – The Australian dollar has struggled to forge any significant recovery from its multi-year lows; and fundamentals have done little to help the currency along. A lingering and vague driver for the Aussie dollar going forward, general risk trends are open to the whims of investor sentiment. In the past week, volatility behind these trends has risen as major efforts made by the US government to stabilize their economy and financial markets were pitted against dreadful, global growth numbers. The balance read in market price action could be stabilized by any number of unscheduled pieces of event risk. As for foreseeable obstacles, the Australian docket is holding a number of notable releases. Most prominent is Friday’s semi-annual parliamentary testimony by RBA Governor Glenn Stevens. His outlook for the economy and policy efforts could tell the market what the central banker will propose and enact to turn the economy around. Next week, a leading composite indicator, fourth quarter construction, fourth quarter capital expenditures and credit numbers for January will give a good mix for growth forecasts to benchmark on.

New Zealand – As the obligatory, high-yield currency, the New Zealand dollar will be dialed into risk trends. Though its Australian counterpart is itself sensitive to risk trends, the kiwi sees far greater consequence in its price action to shifts in market sentiment. Aside from the risk hurdles laid out above, the New Zealand docket may try to give a different fundamental nudge to price action. For the window set out for entry, there is little from the coffers that could stir a move. However, looking past the weekend, the data picks up. Monday’s credit spending numbers for January will provide a look into consumption and credit activity from the biggest component of GDP. Beyond that, the two year inflation outlook from the RBNZ will redefine rate forecasts – which have recently turned neutral.


	Data for February 19 – February 26		Data for February 19 – February 26
Date (GMT)	Australian Economic Data	Date (GMT)	New Zealand Economic Data
Feb 19	RBA Governor Semi-Annual Testimony	Feb 22	Credit Card Spending (JAN)
Feb 24	Construction Work Done (4Q)	Feb 24	RBNZ 2 Yr Inflation Expectation (1Q)
Feb 25	Private Capital Expenditure (4Q)	Feb 25	Trade Balance (JAN)
Feb 26	Private Sector Credit (JAN)	Feb 25	NBNZ Business Confidence (FEB)

Published on Thu, Feb 19 2009, 06:48 GMT

Risk Trends A Deciding Factor For EURJPY Range

Wed, Feb 18 2009, 05:59 GMT
by John Kicklighter

DailyFX

The EURJPY range setup that we see today is very similar to the GBPCHF position we laid out yesterday. High volatility and a clear correlation to vague risk trends makes make this another short-term setup that requires a sound strategy.

Why Would EURJPY Hold a Range?

Levels to Watch:
-Range Top: 120.00 (Fib, Pivot)
-Range Bottom: 115.75 (Trend, Fib)

A major, technical break from EURUSD this morning may have redefined the euro’s path; but traders are still waiting for confirmation. While EURUSD may have produced a volatile break from congestion, the most liquid major has not overrun its recent, multi-year swing low and the other yen crosses have yet to follow suit. Looking at the fundamental drivers going forward, scheduled event risk is not as important as general risk sentiment at this point.

EURJPY has seen congestive price action for nearly four months now, though it was the chop from the last month that is really appealing from a range trading point of view. An ascending wedge has pushed against a long-term bearish bias. Support is moving with a notable trendline coinciding with a Fib and series of swing lows.

Suggested Strategy

Long: A relatively aggressive entry for a half-size position will be placed at 115.80.

Stop: Our initial stop will be set at 114.60. This is covers the Feb 12 swing low but is still tight. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (120) at 117. The second, 118.20 objective is reasonable.

Trading Tip – The EURJPY range setup that we see today is very similar to the GBPCHF position we laid out yesterday.
High volatility and a clear correlation to vague risk trends makes make this another short-term setup that requires a sound strategy. Considering the highly visible, bearish break from EURUSD this morning and the tentative push above resistance in USDJPY, there may be a fundamental shift for this and other crosses underway. As such, we have adjusted our strategy to set limits on risk and ensure we are not caught up in a breakout. Our entry is very aggressive – just above the rising trendline and today’s low – but it is necessary to maintain a reasonable risk reward. With half size orders, we can set our stops below last week’s swing low to avoid any minor false breakouts and ensure that the notional risk is well within reason. Our first stop is reasonable given a time and technical perspective, while the second objective is also a reasonable fraction of the EURJPY’s total range. Since this pair is highly volatile and external risk is high, we will close all open orders within 24-36 hours or should spot it 117.50 before our entry level.

Event Risk Euro Zone And Japan

Euro Zone – Fundamental traders are still uncertain over the health of the euro. In the US, UK and Japan, speculators have a firm grounding in their interest rate, recession and financial trouble forecasts. However, for the Euro Zone, central bank commentary suggests the policy authority is at the end of its rate regime, there is still a positive slant on economic performance (when compared to the region’s global counterparts) and the financial malaise has been met with government money and threats of nationalization. However, in recent weeks this vague, bullish sentiment has clearly started to deteriorate though. Looking at the economic indicators on the docket this week, there are a few notable releases that could alter sentiment for the euro. Friday’s PMI data from Germany and the Euro Zone will help define growth expectations for the first quarter, following the plunge measured through the fourth quarter readings just a few weeks ago. Aside from these scheduled releases, an eye should also be kept on the developments in Europe’s banking sector. Rating agencies have taken to downgrading a few EC members, and the financials sector is especially prone.

Japan – The Japanese yen has traditionally been the safe haven of choice for the currency market; but this defining attribute may be fading as the market starts to take fundamental health more seriously. Just yesterday, the government released its first round, fourth-quarter GPD numbers with a 12.7 percent annualized contraction – the worst in 35 years. With the top BoJ economist suggesting the first quarter could be ‘unimaginable,’ holding Japanese asset is looking more and more like a risky proposition in a global recession. The focus will remain on growth and the government’s efforts to turn things around. On this front, the Bank of Japan’s rate decision will be interpreted for any suggestion that they are taking the United State’s lead in turning to alternative policy efforts. And, for an objective read on growth trends, the central bank’s monthly report due Friday will help benchmark speculators expecting something worse.


	Data for February 18 – February 25		Data for February 18 – February 25
Date (GMT)	European Economic Data	Date (GMT)	Japanese Economic Data
Feb 20	German PMI Services (FEB A)	Feb 19	Bank of Japan Rate Decision
Feb 20	Euro Zone PMI Composite (FEB A)	Feb 19	All Industry Activity Index (DEC)
Feb 24	IFO – Business Climate (FEB)	Feb 20	BoJ Monthly Report
Feb 24	Euro Zone Industrial New Orders (DEC)

Published on Wed, Feb 18 2009, 05:59 GMT

A Short−Term GBPCHF Range Will Have To Avoid Risk Trends

Tue, Feb 17 2009, 05:50 GMT
by John Kicklighter

DailyFX

While GBPJPY may not have exposure to a specific piece of major event risk over the coming week; recent range activity is still under significant strain. With a high correlation to risk trends and a capacity for tremendous volatility, any attempt at making a successful trade through congestion must be developed with a strong technical setup.

Why Would GBPCHF Hold a Range?

Levels to Watch:
-Range Top: 1.7475 (Fib, Pivot, Trend, SMA)
-Range Bottom: 1.6475 (Fib, SMA, Trend)

The financial markets are balancing a fine wire in regards to risk. A wave of growth data released this month has confirmed the global economy is on pace for its weakest performance since World War II; and the worst of the data hasn’t even crossed the wires. Add to this, the potential for another financial seizure and the threat of another slump is obvious. On the other hand, bailout efforts have been stepped up. Either way, there will be a substantial shift in sentiment.

GBPCHF is struggling to find its way between two significant trends. The dominant trend (going back years) still holds in the bears favor. However, the recent reversal from December’s lows has provided a tentative bull wave. How long can this general trend last? Support found in a 38.2% Fib, 20-day SMA and short-term trend will weigh in.

Suggested Strategy

Short: Half size or smaller entry orders will be set for a bullish position at 1.6540.

Stop: Our initial stop will be set at 1.6380. This is very tight considering volatility, but necessary. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (160) at 1.6700. The second objective is deeper at 1.6900.

Trading Tip – While GBPJPY may not have exposure to a specific piece of major event risk over the coming week; recent range activity is still under significant strain. With a high correlation to risk trends and a capacity for tremendous volatility, any attempt at making a successful trade through congestion must be developed with a strong technical setup. Our proposed strategy is looks to limit risk as best as possibility; but the exposure this pair has to enormous daily price swings make it a difficult proposition. Our suggested strategy is very short-term. Our entry is very near spot and well enough above support that we can still find entry. The stop is set quite close considering swing lows going back to late-January; but our targets are just as reasonable. Entry and take profit should follow within 24 to 36 hours; otherwise, price action has not developed as it should have and the market could shift. As such, we will cancel any open orders by Wednesday’s Asian session open. Also, many of our recent range setups have a considerable correlation to risk trends. To avoid leveraging exposure to this one fundamental influence, we will not take this position should any other risk-related trades be on the books.

Event Risk UK And Switzerland

UK – The IMF expects the UK economy to suffer the worst recession among its industrial counterparts through 2009. This has leveraged a considerable weight for the pound to shoulder. As growth expectations and risk appetite wax and wane, the sterling is exposed through heightened sensitivity as one of the most fundamentally weak currencies amongst the majors. Domestic government efforts to recharge growth and find stability in the financial markets are key drivers going forward. Should Prime Minister Brown come encourage a stimulus package and ‘bad bank’ solution to rival that in the US, it could certainly turn speculation for long-term growth later down the line. Realistically, these are vague influences on price action; and the triggers are ill-defined. As for tangible, scheduled event risk, the UK docket holds its fair share of top tier data; but its impact is questionable. Tomorrow’ inflation data means little for a BoE that is concentrating on growth. Furthermore, Wednesday’s central bank minutes have been superseded by the quarterly inflation report. Net borrowing and retail sales numbers may generate a little interest as they clue in expectations for consumers and growth.

Switzerland – Is the Swiss franc still one of the market’s key safe havens? This is a question that will play no small role in deciding the currency’s price action over the coming days, weeks and months. Recently, the fundamental appeal of the yen and Japan’s assets have been shaken to the core with a growth report that marked the sharpest contraction in nearly 35 years. At the same time, the US dollar has been casted in doubt as the epicenter of the world’s virus. However, Switzerland, aside from having its tight link to the Euro Zone is still the banking center for the world. This makes for a clear and favorable safe haven should conditions deteriorate and a source of capital when they improve. As for economic data, the Swiss docket is only a minor threat.
Tomorrow’s retail sales report is the height of the docket; but trade, investment confidence and money supply figures may give a look into long-term growth trends.


	Data for February 16 – February 23		Data for February 16 – February 23
Date (GMT)	UK Economic Data	Date (GMT)	Swiss Economic Data
Feb 17	Consumer Price Index (JAN)	Feb 17	Retail Sales (DEC)
Feb 18	Bank of England Minutes	Feb 19	Trade Balance (DEC)
Feb 19	Public Sector Net Borrowing (JAN)	Feb 19	ZEW Survey (FEB)
Feb 20	Retail Sales (JAN)	Feb 23	Money Supply (M3) (JAN)

Published on Tue, Feb 17 2009, 05:50 GMT

USDJPY Technicals And Event Risk Make For A Very Appealing Range, Or Breakout..

Mon, Feb 16 2009, 05:51 GMT
by John Kicklighter

DailyFX

Like the EURGBP range setup from Thursday, the USDJPY position we are look at for Monday’s open is very risky. In fact, looking at the event risk on hand and the potential in technicals, it is clear that this is an extremely risk range – though one with expected returns to match this danger.

Why Would USDJPY Hold a Range?

Levels to Watch:
-Range Top: 92.25 (Fib, Pivot, Trend, SMA)
-Range Bottom: 87.15 (Fib, SMA)

There is extreme event risk on the horizon for USDJPY. First thing Monday morning in the Tokyo session, Asian traders will take in the first round measurements of fourth quarter Japanese GDP. The figures are expected to cross the wires with numbers that place the world’s second largest economy firmly within the technical parameters of a severe recession. And, should the market hold back on this, we still have risk trends and US data on tap.

While the pressure is building for USDJPY from a fundamental standpoint, the technical strain is perhaps even more severe. Friday’s rally has pushed the pair right up to the edge of a prominent wedge formation that happens to coincide with a previous swing high and notable 50 percent Fib at 92.25. This certainly threatens a breakout.

Suggested Strategy

Short: We will wait to see if the market starts to reverse on the open and put far reduced entry orders at 92.00.

Stop: Our initial stop will be set at 93.00. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (100) at 91.00. The second objective is deeper at 89.00.

Trading Tip – Like the EURGBP range setup from Thursday, the USDJPY position we are look at for Monday’s open is very risky.
In fact, looking at the event risk on hand and the potential in technicals, it is clear that this is an extremely risk range – though one with expected returns to match this danger. As a disclaimer, this setup is only for those that are very risk tolerant and are trading the market during the Tokyo hours or for those that are looking for a pair with substantial breakout potential. Regardless of your intentions, this pair should be treated with the utmost caution through the opening of the week. Japanese GDP data is due for release very early in the Asian session; and it certainly has market-moving potential to drive USDJPY to a massive breakout or sharp reversal in a very short time. Our suggested strategy looks to the range first. A much reduced entry order will be set just after the markets open up and it is clear that there has been no bullish gap over the weekend. Should there be a bullish response from the yen (bearish for USDJPY) to the data, we can build the position to full size as the strong technical range will be confirmed. Our relatively tight stop on the initial entry is relatively tight to account for the breakout potential; and to allow for quick entry for those looking for any bullish follow through in such a scenario. We will not put a time limit on this setup as it isn’t needed, but we will cancel all open orders should spot hit 90.75 or 92.75 before entry.

Event Risk US And Japan

US – For event risk, there are quite a few economic indicators set for release from the US docket next week; however, the market-moving potential behind the mix is lacking. Browsing the notables, we will see a lot of data that will try to play on well-established market biases. Capital flows due Tuesday will be of some interest considering the health of investor sentiment and the demand for safe haven assets and Wednesday’s housing data will measure a vital GDP computer. At the same time, both market and housing sector malaise are considered the dominant trend at this point. Alternatively, there has been growing interest in jobless claims data as economic the focus has shifted on the consumer’s role in sustaining growth. Friday’s CPI data will have an unusual influence as investors are no longer worrying about rate decisions, but rather the cost of living. It is also important to watch the dollar’s correlation to risk trends, especially with Fed Chairman Ben Bernanke set to testify during the week and Japan set to release its dour growth data.

Japan – It is a rare occasion when price action in the Japanese yen is actually driven by Japanese fundamentals; but this is likely the case next week. There are a few note-worthy pieces of event risk; but the primary interest for fundamental traders and for the purposes of our setup is Monday mornings GDP data. The world’s second largest economy is forecasted to have contracted an incredible 11.6 percent on an annualized basis. With the BoJ’s top economy recently saying the current quarter’s pace of growth is going to be “unimaginable” it isn’t hard to imagine that this data has the potential to significantly impact not only the long-term direction of the yen but its title as a reasonable safe haven (when there is a US and Swiss alternative) as well.


	Data for February 15 – February 22		Data for February 15 – February 22
Date (GMT)	US Economic Data	Date (GMT)	Japan Economic Data
17-Feb	Net Long-Term TIC Flows (DEC)	15-Feb	GDP Annualized (4Q P)
18-Feb	Housing starts (JAN)	16-Feb	Tertiary Industrial Index
19-Feb	Continuing Jobless Claims (FEB 7)	18-Feb	Bank of Japan Rate Decision
20-Feb	Consumer Price Index (JAN)	20-Feb	Bank of Japan Monthly Report

Published on Mon, Feb 16 2009, 05:51 GMT

High Risk And High Reward In The EURGBP Range Setup

Fri, Feb 13 2009, 05:56 GMT
by John Kicklighter

DailyFX

There is a high breakout risk from EURGBP over the next 24 hours as technical volatility meets the highly unstable, fourth quarter GDP numbers from Europe. However, the potential for data to meet or exceed recession forecasts could actually work in favor of the pair’s strong, technical range.

Why Would EURGBP Hold a Range?

Levels to Watch:
-Range Top: 0.9075 (Fib, Pivot, Trend, SMA)
-Range Bottom: 0.8630 (Fib, SMA)

Not only has the EURGBP seen substantial volatility recently through its connection to general risk trends and fundamental shifts; but this pair will have to deal with substantial event risk over the next 24 hours. The first readings on Euro Zone and German GDP are scheduled to hit the wires three hours apart for Friday’s European session. With the BoE Governor saying the UK is facing its worst recession since WWII, the European data will have a lot of leverage.

The EURGBP is facing just as much risk from a technical standpoint as it is from the fundamental side. A massive rally over the past three sessions has firmly set momentum behind bulls. This puts considerable pressure on resistance built around 0.9050/100 through a series of daily highs, 20-day SMA and 50% fib retracement of the last bear wave.

Suggested Strategy

Long: Half size (or smaller) entry orders will be placed at 0.9050 – a relatively aggressive level.

Stop: An initial stop at 0.9140 is relatively tight to account for the high breakout potential. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (90) at 0.8960. The second objective is 0.8780.

Trading Tip – There is a high breakout risk from EURGBP over the next 24 hours as technical volatility meets the highly unstable, fourth quarter GDP numbers from Europe. However, the potential for data to meet or exceed recession forecasts could actually work in favor of the pair’s strong, technical range. Looking at the technical and fundamental influences playing on this pair, it is clear that this is a setup only for those that are risk tolerant and working with a sound strategy. The German and Euro Zone growth numbers have considerable market-moving potential as they are the first readings and speculators are taking a greater interest in growth to forecast which economy will be the first to recover from its slump. The market will have to be disappointed by the data (whether or not an inline reading will be enough is uncertain) as momentum is in the bull’s court and the BoE Governor has laid out a forecast for a severe recession. Avoiding this trade altogether is the best policy for those that are cautious. However, even for the risk takers among us, they should be prepared with a strategy that uses relatively tight stop (not too tight as volatility could produce a significant tail after the release), close targets and reduce position size. We recommend using half or a quarter the size of normal lot size with this strategy. What’s more, we will be prepared to cancel open orders should spot hit 0.8950 before we are entered or before Friday’s close.

Event Risk Euro Zone And UK

Euro Zone – There is substantial event risk on the European economic dockets over the next 24 hours and beyond. To fully understand the impact this collective data may have on price action; we have to consider the general fundamental interest behind the euro over the past weeks and months. In this period speculation has wavered on the region’s economic health (compared to its major counterparts) and what it means for potential returns on European assets going forward. After the ECB announced it was holding rates unchanged this month, traders took this as a sign that perhaps the economy would see a recovery before the US and other comparable investment centers – and with a benchmark yield that holds a considerable advantage on the international market. Considering this growth benchmarking, there will be a sure focus on the GDP numbers. Expectations of annual contractions between 1.1 to 1.4 percent are modest, and leave a lot of room for surprise. Looking beyond the weekend, more timely PMI data will already set up 1Q data.

UK – Bank of England Governor Mervyn King has already set the tone for fundamental pound traders. Projections for the worst economic slump in decades, from what is supposed to be a conservative figure head, has lowered the yardstick for speculators.
From here on out, all data releases will have to fight a bearish current. Starting directly after the weekend, we will dive back into the worst hit sector in the economy so far – housing. Expectations for volatility after the CPI data and BoE minutes should be restrained. Rates are already expected to reach zero and the quarterly inflation report has already covered everything. Retail sales still holds some clout.


	Data for February 13 – February 20		Data for February 13 – February 20
Date	European Economic Data	Date	UK Economic Data
13-Feb	German GDP (4Q P)	15-Feb	Rightmove House Prices (FEB)
13-Feb	Euro Zone GDP (4Q P)	17-Feb	CPI (YoY) (JAN)
17-Feb	German ZEW Survey (FEB)	18-Feb	Bank of England Minutes
20-Feb	Euro Zone Composite PMI (FEB A)	20-Feb	Retail Sales (JAN)

Published on Fri, Feb 13 2009, 05:56 GMT

Strong Technicals Look To Compensate For Fundamental Risk In NZDUSD Range

Thu, Feb 12 2009, 06:07 GMT
by John Kicklighter

DailyFX

It is difficult to find a decent range setup that is not highly sensitive to highly volatile risk trends. NZDUSD cannot avoid the link to the back and forth in sentiment; but it does have a promising technical setup.

Why Would NZDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.5355 (Fib, Pivot)
-Range Bottom: 0.5180 (Trend, Fib, Pivot, SMA)

Risk trends are the primary fundamental concern for nearly every pair in the currency market. As the balance between risk and return settles once again into skepticism and losses, we can see that burgeoning trend bull trend in the yen crosses and com bloc are coming under pressure. However, with few events that can generate a market wide shift in sentiment on the docket, major levels could hold. Volatility from regular indicators is still a threat.

NZDUSD is still recovering from a temporary plunge to new multi-year lows through the past week. And, while recent momentum has favored the bullish reversal, we should not ignore the fact that the dominant trend is still with the bears. Through the short-term though, there is a notable selection of support that can hold up trend and range.

Suggested Strategy

Long: Entry orders will be placed at 0.5220 to account for the rising trendline.

Stop: An initial stop at 0.5160 is not far below hard support, but should cover the short trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (60) at 0.5280. The second objective is 0.5340.

Trading Tip – It is difficult to find a decent range setup that is not highly sensitive to highly volatile risk trends. NZDUSD cannot avoid the link to the back and forth in sentiment; but it does have a promising technical setup. Since reversing from a six-year low back on February 2nd, this pair has cut a relatively consistent advance in the form of steady trendline. And, while spot has recently pulled back on a notable bullish range break, we have seen this trend hold up with a confluence of technical support around 0.5180 to 0.5225 step in to secure a floor for price action. However, whereas this short-term setup looks promising, it is important to be cognizant of the risk of a breakdown considering the dominant trend (going back to the first quarter of last year) is bearish and that the market just recently tested a six-year low. With this in mind, we need to minimize risk. Through our strategy, we have set a relatively aggressive entry, set a stop just wide enough to cover the short-term rising trendline and range support, and we have placed our targets at reasonable levels. Nonetheless, traders that are already in a position that looks to ‘go long’ risk should not double their exposure through this setup. Furthermore, with event risk building and the weekend approaching, we will cancel any open orders before Friday’s US consumer confidence data.

Event Risk New Zealand And US

New Zealand – The New Zealand dollar is still the market’s ultimate high yielder amongst the majors after RBNZ Governor Alan Bollard announced his intentions to slow the pace of any further rate cuts he takes. With a 3.50 percent benchmark that could very well ride out the rest of the global recession without further undermining its advantage over its liquid counterparts, this currency looks ripe for those speculators that represent the leading edge of bulls. At the same time, any severe blows to investor confidence will deliver a significant shock to the kiwi. For more accountable fundamentals, there are a series of notable economic releases on the economic docket. For our entry time frame, our primary concern is the December and fourth quarter retail sales data. Domestic growth is still a relatively overlooked factor for this currency; but the severity of its local slump will have a greater and greater influence going forward.

US – In contrast to the kiwi’s status as the key high yielder, the US currency remains one of the market’s most sought after safe havens. With the liquidity and security of treasuries behind the currency there is a constant support for the greenback. However, with the government inflating its budget deficit and the concept of risk/reward blurring; we may see the dollar has a more involved reaction to data that feeds into expectations for economic growth. For the remainder of this week, we will see two key consumer readings (especially in terms of growth). Timely retail sales and confidence figures will benchmark expectations for the consumers’ contribution to first quarter growth.


	Data for February 11 – February 19		Data for February 11 – February 19
Date	New Zealand Economic Data	Date	US Economic Data
Feb 11	REINZ house Sales (JAN)	Feb 12	Advanced Retail Sales (JAN)
Feb 12	Retail Sales (DEC)	Feb 13	U. of Michigan Confidence (FEB P)
Feb 15	Performance of Services (JAN)	Feb 17	Net Long-Term TIC Flows (DEC)
Feb 15	Producer Prices – Output (4Q)	Feb 18	Housing Starts (JAN)

Published on Thu, Feb 12 2009, 06:07 GMT

A Close EURCHF Wedge Will Test Volatility For Range Potential

Wed, Feb 11 2009, 06:02 GMT
by John Kicklighter

DailyFX

With risk trends prompting high volatility from the currency market, any range setups require a sound fundamental and technical foundation to minimize the potential for a breakout should the entire currency market shudder once again. EURCHF delivers on both fronts – though it too is still exposed to the elements.

Why Would EURCHF Hold a Range?

Levels to Watch:
-Range Top: 1.5150 (Fib, SMAs)
-Range Bottom: 1.4900 (Trend, Fib, Pivot)

The euro crosses suffered from the same dramatic flux in volatility that the dollar, pound and yen crosses saw over the past 24 hours. This link between risk trends and growth forecasts reveals the building fundamental pressure that may redefine dominate trends for should a consensus form for global growth and financial stability. EURCHF is exposed to these same whims, but the close link between the countries helps to dampen the swings.

Congestion has been a prominent feature of EURCHF price action since the turn of the year. However, the bullish bias that has developed from lows over the past month has raised the level of uncertainty. A rising trend and notable 50% call a relatively clear 1.49 on the short-term; but horizontal resistance at 1.5150 is far more blatant.

Suggested Strategy

Long: Entry orders will be placed at 1.4915 - very close to the rising trendline, but necessary.
Stop: An initial stop at 1.4865 is set intentionally close as we are only looking at the rising wedge. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (50) at 1.4956. The second objective is 1.5040.

Trading Tip – With risk trends prompting high volatility from the currency market, any range setups require a sound fundamental and technical foundation to minimize the potential for a breakout should the entire currency market shudder once again. EURCHF delivers on both fronts – though it too is still exposed to the elements. We are essentially looking at the same setup that was laid out late last week; but further up the prevailing trendline. Previously, our range trade was following this developing, rising wedge formation; yet we would miss out on the rally as the market was already on the move. We are looking again to the same ascending wedge formation; but this time we have less range to work with. What’s more, the market has just recently cooled after a sharp intraday plunge. Therefore, it is necessary to adjust the position. As we are looking to trade only this wedge formation, we have set our stop relatively tight; which further allows us to adjust our targets closer (an advantage if volatility and technicals both hold up). Considering how narrow our range is and the presence of significant event risk at the end of the week, we will cancel any open orders by Thursday or should spot hit 1.5025 first.

Event Risk Euro Zone And Switzerland

Euro Zone – The euro was run through the ringer over the past 24 hours – suggesting this FX bulwark isn’t immune to the wide reach of risk trends. Fundamental speculation behind this currency is only expected to rise going forward as traders now try to price in interest rate expectations and the region’s relative pace of recession. This past week, the ECB held its benchmark lending rate unchanged at 2.00 percent, leading economists and traders to wonder whether the central bank was done lowering its primary rate for this cycle. However, financial market and economic conditions imply this is an unlikely outcome. Nonetheless, the overnight index swaps (measured by Credit Suisse) price in only 25 basis points of additional easing over the next twelve months. To clear the air, Thursday’s monthly report from the ECB will clarify the fundamentals that policy members have to work with when making future votes. Far more prominent though will be the first readings of 4Q GDP for the Euro Zone and its members come Friday – defining and clear data.

Switzerland – Risk trends are still the primary driver for Swiss franc; and today’s price action no doubt confirms that. With a target short-term LIBOR rate at 0.50 percent, the currency is now a key deleveraging currency as the potential for fluctuation in underlying yields is now minimized. From an economic perspective, the docket will make a modest effort to confirm the SNB’s forecast that a localized recession is unavoidable and offer some evidence for just how deep the slump may eventually become.
Tomorrow, the SECO consumer climate report will offer a key reading on consumer spending which will be further backed by next week’s retail sales report. Aside form this, the producer and import inflation report will reveal the price pressures behind the developing recession and the pressure with which the SNB will be under to further lower rates or otherwise pursue unusual efforts to stabilize the economy.


	Data for February 11 – February 18		Data for February 11 – February 18
Date	European Economic Data	Date	Swiss Economic Data
Feb 12	ECB Publishes Monthly Report (FEB)	Feb 12	SECO Consumer Climate (JAN)
Feb 13	German GDP (YoY) (4Q P)	Feb 13	Producer & Import Prices (YoY) (JAN)
Feb 13	Euro Zone GDP (YoY) (4Q A)	Feb 17	Retail Sales (Real) (YoY) (DEC)
Feb 17	German ZEW Survey (FEB)

Published on Wed, Feb 11 2009, 06:02 GMT

AUDNZD May Be Buffered To Risk Trends But Its Range Is Still Exposed To Volatility

Tue, Feb 10 2009, 06:09 GMT
by John Kicklighter

DailyFX

Is the currency market in the middle of a significant shift in sentiment? With the majors pointing towards possible trend reversals and many of the liquid crosses already on their way, this seems to be a legitimate possibility. Few pairs can hope to avoid this broad market driver; but if any exchange rate can, it would be AUDNZD.

Why Would AUDNZUD Hold A Range

Levels to Watch:
-Range Top: 1.2750 (Range High)
-Range Bottom: 1.2550 (Trend, Fib, Pivot)

For many of the majors and most liquid crosses, the market is hanging on edge of determining major trends. This imbalance carries significant weight for the entire currency market as major waves of buying and selling in a single currency through a very liquid pair often spills over to the crosses. On this front, AUDNZD is well positioned. Both currencies back commodity exporters whose central banks have slowed their pace of cut and growth has cooled.

For price action, congestion from the past two week is obvious - though the levels may be somewhat blurred. Our primary interest is in support as we are looking to follow the steady rising trend that has been in place since the sharp October reversal. However, aside from a short-term rising trendline, this floor is relatively lacking in support.

Suggested Strategy

Long: Half-sized entry orders will be placed at 1.2560 – just above Monday’s intraday low.

Stop: An initial stop at 1.2460 is set wide enough to cover the next range of lows. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (100) at 1.2660. The second objective is 1.2760.

Trading Tip – Is the currency market in the middle of a significant shift in sentiment? With the majors pointing towards possible trend reversals and many of the liquid crosses already on their way, this seems to be a legitimate possibility. Few pairs can hope to avoid this broad market driver; but if any exchange rate can, it would be AUDNZD. From a fundamental standpoint, this pair mutes the influence of risk trends as it is comprised of two key high yielders. This should offer a considerable fundamental buffer for the pair – though there will still be the usual exposure to scheduled event risk and any intense swings in risk appetite. Looking at the technical set up, it is important to hold with the dominant trend – even if resistance seems more stable. We have lowered position size so that our stops can be placed below the next level’s swing low without leveraging the potential for notional losses.
At the same time, this range is severely limited for room; and so our first target is already 50 percent of the zone while the second looks for the entire range (which lowers the probability of taking profit – especially within a reasonable time frame). On the other hand, considering the dominant trend is bullish, a break is more likely to support our positioning. We will cancel all open orders by Australia’s data flow on Wednesday.

Event Risk Australia And New Zealand

Australia – Against its more risk-sensitive counterparts, the Australian dollar is experiencing a hearty rally. This isn’t based on traditional fundamentals (as the economy has slowed just like its larger G10 counterparts) but more in risk appetite. A rebound in yield demand can be seen through many key currencies – particularly the US dollar and Japanese yen. For the Australian dollar, the perk in optimism has leveraged recent speculation that the central bank would take a more neutral stance on monetary policy after its most recent 100 basis point rate cut. However, a true turn in sentiment will take considerable effort across all asset classes that will likely take a large major fundamental driver. In the meantime, the scheduled docket will threaten immediate - if not short-lived - volatility. Business and consumer confidence are notable guides for growth, but true precedence is found in Wednesday’s labor data.

New Zealand – Like its Australian counter-part, the New Zealand dollar is taken direction and momentum from the level of risk trends behind the markets. However, this currency may prove more attuned to demand for return than its complement as the RBNZ maintains a slight yield advantage over the Aussie dollar and Governor Alan Bollard has explicitly stated his intention to slow the pace of any further rate reductions going forward. As for the more mundane economic calendar, there is enough event risk to present a potential problem for a range. The lagging government retail sales report for December (due Thursday) will be preceded by Tuesday’s electronic card sales for January. Add to that the threat of an impending release on home sales and the consumer may redefine the kiwi’s trend.


	Data for February 10 – February 17		Data for February 10 – February 17
Date	Australian Economic Data	Date	New Zealand Economic Data
Feb 10	Westpac Consumer Confidence (FEB)	Feb 9-14	REINZ House Sales (JAN)
Feb 10	Investment Lending (DEC)	Feb 10	NZ Card Spending (JAN)
Feb 11	Employment Change (JAN)	Feb 12	Retail Sales (DEC)
Feb 11	NAB Business Confidence	Feb 15	Performance of Services (JAN)

Published on Tue, Feb 10 2009, 06:09 GMT

Short Term Chop Sets Up A USDCAD Range For Early Next Week

Mon, Feb 9 2009, 06:35 GMT
by John Kicklighter

DailyFX

There is a lot of pent up energy behind the currency market with the yen and pound crosses driving significant drives and the many of the majors positioned for trend-defining breakouts. This raises the appeal of USDCAD when searching for range setups as the close fundamental trade links and long-term congestion are marks of a sound congestion play.

Why Would EURCHF Hold a Range?

Levels to Watch:
-Range Top: 1.2530 (Pivot, Fibs)
-Range Bottom: 1.2225 (Trend, Pivot, Fibs)
Volatility for USDCAD has been extraordinarily high over the past 12 hours thanks to the releases of both the US and Canadian employment reports. However, the pair has yet to stray outside of its technical boundaries – a reflection both of the equally news-worthy reports and the general, fundamental link between the two economies. Looking ahead to next week, scheduled event risk is light, but the US stimulus effort may rouse volatility.
Technically, USDCAD has built a very broad range for months; but recently this has turned to congestion with ill-defined boundaries. Recent, chop has developed relatively clear limits near 1.2525 and 1.2225. Resistance is developed through the 61.8% Fib of the Dec 5th to Jan 6th bear wave and support is the 38.2% retracement of the same move.

Suggested Strategy

Long: Half-sized entry orders will be placed at 1.2260 after the weekend confirms a hold.
Stop: An initial stop at 1.2180 is relatively tight for such aimless chop, but decent for the range. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (80) at 1.2340. The second objective is 1.2420.

Trading Tip – There is a lot of pent up energy behind the currency market with the yen and pound crosses driving significant drives and the many of the majors positioned for trend-defining breakouts. This raises the appeal of USDCAD when searching for range setups as the close fundamental trade links and long-term congestion are marks of a sound congestion play. Considering the US is Canada’s biggest trade partner and vice versa, these two countries have a tight fundamental link which has had an indelible influence on the exchange rate. At the same time, this anchor on price action has also left USDCAD with the habit of ignoring significant technical levels. Moderate levels of resistance and support are often run with ease. Therefore, our strategy needs to take a cautious approach. Entry should be held off until after the weekend to confirm there are no breaks before the liquidity vanishes and we are stuck in a bad position. Confirmation that support is holding up is essential come the Monday open for the Far East. Should we be entered, our stop is held very close considering the frequency of failed technicals we have seen from this pair; but if our range fails, we wouldn’t want to be in an aimless trade. There is a smattering of notable indicators next week and this range is very narrow; so we will cancel all open orders by Tuesday.

Event Risk US And Canada

US – Over the past two weeks, the US docket has set a severe pace for its recession, showed the Fed has few options left to stabilize the economy and employment data showed the worst rate of job losses for the world’s largest economy on record. Through all of this, however, the dollar has not seen a significant shift in trend. With fundamentals fully priced in and the sense of risk maintaining the currency’s safe haven status, there are contradicting influences balancing the dollar’s demand. Looking ahead to next week though, this equilibrium may be tested. The US senate is expected to come to a decision on the President’s estimated $900 billion financial stimulus plan, which could fundamentally shift risk considerations. The economic docket could alter boost activity as well. Trade, retail sales and consumer confidence numbers will refine expectations for first quarter growth – the next major barometer for relative strength.

Canada – The Canadian dollar was shaken up today after Statistics Canada reported a record 129,000 jobs lost through January. This will likely lead the consumer to take on the role as the biggest fundamental weight on growth going forward; which could impart the slump with enough momentum to undo expectations for a relatively quick recovery on improved exports and credit conditions. This will further unnerve long-term bulls and make the currency that much more sensitive to disparaging economic data. From the docket, there are a few indicators that can stir this kind of interest. Housing starts will offer another gauge of consumer wealth – now a major component of growth. Also interesting will be the physical trade and capital flow balance reports. Are Canada’s markets and economy really that strong? These indicators will offer a benchmark.


	Data for February 9 – February 16		Data for February 9 – February 16
Date	US Economic Data	Date	Canadian Economic Data
Feb 11	Bloomberg Global Confidence (FEB)	Feb 9	Housing Starts (JAN)
Feb 11	Trade balance (DEC)	Feb 11	International Merchandise Trade (DEC)
Dec 12	Advanced Retail Sales (JAN)	Feb 16	Int’l Securities Transactions (DEC)
Feb 13	U. Of Michigan Confidence (FEB P)

Published on Mon, Feb 9 2009, 06:35 GMT

A Wide Trading Zone And Fundamental Buffer Secure A EURCHF Range

Fri, Feb 6 2009, 05:40 GMT
by John Kicklighter

DailyFX

With the pound and yen crosses both winning significant breakouts (even if much of the initial surge has been retraced) and many of the majors positioned for something similar on tomorrow’s NFPs, conditions are generally unfavorable for range trading. However, with a fundamentally-buffered EURCHF comfortably positioned in the middle of its own congestion band, a range may be a good setup.

Why Would EURCHF Hold a Range?

Levels to Watch:
-Range Top: 1.5175 (Pivot, SMAs)
-Range Bottom: 1.4825 (Trend, Fib)

The ECB rate decision has come and gone without a major break from EURCHF. While this event itself would end up as a dud for a market mover, this pair is nonetheless buffered from most significant pieces of scheduled event risk. As major trade partners whose interest rate policies tend to track each other, there is rarely an economic shock that can drive a significant break. Surges in general risk trends, on the other hand, is a different story

Technically, the EURCHF range is somewhat lacking in well-defined boundaries. This is a problem should momentum or volatility develop when spot is hovering near one of the range limits. Support is seen in a confluence of a swing low, trend and Fib all around 1.4825/55. Our interest though lies with the far more obvious 1.5175/200 pivot.

Suggested Strategy

Short: Half-sized entry orders will be placed at 1.5140 – well below the late January swing high.
Stop: An initial stop at 1.5240 covers the range with enough room for a modest false breakout. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 1.5040. The second objective is 1.4940.

Trading Tip – With the pound and yen crosses both winning significant breakouts (even if much of the initial surge has been retraced) and many of the majors positioned for something similar on tomorrow’s NFPs, conditions are generally unfavorable for range trading. However, with a fundamentally-buffered EURCHF comfortably positioned in the middle of its own congestion band, a range may be a good setup. The fact that this pair is in the middle of its congestion band (between 1.5200 and 1.4800) means that any sudden shocks to risk appetite (the true driver for price action behind this pair) will be spent in moving spot closer to the range boundaries. Considering there is only one full trading session left and considerable room to cover before the market reaches the range boundaries, this may be a setup that isn’t triggered into the first half of next week. As such, we will cancel any lingering, open orders by Wednesday. Alternatively, a confirmed reversal from support could offer an equally attractive setup within the same time frame.

Event Risk Euro Zone And Switzerland

Euro Zone – The potential for volatility in Euro-Zone event risk may have peaked this week with the passing of the ECB’s rate decision, but there is plenty of data scheduled for release over the coming week to keep the market busy. To finish out the rest of this week, the German physical trade report will take a unique reading for growth and exchange rates. Ultimately though, its leverage on price action is minor – especially with the weekend bearing down on liquidity. After the weekend, there is a lull until Thursday when the ECB releases its monthly report for February. Expectations will be reserved though as central bank president Trichet likely covered most of the report’s findings in his address to the public after the rate decision. Top scheduled, event risk comes on Friday with the first reading of fourth quarter GDP for the Euro Zone and Germany. So far we have seen the UK’s number come relatively in line while the US crossed the wires better than expected. Until recently, optimism surrounding the European economy and its yield potential were holding up pretty well. Should this data disappoint their already low forecasts, it could seriously undermine the euro’s fundamental strength.

Switzerland – Scheduled economic data and general risk trends both present the threat of volatility for the Swiss franc. From the docket, Friday’s unemployment report will act as a general – but lagging – gauge of health for the small economy. With the economy just starting to tip into its own recession, a jump in the jobless rate will certainly lower expectations on the expected bottom to the developing recession. After the weekend, there will be two indicators: one for inflation and the other for consumer spending. Both will likely be burdens for the Swiss benchmark lending rate and the SNB’s next meeting in March, but their volatility is likely limited. The true driver for price will be swells in general risk. This Friday’s US NFPs or next Friday’s European GDP may catalyze the move, but a true shift in sentiment needs to truly get the market moving.


	Data for February 6 – February 13		Data for February 6 – February 13
Date	European Economic Data	Date	Swiss Economic Data
6-Feb	German Trade Balance (DEC)	6-Feb	Unemployment Rate (JAN)
12-Feb	ECB Monthly Report (FEB)	10-Feb	Consumer Price Index (JAN)
13-Feb	German GDP (4Q P)	12-Feb	SECO Consumer Climate (JAN)
13-Feb	Euro Zone GDP (4Q A)

Published on Fri, Feb 6 2009, 05:40 GMT

AUDNZD Range May Survive Coming Volatility And Provide A Good Setup

Thu, Feb 5 2009, 05:44 GMT
by John Kicklighter

DailyFX

Over the next 48 hours, currency market volatility will be stoked by two key central bank rate decisions and the defining US non-farm payrolls report. With the most liquid currency pairs positioned for major breakouts, such tremendous event risk exposes any range setup to danger.

Why Would AUDNZD Hold a Range?

Levels to Watch:
-Range Top: 0.8015 (Trend, Pivot, Fib, SMA)
-Range Bottom: 0.7735 (Channel Bottom, Fib)

There is substantial event risk from the majors over the next 48 hours of trade. Considering many of the market’s most liquid currency pairs are are already threatening to break out of tight congestion bands at the very edge of multi-year lows and highs, the presence of Friday NFPs and the BoE and ECB rate decisions tomorrow makes it very dangerous to search seek a range trade. However, only broad shifts in risk really threaten AUDNZD

Congestion that has developed for AUDNZD over the past week comes with only modest boundaries. A short setup on the range high around 1.2750 this morning would have led to a descent position; but it would have gone against the dominant trend. Instead, we are looking at the trend/fib confluence around 1.2475 as a key level to base a range on.

Suggested Strategy

Long: Half-sized entry orders will be placed at 1.2505 – short of for the trend, but not the range.
Stop: An initial stop at 1.2415 is wide enough to cover the rising trend range low. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (90) at 1.2595. The second objective is 1.2685.

Trading Tip – Over the next 48 hours, currency market volatility will be stoked by two key central bank rate decisions and the defining US non-farm payrolls report. With the most liquid currency pairs positioned for major breakouts, such tremendous event risk exposes any range setup to danger. However, isolating risk through technicals and fundamentals as much as possible, the risk / reward on AUDNZD may offer a worthwhile position for risk tolerant traders. A bearish reversal this morning from this pair at resistance confirmed a broad range; but this pullback actually goes against the market’s dominant trend. With a confluence of technicals calling up support at 1.2475, there is a clear entry on a larger bullish bias. Our stop is relatively tight to avoid the potential for market-wide volatility over the coming days; and we are looking for nearby targets to insure we aren’t in the market for too long. We will cancel all open orders before the week ends.

Event Risk Australia And New Zealand

Australia – The Australian indicator with the greatest market moving potential (the RBA rate decision) has come and gone; and there is little reason to believe it will have a lasting influence on volatility. However, this does not mean that the currency is in the free and clear from a fundamental perspective. There is actually considerable risk on the docket ahead. Up next, the RBA Quarterly policy statement is the only notable indicator for the remainder of the week; but considering the RBA has already announced rates, expectations for a reaction are reserved. Beyond the weekend, we will receive confidence indicators from both the business and consumer sectors to forecast the pace of growth through the first quarter. Top event risk comes next Wednesday morning’s employment report for January. Outside of the calendar, the Aussie dollar’s correlation to general risk trends may also present a threat to price action. An eye should be kept on USDJPY and the Dow for guidance on sentiment.

New Zealand – There are two primary, fundamental drivers for kiwi price action: rate decisions and growth. The RBNZ has already announced its intention to throttle back on its steady pace of rate cuts; but growth has filled the bearish void and kept the currency under pressure. Governor Alan Bollard has already projected an unavoidable recession and financial conditions have certainly deteriorated with time. From the scheduled economic docket, there are only two market-worthy indicators that threaten long-term fundamentals or immediate volatility. Next Wednesday’s retail sales report will end the fourth quarter measurement and offer one of the best benchmarks for economic activity. What’s more, with the RBNZ suggesting it will slow its rate cuts, the kiwi may keep its appeal as a carry currency and thereby see a higher correlation to general risk trends.


	Data for February 5 – February 12		Data for February 5 – February 12
Date	Australian Economic Data	Date	New Zealand Economic Data
Feb 5	RBA Quarterly Monetary Policy Statement	Feb 8	QV House Prices (YoY) (JAN)
Feb 9	NAB Business Confidence (JAN)	Feb 12	Retail Sales (DEC)
Feb 10	Westpac Consumer Confidence (FEB)
Feb 11	Employment Change (JAN)

Published on Thu, Feb 5 2009, 05:44 GMT

A Clear AUDCAD Channel Sets Up A Strong Range Should Momentum Turn

Wed, Feb 4 2009, 05:45 GMT
by John Kicklighter

DailyFX

Viable ranges are few and far between for the currency market; and those that are around are being threatened by significant event risk. AUDCAD has both volatility and economic releases working against it; but a sound strategy could set up a strong trade.

Why Would CHFJPY Hold a Range?

Levels to Watch:
-Range Top: 0.8015 (Trend, Pivot, Fib, SMA)
-Range Bottom: 0.7735 (Channel Bottom, Fib)

The first wave of event risk for AUDCAD has come and passed. The RBA rate decision held considerable market potential; but the event would merely sustain a pre-established trend. There is still plenty of scheduled event risk on the economic docket; but the only high level release is Friday’s Canadian labor report. Aside from the scheduled data, there is a modest correlation to risk trends in this pair; though that too has been relatively mute.

AUDCAD congestion comes with a bias. A descending trend channel has established boundaries for the pair’s steady rallies and declines since the bearish reversal back on the 19th. A short bias clearly aligns itself to market direction. Adding weight to a potential reversal, we also have a 38.2% Fib, 50-bar SMA and pivot all falling around 0.8015.

Suggested Strategy

Short: Entry orders should come on a trend break, but hard levels can be set at 0.7985.

Stop: An initial stop at 0.8045 is tight as this set up is based on the trend channel alone. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (60) at 0.7935. The second objective is 0.7835.

Trading Tip – Viable ranges are few and far between for the currency market; and those that are around are being threatened by significant event risk. AUDCAD has both volatility and economic releases working against it; but a sound strategy could set up a strong trade. The first thing to note with our strategy is that the entry is a hard level for a short; yet momentum has not turned from a very consistent trend. A hard entry should only be taken by those that believe a reversal is inevitable at this level; otherwise, a confirmed turn from a short-term trendline break would be the better approach. Other notable components of our setup are a close stop and rather reserved target. A stop at 0.8050 is very close; but since are primary formation is the falling trend channel; we would not want to be in this position should resistance start to break as it would change the technical layout.
Our first objective equals risk as usual, but our second target does not look to take advantage of the falling channel formation as we do not want to press our luck or stay with the trade for too long (and allow momentum to die out). We will cancel all open orders and tighten stops on existing positions before Friday’s Canadian employment report.

Event Risk Australia And Canada

Australia – The Australian indicator with the greatest market moving potential (the RBA rate decision) has come and gone; and there is little reason to believe it will have a lasting influence on volatility. However, this does not mean that the currency is in the free and clear from fundamental influence. There is actually considerable risk on the docket ahead. Tonight, we will see the frequent volatility stoking retail sales report for December. Few indicators are as accurate in gauging the consumer’s contribution to overall growth as this one; so this indicator may very well decide direction in the short-term wedge that has developed since Monday’s reversal. For the rest of the week, only the RBA Quarterly policy statement will populate the top tier for economic data; but considering the RBA has already announced rates, expectations for a reaction are reserved. Outside of the calendar, the Aussie dollar’s correlation to general risk trends may also present a threat to price action. An eye should be kept on USDJPY and the Dow for guidance on sentiment.

Canada – In contrast to the Australian docket (which is cooling as time goes on), the Canadian calendar presents growing risk as the week wears on. Thursday brings the Ivey PMI report for January. A sound reading for business activity, this indicator will help adjust the outlook for the nation’s recession; but its influence on general growth and immediate loonie volatility will be trumped by the labor data due Friday. A consistent, top market-moving indicator, the employment report can gauge the consumer’s contribution to the economy and offer a direct comparison between Canadian and US health. This is certainly an indicator to avoid – especially if there is the potential for an unfavorable breakout before its is released.


	Data for February 4 – February 11		Data for February 4 – February 11
Date	Australian Economic Data	Date	Canadian Economic Data
Feb 4	Retail Sales (DEC)	Feb 5	Ivey Purchasing Mangers Index (JAN)
Feb 5	RBA Quarterly Monetary Policy Statement	Feb 6	Net Change In Employment (JAN)
Feb 9	NAB Business Confidence (JAN)	Feb 9	Housing Starts (JAN)
Feb 11	Employment Change (JAN)	Feb 11	International Merchandise Trade (DEC)

Published on Wed, Feb 4 2009, 05:45 GMT

CHFJPY Buffered Against Heavy Event Risk While Cutting A Mature Wedge

Tue, Feb 3 2009, 05:56 GMT
by John Kicklighter

DailyFX

There is a considerable amount of scheduled event risk on the economic docket this week – posing a considerable threat to the stability in potential range setups. One pair that will avoid much of the initial volatility present in this worrisome list and defer to the underlying fundamentals is the technically active CHFJPY.

Why Would CHFJPY Hold a Range?

Levels to Watch:
-Range Top: 74.75 (Trend, Pivot, Fib, SMA)
-Range Bottom: 75.85 (Range Bottom, Fib)
There is a lot of scheduled event risk for the currency market in general over this coming week; but CHFJPY will likely avoid the volatility inherent in the high-level data and instead follow along with the underlying trends that develop from the wave. In all likelihood, neither the Franc nor the yen will respond to their respective economic dockets. As two key safe haven currencies, the real driver will be the intensity of risk trends over the coming week.
Looking at the short-term and longer-term CHFJPY chart, we can see two distinct technical setups. From a daily chart, the past four months’ worth of price action has developed two descending triangle formations with a blurred support around 76-75. Zooming in, we can see the trend pulling price action lower with considerable resistance overhead.

Suggested Strategy

Short: Entry orders on a break of the falling trend can be set at 77.55 – right on the pivot.
Stop: An initial stop at 78.15 is wide, but does not cover the falling trend just yet. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (60) at 76.95. A second target is 76.35.

Trading Tip – There is a considerable amount of scheduled event risk on the economic docket this week – posing a considerable threat to the stability in potential range setups. One pair that will avoid much of the initial volatility present in this worrisome list and defer to the underlying fundamentals is the technically active CHFJPY. Both the Japanese yen and Swiss franc are known for ignoring scheduled data and taking direction instead from market-wide risk trends. Such a correlation could present its own problems; but this pair goes one more step at buffering fundamental volatility by setting the two currencies against each other. This means, that the primary driver of CHFJPY will ultimately be the intensity of risk trends and the market’s decision as to which currency is the better harbor from risk. Looking beyond the docket, there is further a strong technical case for a range setup from this pair. Currently, the market is cutting the second, wide descending wedge formation; which happens to have a bearish bias and 200-250 points of wiggle room. Despite the favorable setup, we will still look to avoid unnecessary risk by canceling all open orders by Wednesday.

Event Risk Switzerland And Japan

Switzerland – The Swiss franc is the lesser safe haven when compared to its Japanese counterpart. Nonetheless, this currency will still find is direction in the currency market through scheduled and unscheduled event risk that can stir volatility among the fundamentally-minded traders in the market. A specific piece of external event risk that could have a profound impact on the swissie is the ECB rate decision. The Swiss economy and central bank are known for following their larger European counterpart.
Should European rates be unexpectedly cut, the franc would find itself falling in sympathy to the euro. Looking at the Swiss docket, there is plenty of data to alter expectations for long-term fundamentals. The December trade report and January labor report are two key readings for general growth. The CPI figure will have limited influence on interest rate decisions going forward (as the benchmark is already at 1.00 percent); but it will nonetheless tell the market how easy it will be for the SNB to pursue rate cuts going forward.

Japan – The Japanese yen is the undisputed safe haven currency. Long known as the primary carry currency, the Japanese unit is further prized for the depth of the economy that backs it and the significant amount of savings that naturally supports the financial market in times of stress. This title will prove particularly influential through this week’s key economic releases: the RBA, ECB and BoE rate decisions as well as Friday’s US NFPs. From its own docket, there is plenty of data that could help define the health of the Japanese economy – especially within the context of the position of the global economy. Taking the read on consumers, measures of earnings and confidence will take weight of their potential contributions to growth. In other news, the Eco Watchers survey will measure business activity while the Leading Index for December takes stake on growth through early released indicators.


	Data for February 3 – February 10		Data for February 3 – February 10
Date	Swiss Economic Data	Date	Japanese Economic Data
Feb 3	Trade Balance (DEC)	Feb 2	Labor Cash Earnings (YoY) (DEC)
Feb 6	Unemployment Rate (JAN)	Feb 6	Leading Index (DEC P)
Feb 10	CPI (YoY) (JAN)	Feb 9	Eco Watchers Survey: Outlook (JAN)
		Feb 10	Consumer Confidence (JAN)

Published on Tue, Feb 3 2009, 05:56 GMT

High Risk And High Reward On A EURUSD Range Setup

Mon, Feb 2 2009, 05:53 GMT
by John Kicklighter

DailyFX

Many of the market’s most liquid currency pairs are on the edge of major breakouts, rending any potential range trade a high risk proposition. One that certainly holds its weight in risk – but that also establishes an equally enticing potential for return – is EURUSD.

Why Would EURUSD Hold a Range?

Levels to Watch:
-Range Top: 1.3350 (Pivot, Fib, SMAs)
-Range Bottom: 1.9525 (Trend, Double Bottom)

The most liquid pair in the currency market is hanging on the edge of a significant breakout; and many of its less active counterparts are following suit. Clearly, this is a precarious position to call a range; however, without a fundamental driver, a break may be difficult to accomplish. While there is significant event risk in Thursday’s ECB rate decision and Friday’s non-farm payrolls, that leaves three active sessions free of data.

A range on EURUSD is a dangerous proposition from a technical standpoint as well. While the rising trend and possible double bottom at 1.2775 are encouraging, it is hard to ignore the significant momentum behind the short-term (hourly) bear trend and the general bias on the higher time frame as well. At this point, resistance is more substantial.

Suggested Strategy

Short: Half-size (or smaller) entry orders on a break of the falling trend can be set at 1.2860.

Stop: An initial stop at 1.2720 is below the range bottom to account for potentially high volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (140) at 1.3000. A second target is 1.3140.

Trading Tip – Many of the market’s most liquid currency pairs are on the edge of major breakouts, rending any potential range trade a high risk proposition. One that certainly holds its weight in risk – but that also establishes an equally enticing potential for return – is EURUSD. Such a setup is only for those comfortable with risk; and even with a healthy appetite for danger, we still need to lay out a sound strategy to avoid the significant threat of an unfavorable breakout. The most immediate issue is the steady, bearish momentum derived over the final two sessions of trade this week. We need to see a break from trend to signal the potential for a reversal on nearby support. Therefore, a close from a higher time frame bar (60, 240-minute) that breaks this trend would be best. However, for a hard level, we have set 1.2860 as that level. Our stop is wide enough to cover our range low with a modest buffer- but nothing that will absorb too much loss on a genuine breakout. The first suggested target cover risk; but the second is very aggressive considering the market’s bias. Momentum is more important to taking profit than a hard-fast level. Another key issue is to avoid the major event risk on both sides of the pair. We will cancel all open orders, and tighten stops on active positions, before Thursdays ECB rate decision.

Event Risk Euro Zone And US

Euro Zone – While the economic docket thins out somewhat for the euro (a significant amount of German data has been released over the past two weeks), those indicators on the calendar have real market-moving potential. Topping the list is the European Central Bank’s rate decision scheduled for Thursday. The policy authority has steadily lowered its benchmark lending rate for a number of months and the market has become conditioned to expect the group to maintain their pace towards the zero interest rate policy that the world seems to be pursuing. However, bank President Jean Claude Trichet has disturbed the market’s comfortable sense of certainty when after the last policy meeting he suggested that the next important meeting wasn’t until March. From the usually transparent policy maker, this is taken as a clear sign as a pause in February. Other than scheduled event risk, the euro may also find volatility from the euro’s general economic outlook. With debt downgrades, disparity in member economy recessions and isolated bailout efforts, serious doubt is growing over the health of the world’s second most liquid currency.

US – A significant wave of event risk has passed for the US dollar this week, but there will be no rest for fundamental traders in the days ahead. In effect, this past week’s FOMC rate decision and 4Q GDP reading reminded us what the true underlying trend really are for the world’s reserve currency. The rate decision passed (as expected) without a real change in rates (as they are essentially at zero) or a notable shift in the Fed’s creative efforts to ease the economic and financial crunch. Equally disturbing was the sharpest decline in growth in 26 years. This highlights the trouble the world’s largest economy is still facing despite all the government’s efforts. The economic outlook will remain in focus with spending, credit, factory and service sector activity, and finally employment readings. This will offer a timelier read on the pace of growth following the better-than-expected 4Q growth numbers.


	Data for February 2 – February 9		Data for February 2 – February 9
Date	European Economic Data	Date	US Economic Data
Feb 3	German Retail Sales (DEC)	Feb 2	Personal Spending (DEC)
Feb 4	Euro Zone Retail Sales (DEC)	Feb 2	ISM Manufacturing (JAN)
Feb 5	ECB Rate Decision	Feb 5	ISM Non-Manufacturing (JAN)
		Feb 6	Non-Farm Payrolls

Published on Mon, Feb 2 2009, 05:53 GMT

Clear EURAUD Congestion Threatened By Next Week's Rate Decisions

Fri, Jan 30 2009, 05:50 GMT
by John Kicklighter

DailyFX

Where many of the currency market’s most liquid pairs are riding out short-term bursts in momentum or are otherwise positioned for potential breakouts; EURAUD has actually found itself in a very stable band of congestion.

Why Would EURAUD Hold a Range?

Levels to Watch:
-Range Top: 2.0065 (Pivot, Fib)
-Range Bottom: 1.9525 (Pivot, Fibs)

Fundamentals will play a significant roll in the future of EURAUD. On the one hand, we have the Euro Zone (which at one point was expected to become the world’s new reserve currency) struggling under a recession and financial crunch that is region wide but approached with national solutions. For Australia, a domestic slump in growth is adding momentum to the fading export potential. Perhaps rates will be the defining fundamental driver.

Though it is somewhat messy, congestion has been the rule of thumb for EURAUD for nearly three weeks. There was a significant, bullish drive that initially brought this pair to its current congestion, but the momentum in that bias has faded. Now, we will watch the more defined pivot at 2.0065 to judge whether it can hold out to any spikes in volatility.

Suggested Strategy

Short: Half-sized entry orders will be set at 2.0020 to account for a modest slope to highs.

Stop: An initial stop at 2.0160 is set with a modest buffer over our obvious resistance. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (140) at 1.9880. A second target doubles that at 1.9740.

Trading Tip – Where many of the currency market’s most liquid pairs are riding out short-term bursts in momentum or are otherwise positioned for potential breakouts; EURAUD has actually found itself in a very stable band of congestion. For the past three weeks, this range has proven itself immune to dramatic volatility behind other Australian dollar and euro crosses. Is this a balancing act between offsetting event risk or does is this pair exempt from such fundamental considerations? It is hard to tell.
Regardless, next week’s scheduled event risk should be avoided so as not to take the risk that it is happenstance. Interest rate decisions from both the RBA and ECB offer enough uncertainty and accessibility to general risk trends that a breakout could be accomplished through a surprise outcome from either or both. Our strategy is somewhat risky considering the blatantly obvious level of resistance we are working with. A time stop is particularly important with this pair. We will cancel all open orders before the weekend and we will either tighten stops or close a profitable position before the central bank activity starts.

Event Risk Euro Zone And Australia

Australia – Risk trends and unique event risk are equally significant threats to the Australian dollar over the coming week.
General sentiment across the markets is passing through an ominous period of calm with many assets sitting on the edge of bearish trend extremes. Not often are the markets so calm for long; and certainly not when on the cusp of a major trend change.
However, this is an indefinable risk to price action. We can’t point to a time when the market may finally make its break. On the other hand, the event risk on the economic calendar gives us significant hurdles that we can prepare for ahead of time. There are a few top tier market movers, but the real risk is in the RBA rate decision. After the RBNZ’s rate cut yesterday, the Australian benchmark has taken top spot for the majors. However, the policy group is riding off an aggressive regime of cuts; and speculation that they could reach zero is growing.


	Data for January 30 – February 6		Data for January 30 – February 6
Date	European Economic Data	Date	Australian Economic Data
Jan 30	Euro Zone CPI Estimate (JAN)	Jan 29	Conference Board Leading Index (NOV)
Feb 4	Euro Zone Retail Sales (DEC)	Feb 1	AiG Performance Of Mfg Index (JAN)
Feb 5	ECB Rate Decision	Feb 2	RBA Rate Decision
		Feb 3	Retail Sales (DEC)

Published on Fri, Jan 30 2009, 05:50 GMT

Technicals Confront Event Risk For The Fate Of A Clear USDJPY Range

Thu, Jan 29 2009, 06:03 GMT
by John Kicklighter

DailyFX

Technicals make the best case for a USDJPY range. A well-developed head-and-shoulders formation has set a strong level of resistance in a market that generally holds a long-term bearish bias. However, will this pattern hold up when the fundamental tides rise?

USDJPY

Why Would USDJPY Hold a Range?

Levels to Watch:
-Range Top: 91.00 (Pivot, Fib, SMA)
-Range Bottom: 87.15 (Double Bottom, Pivot)
There are two key drivers for USDJPY over the coming week: risk sentiment and top tier scheduled event risk. Risk appetite is the more pressing concern for the next 24 to 36 hours as many of the most yen crosses have clawed higher thanks to talk of a massive US stimulus package and the establishment of a ‘bad bank’ that can absorb toxic debt. However, come Friday, the docket will take over with the advanced reading of 4Q GDP.
There are two very different views of USDJPY that can be derived depending on what time frame you are in. Looking at the past four months and beyond, there is a steady down trend (spot is just off of 13-year lows). However, zooming in on the past two months, we have seen congestion develop with a relatively clear head-and-shoulders formation.

Suggested Strategy

Short: Half-sized entry orders will be set at 90.75 – above Wednesday’s high but below resistance.
Stop: An initial stop at 91.75 covers swing highs in the area and potential tails beyond that. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 89.75. A second target doubles that at 88.75.

Trading Tip – Technicals make the best case for a USDJPY range. A well-developed head-and-shoulders formation has set a strong level of resistance in a market that generally holds a long-term bearish bias. However, will this pattern hold up when the fundamental tides rise? This is a particularly speculative question and presents a risk that we will want to avoid regardless. As such, our strategy will have to reduce the risk for us. Our set up takes the usual steps towards buffering the potential for loss that is developed through high volatility. We have cut our position size to half the norm to lower our notional risk on the trade.
What’s more, we have widened the stop well above the technical ceiling with enough room to account for any significant tails. At the same time, our range is relatively narrow and established on multi-year lows; so we have made our objectives closer than we would have otherwise. Looking beyond technical setups, we also have to take account of the significant presence of both scheduled and unscheduled event risk. As Friday’s 4Q US GDP report represents a top tier market moving candidate, we will close any open orders and tighten stops on live positions before this release.

Event Risk US And Japan

US – The US dollar is torn by itsfundamental roles in the broader market. On the one hand, deep liquidity and a history as the world’s primary reserve currency have imparted the unit with the title of safe haven. However, how influential this driver is a factor of how panicked the markets are. Back in October, investors were concerned only with protecting their capital and only the most liquid markets would do. Today, the market is still cautious but far from panicked; and safety is once again a relative concern with a mind towards potential yield. This allows for greater concern in the more lasting dynamic for any currency – economic health. If the outlook for the economy is dour, there is little expectation of return and capital will naturally seek yield.
Come Friday, the market will qualify just how bad a position the US is in with the fourth quarter GDP report. Expected to contract at an annualized 5.5 percent pace, the outlook certainly isn’t good.

Japan – There is little interest for scheduled event risk when it comes to the Japanese yen. While the health of the economy is tantamount to potential returns, the currency’s title as the market’s primary safe haven more or less immunizes it to all but the most severe shifts in traditional fundamentals. From the coming week’s economic docket, we see little to suggest that scheduled data will make a notable impact on price action – though it will help to define general forecasts for economic growth. One of the key components of the economy, the consumer will see a full checkup with labor earnings figures, household consumption and retail sales figures. Should Japanese citizens boost their savings even further, the Japanese slump will only be prolonged.


	Data for January 29 – February 5		Data for January 29 – February 5
Date	US Economic Data	Date	Japanese Economic Data
Jan 29	Durable Goods Orders (DEC)	Jan 28	Retail Trade (DEC)
Jan 30	Annualized GDP (4Q A)	Jan 29	Household Spending (DEC)
Feb 2	ISM Manufacturing (JAN)	Jan 29	Industrial Production (DEC P)
Feb 4	ISM Non-Manufacturing (JAN)	Feb 2	Labor Cash Earnings (DEC)

Published on Thu, Jan 29 2009, 06:03 GMT

A Low Risk Profile And Clear Congestion Set Up A Wide AUDCAD Range

Wed, Jan 28 2009, 05:53 GMT
by John Kicklighter

DailyFX

It is still slim pickings for range trades in the currency market. While volatility has settled somewhat, the too many pairs are threatening to force breakouts and revive long-term trends. AUDCAD is a notable exception from a technical standpoint, but this pair nonetheless comes with its own risks.

Why Would AUDCAD Hold a Range?

Levels to Watch:
-Range Top: 0.8500 (Pivot, Fib)
-Range Bottom: 0.8000 (Trend, Fib)

Risk appetite is holding a heavy hand over the currency market. Though there is currently no clear direction behind risk aversion or appetite, the potential for significant breaks and trend resumption is obvious. AUDCAD will likely avoid all but the strongest swings in sentiment as it has in the past. Scheduled event risk on the other hand may be more difficult to avoid. A rate decision, GDP and other figures mark significant land mines.

It can be said that AUDCAD is in an ascending wedge formation, but it is so flat as to essentially be a range. The rising floor on this congestion meets Fib confluence around 0.8000/35 establish a bottom that was confirmed in a prominent reversal candle Monday. A 0.8175 pivot level may slow things down, but true resistance doesn’t come in until 0.85.

Suggested Strategy

Long: Half-sized entry orders will be set at 0.8050 – easily achievable.

Stop: An initial stop at 0.7930 is wide enough to cover the trend and the average tail. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (120) at 0.8170. The other is 50% of the swing at 0.8335.

Trading Tip – It is still slim pickings for range trades in the currency market. While volatility has settled somewhat, the too many pairs are threatening to force breakouts and revive long-term trends. AUDCAD is a notable exception from a technical standpoint, but this pair nonetheless comes with its own risks. For starters, there is considerable event risk on the economic docket – including a Reserve Bank of Australia rate decision due next Tuesday and Canada’s employment data due a couple days later. Before that time there are more than a few top tier indicators dotting the calendars to be concerned. Alternatively, there is far less concern from this pair when risk trends come into the picture – which is a considerable benefit when such a prevailing trend holds the future of so many trends within the currency market. To curb our risk, we tailored our strategy somewhat to fit technical and fundamental considerations. Our entry is well below spot, but also holds a good range above support. This will prevent us from ‘chasing the market’ while simultaneously giving us a buffer should a piece of event risk spark volatility and knock us in. Furthermore, our stop has been set wide enough to account for our trend and the potential for a sizable tail. With a busy docket ahead, we will cancel any open orders by Thursday or should spot hit 0.8250 first.

Event Risk Australia And Canada

Australia – The Australian dollar is a magnet for fundamental speculators for the next two weeks. Risk trends are perhaps the most threatening dynamic for the currency as we cannot see such tides rise ahead of time. Nonetheless, as one of the highest yielding currencies among the G10 and with an economy that has considerable exposure to global growth trends (thanks to a heavy export base for natural resources), the Aussie dollar will no doubt respond to any market-wide shift in fear or greed. A more definable threat for stability will be the economic docket. There is a full list of indicators penciled in and accented by the RBA’s rate decision next Tuesday. For the rest of this week, we need to be concerned with advanced leading economic composite reports, sector activity gauges and fourth quarter consumer inflation figures. As a key factor for rate decision, the price gauge could be particularly market moving.

Canada – Standing in direct contrast to the Australian calendar, the Canadian docket is otherwise thin for the coming week. The only notable economic release for the expected period this position takes to unfold is the November gross domestic product report. While growth numbers are growing in importance as the global recession picks up, the monthly reading is often overlooked by the market. However, this may not be the case going forward. Until recently, economists and market participants were pricing the Canadian dollar as if it would largely avoid the recession and rate cuts that the rest of the developed world was facing. With the BoC having already lowered the benchmark rate to 1.00 percent and the policy officials forecasting an unavoidable, domestic recession, this sentiment is clearly on the ropes and the Canadian currency could suffer for it.


	Data for January 28 – February 4		Data for January 28 – February 4
Date	Australian Economic Data	Date	Canadian Economic Data
Jan 27	Westpac Leading Index (NOV)	Jan 30	Gross Domestic Product (NOV)
Jan 28	Consumer Prices (4Q)
Feb 3	RBA Rate Decision
Feb 4	Retail Sales (DEC)

Published on Wed, Jan 28 2009, 05:53 GMT

EURCHF Range Looks To Weather Market−Wide Volatility

Tue, Jan 27 2009, 05:38 GMT
by John Kicklighter

DailyFX

Market conditions are generally non-conducive to range trading. Volatility is still excessively high and many of the market’s most liquid pairings are subject to either significant breakouts or sharp reversals. To help minimize this risk, we turn our focus to EURCHF which is experiencing congestion and is comprised of currencies that are close fundamental cousins.

Why Would EURCHF Hold a Range?

Levels to Watch:
-Range Top: 1.5140 (Pivot, Fib)
-Range Bottom: 1.4650 (Swing Low)

Volatility is high across the currency market and there is a standoff behind a potential reversal in many of the most liquid euro and swissie currency pairs. These conditions are certainly not supportive of general range trades. On the other hand, EURCHF looks to isolate some of this risk. This pair is made of up two currencies whose economies are closely tied. What’s more, interest rate risk is minimal and general risk exposure is modest.

From a technical perspective, the setup behind this pair is relatively weak. However, resistance read in the frequented pivot level around 1.5125/50 will naturally stand as a point of inflection for market bulls that frequent this pair. Add to this, the presence of a Fib confluence between 1.51000/20 and there is notable overhead resistance.

Suggested Strategy

Short: Half-sized entry orders will be set at 1.5100 which is well below the pivot.

Stop: An initial stop at 1.5200 should cover the zone of resistance under mild volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.

Target: The first objective equals risk (100) at 1.5000. The second is more aggressive at 1.4840.

Trading Tip – Market conditions are generally non-conducive to range trading. Volatility is still excessively high and many of the market’s most liquid pairings are subject to either significant breakouts or sharp reversals. To help minimize this risk, we turn our focus to EURCHF which is experiencing congestion and is comprised of currencies that are close fundamental cousins. On the other hand, there is still significant exposure to the ebb and flow of general risk sentiment as the franc is considered one of the primary safe havens for the currency market. In this respect, this EURCHF setup is an extension of the EURUSD position from Friday. To help minimize the broad threat to range conditions, our strategy first looks to reduce positions size (we are looking at half sized, but further reductions are reasonable). Furthermore, our suggested stop is wide enough to cover modest tails that may occur near our range top; and this further sets up a first target that is easily reached. To further reduce exposure to event risk from the economic calendar, we will cancel any open orders by Wednesday or should spot hit 1.4925 before we are entered.

Event Risk Euro Zone And Switzerland

Euro Zone – Is the Euro Zone in a fundamentally better position to weather the global recession than the US or UK? This is a broad question that will guide the underlying trend behind the euro for some time to come. If we had asked the same question a year ago, the market’s answer would be a resounding yes followed by suggestions that the euro would replace the US dollar as the world’s reserve currency. Now, however, this sentiment has changed. The stability of the union has been strained by financial crisis, efforts to stimulate domestic economies, government interference and sovereign rating downgrades. More overwhelming though may be the lack of growth in individual member nations and the region as a whole. Speculation over how long and severe recessions will be has become the key for evaluating a currency’s strength. Over the coming week, there will be considerable fuel to stoke such speculation. Building up through the week, we will see readings of both consumer (GfK) and business (IFO) confidence for German to gauge spending. Employment figures and inflation data are both notable market movers and further key to determining whether the ECB will reach zero.

Switzerland – Like the US dollar, the Swiss franc’s primary driver is risk sentiment. Considering the SNB has lowered rates to near-zero and Switzerland has long been a safe haven for assets, the Swissie will always respond to any unforeseen shifts in sentiment. It is difficult to foretell what event may trigger a market shock, though the US GDP report scheduled for Friday is large enough to send concerns of risk / reward throughout the FX market and beyond. Locally, there is substantial event risk populating the Swiss docket. Over the next two days we will receive indicators on consumer spending habits and the general pace of growth through Jan. These are notable readings, but not known market movers.


	Data for January 27 – February 3		Data for January 27 – February 3
Date	Euro Zone Economic Data	Date	Swiss Economic Data
Jan 27	German IFO Expectations (JAN)	Jan 27	UBS Consumption Indicator (DEC)
Jan 28	German GfK Consumer Confidence (FEB)	Jan 28	KOF Swiss Leading Indicator (JAN)
Jan 29	German ILO Unemployment Change (JAN)	Feb 2	SVME PMI (JAN)
Jan 30	Euro-Zone CPI Estimate (YoY) (JAN)	Feb 3	Trade Balance (DEC)

Published on Tue, Jan 27 2009, 05:38 GMT

A Market Bias Offers A Strong EURUSD Range To Start The Week

Mon, Jan 26 2009, 05:51 GMT
by John Kicklighter

DailyFX

Congestion is not always horizontal. EURUSD has developed a descending trend channel since the turn of the year; and a rebound through the end of the week may represent a strong range setup with the technical advantage of a market bias.

EURUSD

Why Would EURUSD Hold a Range?

Levels to Watch:
-Range Top: 1.3075 (Trend, SMA, Fib, Pivot)
-Range Bottom: 1.2765 (Trend)
As the most liquid pair in the currency market, fundamentals are always a concern for price action. At the same time, a deep market helps to stabilize in all but the most influential shifts in market sentiment. Looking at the docket for next week, however, we have a significant amount of event risk that will have to be weathered. The most notable release without doubt is the US GDP number. This pair’s relation to risk trends will also be a factor.
Technically, there is a conflict between trends and momentum. A steady downtrend from the December 29th swing high covers notable support around 1.3025/75. At the same time, a rising trend going back to October will have to prove it still has a presence if the bears find their pace again. When the clash peaks though, momentum will factor in.

Suggested Strategy

Short: Half-sized entry orders will be set at 1.3050 as a reasonable entry on the trend.
Stop: An initial stop at 1.3170 would cover the falling trend with room enough for mild volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 1.2930. The second target will be 1.2810.

Trading Tip – Congestion is not always horizontal. EURUSD has developed a descending trend channel since the turn of the year; and a rebound through the end of the week may represent a strong range setup with the technical advantage of a market bias.
Since we are at the end of the week, and liquidity has been drained for the market, our suggested entry is set above spot with something of an aggressive entry to offer buffer room when volume fills back up. For cautious traders, it may be beneficial to hold off on placing any orders until the London market comes online as the market frequently lacks direction until liquidity fills out. Our setup further sets stops relatively wide which requires an adjustment to position size to limit the total notional risk of the trade. Realistically, this pair will mark a breakout from this range some time next week; and the catalyst for such a move will likely be related to general risk sentiment with contributions from big name event risk. We should expect this position to be entered early; and so to avoid substantial event risk, we will cancel open orders by Tuesday.

Event Risk Euro Zone And US

Euro Zone – Is the Euro Zone in a fundamentally better position to weather the global recession than the US or UK? This is a broad question that will guide the underlying trend behind the euro for some time to come. If we had asked the same question a year ago, the market’s answer would be a resounding yes followed by suggestions that the euro would replace the US dollar as the world’s reserve currency. Now, however, this sentiment has changed. The stability of the union has been strained by financial crisis, efforts to stimulate domestic economies, government interference and sovereign rating downgrades. More overwhelming though may be the lack of growth in individual member nations and the region as a whole. Speculation over how long and severe recessions will be has become the key for evaluating a currency’s strength. Over the coming week, there will be considerable fuel to stoke such speculation. Building up through the week, we will see readings of both consumer (GfK) and business (IFO) confidence for German to gauge spending. Employment figures and inflation data are both notable market movers and further key to determing whether the ECB will reach zero.

US – The dollar’s safe haven status has helped it to gain traction as normal economic fundamentals have deteriorated from underneath the currency. How long will this remain as a primary driver for the world’s largest currency? That is a question of how significant risk aversion / appetite will be going forward and the overall confidence in the US as a safe harbor for capital. While details of bailout proposals and financial stimulus plans, along with stumbles in the banking sector, may present some difficulty going forward; scheduled releases will have a more definable role in gauging the health of the US economy. The timbre of the docket will grow as the week wears on. Consumer confidence offers insight into the key market sector for the economy on Tuesday. Wednesday’s FOMC rate decision may lose its muster without the ability to set rates, but commentary will still be influential. Topping the global docket as top mover though will be Friday’s 4Q advanced GDP reading. An expected 5.0 annualized drop in growth would paint a very dour future for the US and dollar.


	Data for January 26 – February 2		Data for January 26 – February 2
Date	Euro Zone Economic Data	Date	US Economic Data
Jan 27	German IFO Expectations (JAN)	Jan 27	Consumer Confidence (JAN)
Jan 28	German CPI (JAN P)	Jan 28	FOMC Rate Decision
Jan 28	German GfK Consumer Confidence (FEB)	Jan 30	Gross Domestic Product (4Q A)
Jan 29	German ILO Unemployment Change (JAN)	Feb 2	ISM Manufacturing (JAN)

Published on Mon, Jan 26 2009, 05:51 GMT

A Sound Strategy Could Take Advantage Of A Wide NZDUSD Range

Fri, Jan 23 2009, 05:51 GMT
by John Kicklighter

DailyFX

The sting of high volatility and the broad wave of risk aversion that swept over the market yesterday is a viable threat for any potential range trades. For NZDUSD’s broad price band, the conflict between technicals and fundamentals will have to be skewed by a sound setup.

NZDUSD

Why Would NZDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.6085 (Fib, Range High, SMA)
-Range Bottom: 0.5200 (Triple Bottom)
Swings in risk sentiment are vital to the direction NZDUSD takes going forward. While the fear-driven decline from Wednesday may seem to have lost its momentum, it is still a risky proposition to position against such a heady trend when volatility is still very high and many pairs are hanging on the edge of significant breaks in favor of risk aversion. Aside from this background influence, we also have to take care of the RBNZ rate decision and US GDP figures.
While volatility is still very high across the currency market and momentum behind the recent NZDUSD downswing has not been fully sidelined; the pair is nonetheless come upon significant support. A triple bottom would be set with a confirmed reversal in this phase of the pair’s broad range. It should also be said that this is a six year low with few levels below.

Suggested Strategy

Long: Half-sized entry orders will be set at 0.5235 to offer an entry that fits our risk profile.
Stop: An initial stop at 0.5105 is wide enough to cover our range and provide a buffer to volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 0.5355. The second target will be 0.5535.

Trading Tip – The sting of high volatility and the broad wave of risk aversion that swept over the market yesterday is a viable threat for any potential range trades. For NZDUSD’s broad price band, the conflict between technicals and fundamentals will have to be skewed by a sound setup. From our suggested strategy, we take the more aggressive approach – an entry that is very close to support that further allows for a wider stop and reasonable targets. To minimize notional risk, we are taking a position that is only half our normal size. For those that are more cautious, we can alter the setup to look for confirmation of a medium-term trend reversal (momentum is arguably still bearish) while maintaining a reasonable risk profile. Different people have different views on what makes for a good confirmation on trend changes; but a reasonable trigger for this setup could be an hourly bar close above the falling trendline that has defined the medium-term bear wave or perhaps a close above nearby resistance at 0.5350. A stop could be set below short-term technical levels or the larger range bottom, but position size should be adjusted appropriately so that total notional risk is acceptable. We will cancel open orders by Friday’s close.

Event Risk New Zealand And US

New Zealand – Event risk looks to pick up after the weekend; but for the time frame of our open orders, there is no specific piece of scheduled event risk that threatens to drive this pair to a breakout or revive a trend. This does not mean we could not see a significant move from behind the kiwi however. This currency has a high correlation to general risk trends thanks to its high benchmark lending rate and level of significant amount of foreign capital that flows into the economy specifically for investment yields. On the other hand, it is difficult to forecast a specific driver for risk trends going forward. One indicator that may fill this role though is the advanced reading on fourth quarter UK GDP. As the first G10 nation to release its growth numbers, it will set the tone for global recession forecasts. Looking beyond the weekend, an active position will find some potential road bumps. At the very start of the week, a service sector activity gauge and credit spending report offer second tier figures; but it will be the RBNZ rate cut on Thursday that is the real threat.

US – The US economic docket looks to have just as much influence on our NZDUSD open orders as the New Zealand calendar will.
There are no notable indicators due for release until next week; but the flow of data nonetheless picks up as the week wears on. Monday’s Leading Indicator’s report for December will offer modest guidance to growth expectations. The following day brings the Consumer Confidence survey for January – an important reading as other sentiment gauges around the globe have started to perk up on lower gas prices and faith in governments’ proposals for bailout packages and stimulus plans. Expectations for Wednesday’s FOMC policy report are up in the air, but despite their inability to lower rates, the group still has to stimulate the economy. The top market mover for the week will be the United State’s fourth quarter growth numbers. As the largest economy in the world, the health of this economy will define expectations for global trends.


	Data for January 23 – January 30		Data for January 23 – January 30
Date	New Zealand Economic Data	Date	US Economic Data
25-Jan	Performance of Services (NOV)	26-Jan	Leading Indicators (DEC)
25-Jan	Credit Card Spending (DEC)	27-Jan	Consumer Confidence (JAN)
28-Jan	RBNZ Rate Decision	28-Jan	FOMC Rate Decision
28-Jan	Trade Balance (DEC)	30-Jan	Gross Domestic Product (4Q A)

Published on Fri, Jan 23 2009, 05:51 GMT

High Volatility And Looming Breakouts Threaten AUDCAD Range

Thu, Jan 22 2009, 05:41 GMT
by John Kicklighter

DailyFX

Volatility is extraordinarily high for the FX market and a few key currencies have pushed for significant technical breakouts over the past 48 hours. This means range traders are a dangerous proposition; and those setups that are pursued should find a solid foundation in fundamentals, technicals and a strategy.

Why Would AUDCAD Hold a Range?

Levels to Watch:
-Range Top: 0.8500 (Pivot, Fib)
-Range Bottom: 0.8125 (Trend, Pivot, Fib)
Volatility is extremely high in the currency market and many currencies have either seen significant breaks or are on the cusp of noteworthy moves. For AUDCAD, there is certainly exposure to general risk sentiment as the combination of the high Australian benchmark lending rate and signs that the BoC is heading towards zero have imparted the pair with a clear carry influence. However, each economy is considered a leader in their respective regions.
With little serious momentum developing behind price swings, congestion is relatively stable for AUDCAD price action. Support is read around 0.8100/25 where a general bullish bias finds a clean trendline to follow. This is further backed by a 38.2% fib retracement and notable pivot that happen to all fall within the same area.

Suggested Strategy

Long: Half-sized entry orders will be set at 0.8175, aggressive considering the rising trend.
Stop: An initial stop at 0.8055 should cover a tail that develops from a horizontal range low. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 0.8295. The second target will be 0.8415.

Trading Tip – Volatility is extraordinarily high for the FX market and a few key currencies have pushed for significant technical breakouts over the past 48 hours. This means range traders are a dangerous proposition; and those setups that are pursued should find a solid foundation in fundamentals, technicals and a strategy. Our AUDCAD looks to answer at least two of these contingencies. From price action, we can see that this pair is firmly set within a trading band that is wide enough to accommodate volatility with significant technical barriers. Since we are looking to keep with the medium-term bias, our only concern is for a long entry on the range. This finds both a general and concise rising trend, the 38.2 percent retracement of the October 8th to January 5th bull wave and strength as a former resistance on price action around 0.8125. To curb our exposure to potential breakouts, we have reduced position size and widened stops. The real risk to this position is fundamentals. There is significant scheduled event risk on deck, but the real concern is risk trends. Though it is dampened somewhat, this pair still has significant exposure to the ebbs and flows in risk aversion that drive the yen and dollar pairs. With this in mind, we will look to cut open orders by Thursday’s close or if spot hits 0.8420 before we are entered.

Event Risk Australia And Canada

Australia – While the Australian economy is still considered one of the strongest in the far East, its clout is nonetheless fading among disillusioned traders. This is largely a condition of speculation rather than data (the fundamentals have shown the Australian economy has been suffering for a while) which is more difficult to gauge as a market driver as such general perceptions do not have starting and ending points as they shift. Nonetheless, we will see this sentiment hang over the Aussie dollar and leverage the currency’s correlation to general risk trends. As for scheduled event risk, most of the major data crosses after the weekend. This Thursday’s import inflation gauge and next week’s producer counterpart is merely a guide to CPI. If inflation plunges towards zero, the RBA can extend its cuts.

Canada – Uncertainty hangs over the Canadian dollar’s future. Can the nation’s economy and financial markets indeed weather the global crisis better than the United States; or is this wishful think that will consistently be discounted through loonie depreciation? These concerns will be partially answered by through developments in business activity going forward – an unpredictable market dynamic. However, there will also be scheduled event risk that could have an immediate impact on volatility as well as a lasting influence on the fundamental outlook for the economy. On deck for the end of the week, we have two key market movers: retail sales and the consumer price index series. Through the most recent growth figures, Canada seems to have actually seen a boost in growth through the second half of 2008, but this is unlikely to last through fourth quarter data.
With November’s retail sales report, we will receive an updated read on consumer spending, a vital component of overall growth going forward. CPI will look to confirm the BoC’s forecasts for inflation to turn negative for two quarters of 2009: but as a confirmation, its impact on the currency will be relatively limited.


	Data for January 22 – January 29		Data for January 22 – January 29
Date	Australian Economic Data	Date	Canadian Economic Data
22-Jan	Import Price Index (4Q)	22-Jan	Leading Indicators (DEC)
26-Jan	NAB Business Confidence (DEC)	22-Jan	Retail Sales
27-Jan	Westpac Leading Index (NOV)	22-Jan	BoC Monetary Policy Report
27-Jan	Consumer Price Index (4Q)	23-Jan	Consumer Price Index (DEC)

Published on Thu, Jan 22 2009, 05:41 GMT

Momentum In The Yen Crosses Key To A CADJPY Range Setup

Wed, Jan 21 2009, 05:48 GMT
by John Kicklighter

DailyFX

Many of the yen crosses have already made the move for significant bearish breakouts, but a few notables have held back. Should these liquid pairs hold back the tides, CADJPY may be set for a sharp rebound on a major range bottom.

CADJPY

Why Would CADJPY Hold a Range?

Levels to Watch:
-Range Top: 75.50 (Trend, Pivot, Fib)
-Range Bottom: 87.15 (Multi-Year Range Low)
From a fundamental perspective, there is considerable risk in approaching a CADJPY congestion setup. While this pair is not as highly correlated to risk trends as its pound or Australian dollar counterparts, it nonetheless retains its sensitivity to the yen’s status as primary safe haven for the currency market. What’s more, a significant amount of scheduled event risk can stir up volatility and redirect longer-term growth forecasts.
The risk of a breakout from the highly visible CADJPY range is tangible. However, the technical level of support is significant in itself. The 70.60/95 zone has been a range low for the past three months and has similarly held up a previous base low some years ago. Tails are numerous in this area; so daily closes hold greater consequence.

Suggested Strategy

Long: Half-sized entry orders will be set at 71.45, which will actually require a bullish turn.
Stop: An initial stop at 70.05 is well below past months’ intraday tails. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (140) at 72.85. The second target will be 74.25.

Trading Tip – Many of the yen crosses have already made the move for significant bearish breakouts, but a few notables have held back. Should these liquid pairs hold back the tides, CADJPY may be set for a sharp rebound on a major range bottom. Our suggested strategy works with this premise; but accounts for this being a relatively risk proposition. In essence a long position in any yen cross inherently find correlation to general risk trends – currently a volatile market dynamic. Therefore, our setup looks to use half-sized entry orders to reduce risk and allow for a wider stop. What’s more, our entry is set above current spot, which would require a rebound from this pair to take one more step towards assuring a bullish reversal that holds with support. Should spot drop below 69.50 before we are in a position, we will cancel any open orders as the market environment will have shifted.
Furthermore, we will cut lingering positions by Wednesday’s close as this is an active setup and should trigger well within the next 12-18 hours. It is also important to note that this position is a partial hedge to the USDJPY exposure that we have established with yesterday’s setup – an additional benefit towards lowering risk.

Event Risk Canada And Japan

Japan – Your typical economic releases have never had much of an impact on the Japanese yen as the currency has instead found a greater sense of purpose as a measure for risk appetite. This will almost certainly remain the case over the coming week.
However, preparing for shifts in risk is very difficult as such events are rarely foreseeable. On the other hand, there are a few issues developing now that may evolve into something more pressing over time – including the financial difficulties of a few major banks, details on where US officials will spend the second half of the TARP funds and signs that the UK government has to expand it bailout efforts significantly to stabilize it’s economy. Looking at the traditional economic docket, the Bank of Japan should be monitored just in case. With a specific release time, the central bank will have to layout any efforts beyond rate shifts that they plan to take relatively soon.


	Data for January 21 – January 28		Data for January 21 – January 28
Date	Canadian Economic Data	Date	Japanese Economic Data
22-Jan	Retail Sales (NOV)	22-Jan	Bank of Japan Rate Decision
23-Jan	Consumer Price Index (DEC)	22-Jan	All Industry Activity Index (NOV)
27-Jan	Canada 2009-2010 Annual Budge	23-Jan	BoJ Monthly Report
		28-Jan	Retail Trade (DEC)

Published on Wed, Jan 21 2009, 05:48 GMT

Balanced Risk Influences And A Technical Setup Draw Traders To Potential USDJPY Range

Tue, Jan 20 2009, 05:42 GMT
by John Kicklighter

DailyFX

There are few fundamental themes that are so prominent that they can determine price action for the entire currency market; but one of those few happen to be risk appetite. However, with correlations wearing down and technicals filling out, a USDJPY range may represent a source of temporary stability for range traders.

Why Would USDJPY Hold A Range?

Levels to Watch:
-Range Top: 91.35 (Major Swing Low, Pivot)
-Range Bottom: 87.15 (Pivot, Fib, SMA)
Risk appetite has developed into one of the primary drivers for the currency market over the past year. With the global economy contracting and falling rates of return threatening capital depreciation, investors have turned to stable economies and assets. This draws a fundamental split for USDJPY which is comprised of two very similar currencies. This will help to dampen such an all encompassing influence and open the door to technicals.
Looking at price action behind this pair, it is clear that we are at the crossroads of deciding a dominant trend. At the beginning of this month, a steady, falling trend was broken by a sharp rally; and a new low has not been tested since. However, with resistance developing around 91.00/50, a possible head-and-shoulders formation may revive bears.

Suggested Strategy

Short: Half-sized entry orders will be set at 91.05, which is well below resistance.
Stop: An initial stop at 92.05 will allow for a significant test of our H&S formation. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (100) at 90.05. The second target will be 88.75.

Trading Tip – There are few fundamental themes that are so prominent that they can determine price action for the entire currency market; but one of those few happen to be risk appetite. However, with correlations wearing down and technicals filling out, a USDJPY range may represent a source of temporary stability for range traders. Fundamentally, both the dollar and yen are backed by economies plunging into recession, interest rates just above zero and imbalances behind investment flows. From price action, there is greater concern. After breaking its long-term falling trend at the beginning of this month, we have seen sentiment open up behind a potential trend reversal. At the same time, this initial breakout has clearly lost momentum and now we are developing a notable head-and-shoulders formation. And, though this is not an ideal setup (considering the lead up to the formation was bearish and the neckline is ill-formed), the relative levels are clear enough to develop a sound strategy around. Our stops are set intentionally wide to avoid a false break and position size has been adjusted to account for this. We will close all open orders by Wednesday as this position should not take long to play out.

Event Risk US And Japan

US – Is the dollar the ultimate safe haven currency in the Forex market? When measured against the Japanese yen, this question becomes much more difficult to answer. When liquidity is the primary concern for investors, sentiment is likely at an extreme; and the dollar’s appeal as a harbor is thereby highlighted. However, it is hard to forecast such an extreme level of risk returning anytime soon. Therefore, such trends should be relatively muted over the coming week. As for scheduled event risk, there are only a few secondary readings that threaten a boost in volatility; and very few of them will have any lasting effect. The only notable event risk scheduled through the rest of this active week is the housing starts and building permits data – relatively unremarkable considering the market’s acceptance of the US housing recession. The same logic applies to leading indicators and existing home sales – it is hard to take a one month’s reading as particularly market moving when such a prominent trend is in place.


	Data for January 20 – January 27		Data for January 20 – January 27
Date	US Economic Data	Date	Japanese Economic Data
22-Jan	Housing Starts (DEC)	Jan 19	Tertiary Industry Index (NOV)
26-Jan	Leading Indicators (DEC)	Jan 20	Consumer Confidence (DEC)
26-Jan	Existing Home Sales (DEC)	22-Jan	Bank of Japan Rate Decision
Jan 27	Consumer Confidence (JAN)

Published on Tue, Jan 20 2009, 05:42 GMT

A Broad GBPUSD Range Meets The Promise Of Volatility Next Week

Mon, Jan 19 2009, 05:48 GMT
by John Kicklighter

DailyFX

After a brief shock to market-wide risk trends, many of the currency market’s most liquid pairs have pulled back to close out the week. For GBPUSD, however, the market’s surge highlights a larger consolidation pattern that may be exploited through price action charged by tomorrow’s busy economic docket.
GBPUSD

Why Would GBPUSD Hold a Range?

Levels to Watch:
-Range Top: 1.5000 (Fibs,Trend, Pivot)
-Range Bottom: 1.4350 (Trend, Pivot)
The fundamental influences are heavy for GBPUSD. Looking ahead to next week, there is flood of UK event risk scheduled for release throughout the week. Most important though is Friday’s 4Q GDP number which will offer the first definitive reading on growth through the end of the year among the G10. This could play havoc with risk trends, which this pair are already highly sensitive to. With banks facing a new crisis, risk will be high.
Heading into Friday’s close, GBPUSD is drifting in the middle of its wide range after a sharp rally through the morning. However, with volatility still clearly high and a visible wedge pattern encouraging a bearish bias, a confluence of Fib resistance at the psychologically important 1.50 level may offer a solid level for a ceiling defined by a moving trend.

Suggested Strategy

Short: Half-sized entry orders will be set at 1.4950, to allow for a decent entry in the wedge.
Stop: An initial stop at 1.5100 is set well within the wedge, but this target will move closer. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (150) at 1.4800. The second target will be 1.4575.

Trading Tip – After a brief shock to market-wide risk trends, many of the currency market’s most liquid pairs have pulled back to close out the week. For GBPUSD, however, the market’s surge highlights a larger consolidation pattern that may be exploited through price action charged by tomorrow’s busy economic docket. Looking at price action from GBPUSD over the past three months, there is a clear shift to consolidation in a descending wedge pattern. What’s more, a long-term, dominant trend will leverage the probabilities in our favor as a breakout is more to come at bulls’ expense. At the same time, this is definitely a situation where we will need to let price come to us – as we are in the middle of the range and coming on the weekend. Our suggested strategy looks for an entry much higher than current price, but also bows to the psychologically important 1.50 level. This does not cover the very top of the wedge formation; but that trendline is quickly falling towards our range boundary. It may take a few sessions before we reach this level again; but the zone’s prominence will encourage us to keep orders open until Thursday (before GDP). Though, should momentum build towards 1.50, we will reevaluate.

Event Risk UK And US

UK – While the British currency has proven itself highly sensitive to risk trends over the months, the currency may find more encouragement from price action through its fully stocked economic docket next week than uncertain announcements. The significance of the data increases as the week wears on. When liquidity starts to return after the weekend, the Rightmove housing inflation report will give an update on a mature trend. Looking ahead to Tuesday, the plot thickens with the consumer inflation data; which will play a considerable roll in helping the BoE decide whether it will lower rates all the way down to zero. The minutes from the MPC’s last meeting and the employment change for December will issue good measures on the economy – as will Friday’s retail sales. However, this all pales in comparison to the 4Q GDP number due at week’s end. We will see how bad the UK and global recession is becoming.

US – Roles have shifted. The previously busy US calendar will contract going forward to allow for a fundamentally stocked UK docket. Looking at the notable listings, the will be a line of housing data in starts, building permits and existing home sales figures. These are all notable indicators, but the health of the general sector has been well debated and has been priced in with a wide buffer for surprises. Leading indicators will offer an interesting lead to the GDP number due later in the month, though its correlation gives little confidence to leading the government’s number. Aside from data due next week, we also have the lead up to the following week’s FOMC rate decision which will find the central bank having to take a different tack than typical rate cuts. Also, the threat of shifting risk trends could similarly boost volatility behind the questionable safe haven currency.


	Data for January 18 – January 26		Data for January 18 – January 26
Date	UK Economic Data	Date	US Economic Data
18-Jan	Rightmove House Prices (JAN)	22-Jan	Housing Starts (DEC)
20-Jan	CPI (DEC)	26-Jan	Leading Indicators (DEC)
21-Jan	Bank of England Minutes	26-Jan	Existing Home Sales (DEC)
21-Jan	Claimant Count Change (DEC)
23-Jan	GDP (4Q A)

Published on Mon, Jan 19 2009, 05:48 GMT

A Confirmed Short−Term Reversal Would Set Up Strong USDCHF Range

Fri, Jan 16 2009, 06:30 GMT
by John Kicklighter

DailyFX

Sensitive risk trends have kept the dollar in high volatility and pushed many of the majors up to the edge of significant breakouts. These clearly are not the ideal conditions for range trading; but for USDCHF, some balance in risk and a confirmed reversal could lead the pair to a significant reversion move.

USDCHF

Why Would USDCHF Hold a Range?

Levels to Watch:
-Range Top: 1.1285 (Fibs, Pivot)
-Range Bottom: 1.0375 (Trend, Pivot)
Broad risk trends are highly uncertain at this point, so we will look for some level of shelter from the back and forth in sentiment through USDCHF. Both the US dollar and Swiss franc are known safe haven currencies – though there a bias is certainly discernable when the bias of fear or greed grows excessively unbalanced. Aside from this general risk, scheduled economic releases could also prove an issue. Both dockets have a few notable figures.
Looking at price action over the past month, we can see that there are two conflicting patterns at play. The first is a loose range found between the swing low (which coincided with a rising trend) at 1.0375 and resistance at 1.1285 developed through a notable pivot and fib congestion. In contrast, we also have a steady, rising trend from the Dec 29th low.

Suggested Strategy

Short: Half-sized entry orders will be set at 1.1090 to jump on a bearish break of the wedge.
Stop: An initial stop at 1.1210 is wide as long as the short-term trend does begin to turn. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 1.0970. The second target will be 1.0825.

Trading Tip – Sensitive risk trends have kept the dollar in high volatility and pushed many of the majors up to the edge of significant breakouts. These clearly are not the ideal conditions for range trading; but for USDCHF, some balance in risk and a confirmed reversal could lead the pair to a significant reversion move. Since both the US and Swiss currencies are considered safe havens in their own right, there is naturally a dampening effect during shifts in sentiment – though dramatic changes will expose the dollar’s greater sensitivity. Event risk aside, it is rather clear that short-term momentum has developed an ascending range that threatens a bullish breakout. Therefore, our strategy sets entry below recent congestion and rising trendline as confirmation that the range is stable and the market is turning to a reversal. The stop is set relatively wide to compensate for the reversal we are looking for in the entry; so position size has been halved to reduce notional risk on this trade. Conversely, the targets are relatively aggressive, but reasonable should the range indeed hold. To further reduce risk, we will cancel any open orders before Friday’s close or should spot hit 1.14.

Event Risk US And Switzerland

US – An indelible need for liquidity has kept the US dollar closely linked to general risk trends – a relationship that will likely keep the dollar underpinned by volatility and on the edge of major breakouts. Looking ahead, however, it is difficult to gauge when fear could once again swell or plunge. Less ambiguous though is the foreseeable hurdles in scheduled economic releases. For the remainder of this week, Friday will bring the advanced January reading of the University of Michigan confidence survey and December CPI. Consumer spending is critical at this point for the nation’s recession. With forecasts for economic activity starting to turn over to a severe recession, signs that consumers will further rein in spending is disturbing. Alternatively, the inflation gauge will shift its influence from rate speculation to growth potential. If this gauge marks deflation as expected, stagnation may draw the US into a liquidity trap.

Switzerland – Unlike the US dollar, the Swiss franc has held a high correlation to risk aversion for years as one of currency market’s top funding currencies. However, as carry interest fades, the franc’s sensitivity to the broad changes in sentiment have waned, leaving the currency exposed to significant volatility when paired with the dollar or Japanese yen. This should be a dynamic that is closely monitored for a USDCHF setup as such imbalances will likely be a key driver for price action going forward. As for forecasted event risk, there is a significant amount of economic data scheduled for release. While Friday’s inflation statistics are unlikely to produce significant volatility; notable reports on retail sales, housing activity through the fourth quarter and investor sentiment are all due after the weekend. With SNB members recently suggesting a 2009 recession was ‘unavoidable,’ this data will gauge how sever it could be.


	Data for January 16 – January 23		Data for January 16 – January 23
Date	US Economic Data	Date	Swiss Economic Data
16-Jan	Consumer Price Index (DEC)	16-Jan	Producer & Import Prices (DEC)
16-Jan	U. of Michigan Confidence Survey (JAN P)	19-Jan	Retail Sales (NOV)
22-Jan	Housing Starts (DEC)	21-Jan	Real Estate Index Family Homes (4Q)
22-Jan	House Price Index (NOV)	22-Jan	ZEW Survey (JAN)

Published on Fri, Jan 16 2009, 06:30 GMT

A High Risk CADJPY Range Must Come With A Sound Setup And High Reward

Thu, Jan 15 2009, 05:59 GMT
by John Kicklighter

DailyFX

Market conditions are still highly unfavorable for range-based setups – especially with risk trends still on the rise. For a highly speculative position however, CADJPY offers potential compensation that could match the danger inherent.

Why Would CADJPY Hold A Range?

Levels to Watch:
-Range Top: 70.90 (Range Low)
-Range Bottom: 75.50 (Fib, Pivot, SMA)

With CADJPY and other yen crosses testing the lows of their prominent ranges, there is substantial risk in trading a range with volatility high across the currency market. For a fundamental driver, this pair is highly sensitive to the shifts in risk sentiment. Should fears that the global recession is accelerating or major defaults are looming rise, this pair will see a sharp drop – and at this level, it wouldn’t an event so severe to force a break.
Technically, this is a precarious position as well. While the range of support around 70.60/95 looks rather stable, we are at the very bottom of historical range. What’s more, Wednesday’s close has set a new official low for the exchange rate. Shifting momentum is clearly a necessity in calling a bottom on an otherwise steady bear trend.

Suggested Strategy

Short: Far reduced entry orders will be set at 71.35 to take advantage of the range of lows.
Stop: An initial stop at 70.15 covers previous tails, but won’t hold up a burst in volatility. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 72.55. The second target will be 74.05.

Trading Tip – Market conditions are still highly unfavorable for range-based setups – especially with risk trends still on the rise.
For a highly speculative position however, CADJPY offers potential compensation that could match the danger inherent. From a technical perspective, this pair is bouncing off a string of swing lows that is holding up a temporary floor at the very low of its historical range. With risk sentiment still brewing and considering the pair has not broken a six-day decline that has covered nearly 950 points, this is clearly a situation where controlled risk is a necessity. Therefore, our suggested strategy looks for ‘far-reduced’ entry orders, which means the maximum loss in this setup should be set very small through position size. Beyond this, our stop is relatively wide, but not if we see sharp intraday swings (like those back in December) from current levels. There is no scheduled risk to threaten this setup, but we naturally do not want to stay in the market for too long as if a market as volatile as this one sticks near support it is likely a sign that a breakout is impending. Therefore, we will cancel all open orders in 24 hours time or should spot hit 73.50 before we are entered.

Event Risk Canada And Japan

Canada – Since the trade report crossed the wires this morning, there are no significant Canadian indicators scheduled for release through the rest of this week. This will leave traders to speculate on vague and tangential fundamentals for direction on the single currency. However, as the week wears on, speculative trends will take on a more singular interest – the outcome of next Tuesday’s Bank of Canada rate decision. Economists are forecasting a 50 bps cut to 1.00 percent. At this rate, the Canadian monetary authority could easily match its American counterpart near zero – cutting one of advantages the loonie still holds over the dollar.

Japan – There is a modest level of scheduled Japanese event risk on the docket, but that will hardly influence the yen within the time frame of our setup. The real issue with this pair is general risk trends. Looking forward, the swells in sentiment are difficult to forecast, but central bank commentary (from all central banks, since the financial crisis is clearly a global one at this point) and rate decisions could have a profound impact on the balance between risk/reward in the market. Notably, tomorrow, the ECB is expected to announce policy decision. This could inadvertently affect the yen as the European authority is considered one of the few that sees the ability to hold rates relatively high – standing as a sign of confidence that conditions will prove relatively soon. Should the central bank deliver a hearty rate cut and produce dovish commentary, it will dampen any lingering optimism in the market and may very well tip risk aversion into its next trend.


	Data for January 14 – January 21		Data for January 14 – January 21
Date	Canadian Economic Data	Date	Japanese Economic Data
19-Jan	Int’l Securities Transactions (NOV)	19-Jan	Tertiary Industry Index (NOV)
20-Jan	Bank of Canada Rate Decision	20-Jan	Consumer Confidence (DEC)
		20-Jan	Cabinet Office Monthly Eco Report
		21-Jan	Bank of Japan Rate Decision

Published on Thu, Jan 15 2009, 05:59 GMT

Long−Term Congestion May Cancel Short−Term Volatility For The USDCAD Range

Wed, Jan 14 2009, 05:54 GMT
by John Kicklighter

DailyFX

Though ranges and congestion are prevalent across the currency market, high levels of volatility and early signs of breakouts have imparted a clear sense of risk to range trading. For technical and fundamental considerations, USDCAD’s congestion looks to be among the most stable setups.

Why Would USDCAD Hold a Range?

Levels to Watch:
-Range Top: 1.2375 (Fib, Range High)
-Range Bottom: 1.1770 (Fib Range Low)
Congestion has been the dominant force behind USDCAD over the past few months despite the clear presence of volatility. However, considering the perceived differences between US and Canadian fundamentals, it may not take much of a shift in speculation to turn the market back to trend. For event risk, the real threat to price action comes closer to the weekend. One benefit though, is this pair’s dampened response to broad risk trends.
From a technical standpoint, this pair has taken to broad ranges for nearly three months now, but these formations are starting to interrupt each other and thereby reduce their individual influence on the market. We have recently seen the first lower swing low since last March, so a bearish shift may be under way. Hard levels are somewhat light though.

Suggested Strategy

Short: Half-sized entry orders will be set at 1.2325 which is well within the range of tails.
Stop: An initial stop at 1.2445 is wide enough to give room for another wide-berthed reversal. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (120) at 1.2205. The second target will be 1.2000.

Trading Tip – Though ranges and congestion are prevalent across the currency market, high levels of volatility and early signs of breakouts have imparted a clear sense of risk to range trading. For technical and fundamental considerations, USDCAD’s congestion looks to be among the most stable setups. This pair has seen a sharp rally over the past two sessions; but the advance puts the pair right back into a deeper area of congestion. What’s more, we would usually consider a short-term go against the dominant trend (the bullish advance since the November 2007 reversal); but the extended period of congestion paired with the first lower swing low in months (in last week’s push to 1.1775) lessens the importance of direction at this point. Nonetheless, we are dealing with a volatile market and our range extreme is set on wide tails; which necessitates a distant entry and wide stop. To counter the risk this brings, we have cut our position size in half to keep manageable levels of risk. Our objectives are reasonable, though the second is aggressive should the market settle in the same price congestion from late December. There is considerable event risk through the rest of this week and the outlook for general risk appetite is still up in the air; so we will cancel any open orders before Friday’s event risk crosses the wires.

Event Risk US And Canadian

US – Risk aversion has maintained the dollar’s general appreciation in the currency market thanks to comments from global regulators, but this advance looks like it may be growing winded unless given additional fuel to stoke its fire. However, fundamental influences won’t merely fade into the background; rather we will likely see a shift in interest to scheduled event risk. Looking at the US docket for the coming week, there is more than enough data to feed speculation on the extent of the nation’s recession. From the consumer’s perspective, the advanced reading of January confidence from the University of Michigan and December retail sales report will gauge the health of the economy’s largest sector. The other common theme will take on a whole new meaning for dollar traders. No longer will the import, producer and consumer inflation gauges be read for rate speculation; but now they will be read for stagflation signs.

Canadian – Since the trade report crossed the wires this morning, there are no significant Canadian indicators scheduled for release through the rest of this week. This will leave traders to speculate on vague and tangential fundamentals for direction on the single currency. However, as the week wears on, speculative trends will take on a more singular interest – the outcome of next Tuesday’s Bank of Canada rate decision. Economists are forecasting a 50 bps cut to 1.00 percent. At this rate, the Canadian monetary authority could easily match its American counterpart near zero – cutting one of advantages the loonie still holds over the dollar.


	Data for January 13 – January 20		Data for January 13 – January 20
Date	US Economic Data	Date	Canadian Dollar Economic Data
14-Jan	Import Price Index (DEC)	19-Jan	Int’l Securities Transactions (NOV)
14-Jan	Advanced Retail Sales (DEC)	20-Jan	Bank of Canada Rate Decision
15-Jan	Producer Price Index (DEC)
16-Jan	Consumer Price Index (DEC)
16-Jan	University of Michigan Confidence (JAN P)

Published on Wed, Jan 14 2009, 05:54 GMT

Short−Term Momentum Strains An Otherwise Strong AUDCAD Range

Tue, Jan 13 2009, 05:56 GMT
by John Kicklighter

DailyFX

The market has picked up considerable steam since liquidity returned after the weekend, which threatens the low volatility and safety in technicals we usually require for range trading. So, while AUDCAD’s technical setup is promising, we will remain cautious through our setup.

Why Would AUDCAD Hold a Range?

Levels to Watch:
-Range Top: 0.8665 (Triple Top)
-Range Bottom: 0.8175 (Trend, Fibs, Pivot, SMA)

The Australian dollar has turned sharply lower over the past few active sessions thanks to selling spurred through those pairs more closely linked to risk appetite trends. For AUDCAD, the two economies are on relatively even ground – both are considered to be leaders for their respective regions, finding income through exports and they are expected to ride be among the leaders to the global turn in growth. Interest rates are a different story.

We should not become wrapped up in the strength of technical levels without paying mind to short-term momentum. The recent downturn from AUDCAD has been particularly swift – even if there was temporary reprieve this morning. We must balance support around 0.8175 (a trend and 50-day SMA among other things) with risk through trade setup.

Suggested Strategy

Long: Half-sized entry orders will be set at 0.8210 which is well above today’s intraday low.
Stop: An initial stop at 0.8120 is set relatively wide and should hold against regular tails. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (90) at 0.8300. The second target will be 0.8450.

Trading Tip – The market has picked up considerable steam since liquidity returned after the weekend, which threatens the low volatility and safety in technicals we usually require for range trading. So, while AUDCAD’s technical setup is promising, we will remain cautious through our setup. From a momentum perspective, there has been significant selling pressure against the Australian dollar across many of its liquid pairings. Such a pull threatens to carry this cross to its own bearish breakout if pairs like AUDUSD, AUDNZD and AUDJPY maintain their bearings. However, should they stall (or retrace) before AUDCAD pushes below support, the technical level would likely act as a springboard for bulls. Nonetheless, we must approach this cautiously. Our strategy looks to hold with longer-term momentum (this pull back is relatively young at this point), we have lowered our position size and our stop is relatively wide considering the average tail this pair generates at technically significant levels. We will cancel all open orders by Wednesday. To further lower risk, a trader should also look for a confirmed break in short-term, bearish momentum and perhaps even wait for a reversal before attempting the range.

Event Risk Australia And Canadian

Australia – Once again, the Australian dollar is the currency to watch in our potential range-based pair. Not only is there notable event risk on the economic docket; but a jump in activity behind risk trends has led the currency to be a relatively risky, fundamental candidate for a range position. However, looking at the relative sentiment of traders and lenders, there has been no specific event to summarily shoot risk aversion higher. That does not mean though that speculation for improvement cannot be undone. Looking to predictable risk, there are more than a few notable pieces of event risk scheduled for release. Wednesday morning brings lending figures through investment and real estate. These should offer relatively sound gauges for credit conditions in the country and the consumers’ and business leaders’ efforts to seek it. The docket ups the ante on the following day with December labor data – a proven top-market moving indicator. We should also keep an eye on 4Q business confidence and TD inflation readings.

Canadian – There is very little for Canadian fundamental traders to work in terms of foreseeable event risk. For the current week, only the November physical trade balance figures have any serious market-moving potential. This indicator however is relatively important for long-term growth forecasts – though it has greater relevance for a pair like USDCAD where the commodity dynamic of the report highlights the consumer from producer aspect. Outside of this data, speculation for the BoC rate decision (20th) will also weigh.


	Data for January 12 – January 19		Data for January 12 – January 19
Date	Australian Economic Data	Date	Canadian Dollar Economic Data
Jan 13	Value of Loans (NOV)	Jan 13	International Merchandise Trade (NOV)
Jan 13	Investment Lending (NOV)	Jan 19	Int’l Securities Transactions (NOV)
Jan 14	Employment Change (DEC)
Jan 14-30	NAB Business Confidence (4Q)
Jan 18	TD Securities Inflation (DEC)

Published on Tue, Jan 13 2009, 05:56 GMT

Technicals Buffer A Fundamentally Stable AUDNZD Range

Mon, Jan 12 2009, 06:05 GMT
by John Kicklighter

DailyFX

A relatively volatile week has ended, yet the broader market has not taken up trend on risk sentiment. This remains one of the greatest fundamental threats to range conditions in the currency market, but not necessarily for AUDNZD.

Pairs To RangeTrade

Why Would AUDNZD Hold a Range?

Levels to Watch:
-Range Top: 1.2215 (Range High, Trend)
-Range Bottom: 1.1785 (Trend, Fibs, SMA)

Is risk appetite going to rally or plunge next week? This is a question that has constantly plagued fundamental traders over the past six months. However, with AUDNZD, this concern is relatively minor to the pair’s overall direction. Comprised of the G10’s top two yielding currencies, this pair has a buffer to the lingering correlation between carry and risk trends. However, there is still scheduled event risk to deal with, a particular problem for AUD.
While fundamentals may hold off on exacting their influence on price action, it will be the technicals that truly hold back the tides in the market. There is modest breakout pressure behind this pair with an ascending wedge developing over the past months. Support is the immediate concern with a Fib confluence, 50-day SMA and trendline at 1.1765/85.

Suggested Strategy

Long: Entry orders will be set at 1.1915 which is generous for the natural spread on the pair.
Stop: An initial stop at 1.1840 is well below technical congestion, but won’t hold large tails. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (75) at 1.1990. The second target will be 1.2090.

Trading Tip – A relatively volatile week has ended, yet the broader market has not taken up trend on risk sentiment. This remains one of the greatest fundamental threats to range conditions in the currency market, but not necessarily for AUDNZD. In the past months, as global interest rates have tumbled, we have seen that both the Australian and New Zealand dollars’ have retained their relative interest rate advantage over their G10 contemporaries. This has imparted both with a distinct sensitive to risk appetite; but when paired, this pull is largely balanced out. This is a significant benefit to have when the rest of the currency market is suffering from high volatility and this large burden lingering. AUDNZD is not a sure bet though. An exaggerated double top earlier in the week has built bearish momentum. Also, with around 400 points of room to move (and closing thanks to the wedge), a breakout is closing in. However, if unforeseen surprises through event risk hold off, technicals could hold the market back for another range swing. Certainly the collection of a number of Fib retracements, a 50-day SMA and rising trendline from the November lows offers significant stopping power. Our strategy looks to keep with this confluence, but it may not survive wide tails to test the late December congestion floor (which would likely institute a trend change anyway). As spot is actually below our entry, we will cancel any open orders by Monday’s close.

Event Risk Australia And New Zealand

Australia – Of the two economic dockets, the Australian calendar is certainly the true concern for event-driven breakouts next week. Though populated with only a few notable pieces of data, they are significant market movers that could force a breakout if volatility is supporting the release. The first round of data doesn’t come out until Wednesday morning with the lending data.
Investment and home loan numbers, as well total value of loans is an important collection of data to objectively measure the health of the economy (spending is essentially activity) and credit availability. The top market mover, however, is the following day’s employment report. With economic growth acting as the key gauge for fundamental currency trading going forward, this gauge will set the benchmark for Australia. After that, the NAB 4Q business confidence number and TD inflation hold less sway, though a confirmed day for the sentiment release could leverage the indicator’s appeal.

New Zealand – Event risk finally returns to the New Zealand calendar next week – though the offerings are relatively sparse. The top mover for the entire period, actually also happens to be the first. The NZIER business leader sentiment report for the final quarter of 2008 will set the tone for activity expectations going into the first part of the new year. A slip here could thwart any hopes for rebounds in employment, investment and credit. For the rest of the week, housing data takes the stage. Building permits through November and QV housing inflation numbers for the following month will gauge levels of consumer wealth – and thereby confidence.


	Data for January 11 – January 18		Data for January 11 – January 18
Date	Australian Economic Data	Date	New Zealand Economic Data
Jan 13	Value of Loans (NOV)	Jan 12	NZIER Business Opinion Survey (4Q)
Jan 13	Investment Lending (NOV)	Jan 13	Building Permits (NOV)
Jan 14	Employment Change (DEC)	Jan 15	QV House Prices (DEC)
Jan 14-30	NAB Business Confidence (4Q)
Jan 18	TD Securities Inflation (DEC)

Published on Mon, Jan 12 2009, 06:05 GMT

A High Risk USDJPY Range Setup Could Play Out Quickly

Fri, Jan 9 2009, 05:58 GMT
by John Kicklighter

DailyFX

For those that like to live on the edge, the technical draw of USDJPY’s range presents the market with a very clear setup for a short-term play. However, the risk is extremely high as the very attractive technical formation precedes one of the most market-moving indicators the dollar has to offer: non-farm payrolls (NFPs).

USDJPY

Why Would USDJPY Hold Its Range?

Levels to Watch:
-Range Top: 94.60 (Fib, Pivot)
-Range Bottom: 90.85 (Trend, Fib, Pivot, SMA)

USDJPY will be the epicenter for risk during tomorrow’sUS non-farm payrolls release. With this pair stalled between potential trends and on the edge of a technical breakout, its sensitivity to the data is fully bared upon the world. Not only is the dollar going to reflect the volatility of its top, market-moving economic indicator; but this pair’s clear relation to general risk sentiment can leverage a response to signs of an accelerating recession.
If event risk were not so pressing, the range conditions in USDJPY would be offering incredibly enticing. However, breakout potential is very high, so a trade will be reliant upon the technicals. The pair has recently broken its long-term trend and has developed a bullish channel. It helps that a floor in 90.85 is substantial with a trend, pivot, SMA and Fib.

Suggested Strategy

Long: Half-sized entry orders (or smaller) will be set at 91.25 for an aggressive entry.
Stop: An initial stop at 89.95 is well below trend, but falls short of lower congestion. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (130) at 92.55. The second target will be 93.95.

Trading Tip – For those that like to live on the edge, the technical draw of USDJPY’s range presents the market with a very clear setup for a short-term play. However, the risk is extremely high as the very attractive technical formation precedes one of the most market-moving indicators the dollar has to offer: non-farm payrolls (NFPs). This potential volatility stored in this event risk is tremendous; and mixed with the breakout potential seen in this pair, it is clear that the suggested strategy is only for those that are very confident taking on the risk. Even for those that are willing to accept the risk, our setup looks to further remove the potential for a loss. As usual, when conditions are not ideal for range trading, we will look to reduce position size to at least half (a quarter would be better) of our normal setup. Further, our stop has been set very wide, but due to constraints on the objective (that would skew risk/reward) we have not put it wide enough to cover the late December congestion. We will cancel any open orders by the close on Friday. There is no reason to exit a trade before the event risk as price action is likely to settle before the release; so this is indirectly a bet that NFPs will either be better than expected or will not surprise to the downside. And, as one more disclaimer: risk adverse traders should not attempt this strategy.

Event Risk US And Japan

US – Scheduled event risk is key to the dollar’s price action tomorrow. The frequent, top market-moving non-farm payrolls release for December is expected to report another 525,000 jobs lost through the end of the year. That would mark a more than a million American’s finding themselves unemployed in just two months time. Such a dramatic increase in joblessness has only been seen a few times in the past 50 years and each time was during a sharp recession. Should we see a payroll cut of this magnitude or greater, it would certainly sink speculation for the US economy recovering from its recession before its major counterparts. Looking beyond next week, event risk will hold relatively steady. The physical trade balance, retail sales, consumer inflation and consumer confidence are all set for release. Each of these indicators will contribute to the focus on growth factors going forward. Scheduled event risk aside, the dollar’s association to risk sentiment could also prove influential in the coming week. Another liquidity scare could send investors back to the dollar; but at the same time, it will have to compete with the yen for speculators’ attention.

Japan – There is very little to worry about from the Japanese economic docket. In fact, the most pressing data scheduled for release are the leading index and Eco Watchers survey; both indicators that have shown little influence on price action in the past. However, the yen won’t go without fundamental impetus. As the most sensitive currency to risk trends, the yen will likely find significant volatility on the US NFPs release, especially if the indicator leads to fear over global growth trends and US expansion at the same time.


	Data for January 9 – January 16		Data for January 9 – January 16
Date	New Zealand Economic Data	Date	Japanese Economic Data
Jan 9	Change In Non-Farm Payrolls (NOV)	Jan 9	Leading Index (NOV P)
Jan 13	Trade Balance (NOV)	Jan 13	Eco Watchers Survey: Outlook (DEC)
Jan 14	Retail Sales (DEC)	Jan 14	Domestic CGPI (DEC)
Jan 16	Consumer Price Index (DEC)
Jan 16	U. of Michigan Confidence (JAN P)

Published on Fri, Jan 9 2009, 05:58 GMT

NZDUSD Presents An Attractive Range Before Key Dollar Event Risk

Thu, Jan 8 2009, 05:40 GMT
by John Kicklighter

DailyFX

Direction and volatility are still highly uncertain for the broader currency market. However, in falling in line with momentum and fundamental, our proposed NZDUSD setup benefits from two of three possible scenarios.

Why Would NZDUSD Hold a Range?

Levels to Watch:
-Range Top: 0.6085 (Triple Top, Fib, SMA)
-Range Bottom: 0.5650 (Pivot, Fib)

Risk appetite is the primary, fundamental driver at the beginning of this New Year; and NZDUSD has a direct correlation to this sweeping trend. As the New Zealand currency currently holds (and will likely retain) the highest benchmark lending rate of the G7 and the US is essentially at zero, there is a strong argument for price action to continue and track this relationship. Scheduled event risk will become a significant problem come Friday’s NFPs.

The development in NZDUSD is not a traditional horizontal range. Rather, price action has developed a clear rising wedge that leverages the potential for a breakout. However, the long-only stance our strategy takes aligns itself to the market’s natural bias. Resistance is easily defined at 0.6085, but support is moving and therefore more discretionary.

Suggested Strategy

Long: Half-sized entry orders will be set at 0.0.5850 to keep with the rising floor.
Stop: An initial stop at 0.5770 will cover the trend only, so a new range could be cut. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (80) at 0.5930. The second target will be 0.6050.

Trading Tip – Direction and volatility are still highly uncertain for the broader currency market. However, in falling in line with momentum and fundamental, our proposed NZDUSD setup benefits from two of three possible scenarios. Congestion has dominated price action for the past two months, though this was seen in trading bands that retained a bias. Now, the relatively uniform advance behind NZDUSD is coming up against a significant level of resistance. With the 200-day SMA, a significant 50 percent Fib retracement and two-month mature triple top all coinciding at 0.6075/85, there is enough pressure to through short-term momentum off its pace. There is certainly room to move for a few trading days to a week in this dwindling range, but the potential for breakouts only grows with times. We are looking to position with short-term momentum that would keep with a horizontal range and a bullish break; but to lower the risk in a trend reversal, we have cut our position size down. To further avoid significant, fundamental event risk, we will cancel any open orders before Friday’s NFPs is released.

Event Risk New Zealand And US

New Zealand – Whether global interest rates are high (like two years ago) or low (as they are currently), the New Zealand dollar has consistently held its title as the top yielding currency of the majors. However, the overall level of interest rate is no longer the primary issue for trader, rather the balance between risk and return has turned into the primary driver for price action. And in turn, the kiwi has seen its correlation to risk trends hold through thick and thin. This dynamic could be trend-defining for the coming week as we see the rise is optimism through the start of the year has recently stalled. With global stimulus packages expected to expand while recession pinches credit and growth, there is a significant tug-o-war behind risk trends and the New Zealand dollar. Aside from these general themes, the market will see little in the way of market-moving scheduled event risk. For fundamental trends however, a focus on business activity and housing will be key in the docket. Fourth quarter business sentiment will provide a broad gauge for growth; while building permits and housing prices take the consumer and credit market’s temperature.

US – The dollar has found its correlation to general risk trends stand strong after the turn of the new year. However, recently, we have seen that the reduced volatility behind the markets has allowed for speculation over growth potential to take a greater role in the currency’s direction. Such a shift could charge the dollar to a significant volatility thanks to a very active economic docket. Tomorrow, event risk warms up with the ICSC chain store sales report for December and consumer credit through November.
Both will measure spending habits and the availability of credit through the critical holiday shopping season. Friday’s non-farm payrolls represents the greatest potential for volatile markets as estimate place another half-million-plus reduction in payrolls.
Such a figure can turn a moderate recession into a severe one. Beyond the weekend, more mundane trade and retail sales figures are due.


	Data for January 8 – January 15		Data for January 8 – January 15
Date	New Zealand Economic Data	Date	Canadian Economic Data
12-Jan	NZIER Business Opinion Survey (4Q)	8-Jan	ICSC Chain Store Sales (DEC)
13-Jan	Building Permits (NOV)	8-Jan	Consumer Credit (NOV)
15-Jan	QV House Prices (DEC)	9-Jan	Change In Non-Farm Payrolls (NOV)
		13-Jan	Trade Balance (NOV)
		15-Jan	Retail Sales (DEC)

Published on Thu, Jan 8 2009, 05:40 GMT

A Clear Channel And Immunity To Risk Trends Stabilizes AUDCAD Range

Wed, Jan 7 2009, 06:15 GMT
by John Kicklighter

DailyFX

A rebound in risk appetite has thrown many, former ranges into disarray. However, the AUDCAD congestion we have pointed out will both benefit from a sustained rise in yield demand and even a tumble back into risk aversion.

Why Would AUDCAD Hold a Range?

Levels to Watch:
-Range Top: 0.8650 (Range, Trend)
-Range Bottom: 0.8400 (Pivot, Fib)

Risk appetite has risen since the turn of the year; but its permanence is questionable. However, whether or not the market is able to hold back the dam on fear and deleverage is less of a concern for AUDCAD. While there is a significant yield differential between the two currencies, this pair seems to have found a stronger foundation in the relative strength of the underlying economies, robust markets and comparatively bullish rate forecasts.

Looking at the development of AUDCAD price action, this pair is following the course of a dominant trend channel that has happen to come upon short-term congestion. However, working within the auspices of both formations, there is a better chance at success. Support is seen on a relative pivot, rising trend and 20-day SMA. Resistance is far less stable.

Suggested Strategy

Long: Entry orders will be set at 0.8430 – within today’s range but relatively aggressive.
Stop: An initial stop at 0.8360 is relatively tight considering the frequent tails, but follows trend. To secure profit, move the stop on the second lot to breakeven when the first target hits.
Target: The first objective equals risk (70) at 0.8500. The second target will be 0.8600.

Trading Tip – A rebound in risk appetite has thrown many, former ranges into disarray. However, the AUDCAD congestion we have pointed out will both benefit from a sustained rise in yield demand and even a tumble back into risk aversion. Taking a critical look at this pair from a technical and fundamental perspective, AUDCAD looks to have a solid foundation for a short-term range. For an economic bias, our long strategy follows the probability of swelling optimism with a significant yield differential. Alternatively, even if sentiment changes course, we have seen this pair weather such seas for the past two months. Looking at the charts, our horizontal range falls within a broader, rising trend channel. This aligns our short-term congestion play with the dominant trend; but it also means the life of this setup is limited. Therefore, we will cancel any open orders after two days or should spot hit 0.8610 before we are entered. Looking further to our risks, volatility is quite high and tails have been large; so our channel will have to stand up to false breakouts. This is further reason to limit the time frame on this strategy. Ultimately though, this short-term setup is a good buffer to the open AUDNZD range orders from Monday.

Event Risk Australia And Canada

Austra

FXstreet.com

Technical

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Why Would AUDUSD Hold a Range?

Event Risk Australia and US

A Clear EURAUD Range Must Manage High Volatility and Building Breakout Pressure

Why Would EURAUD Hold a Range?

Event Risk Euro Zone and Australia

Building Technical Pressure Necessitates A Quick AUDUSD Range Trade

Why Would AUDUSD Hold a Range?

Event Risk Australia and US

A Resistance To Risk Trends May Serve The USDCHF Range Well

Why Would USDCHF Hold a Range?

Event Risk US and Switzerland

AUDCHF The Best Range Candidate Among Congestion Bound Australian Dollar Crosses

Why Would AUDCHF Hold a Range?

Event Risk Australia and Switzerland

GBPAUD Range Looks To High Risk, High Reward and a Fast Pace

Why Would GBPAUD Hold a Range?

Event Risk UK And Australia

Approaching BoE And ECB Rate Decisions Require A Flexible EURGBP Range Setup

Why Would EURGBP Hold a Range?

Event Risk Euro Zone And UK

Momentum and Event Risk Require a Strong CADJPY Range Setup

Why Would CADJPY Hold a Range?

Event Risk Australian And Canada

A Quick AUDCAD Range Setup Before Heavy Event Risk

Why Would AUDCAD Hold a Range?

Event Risk Australian And Canada

Taking A Short Term Range In Long Term USDCAD Congestion

Why Would USDCAD Hold a Range?

Event Risk US And Canada

GBPCHF A Riskier Range Alternative To Its Euro Counterpart

Why Would GBPCHF Hold a Range?

Event Risk UK And Switzerland

EURCHF Range May Survive Policy Shocks and Building Event Risk

Why Would EURCHF Hold a Range?