The foreign currencies futures closed down on Friday and should start the last week of the first quarter on a soft note amid rumors that the Fed will hike the discount rate before the next policy meeting in April. I believe that the European and commodity currencies should decline for about two weeks, but still need to gauge if this sustained decline will start by the middle of the week (because these currencies are oversold in the short term) or is already in play. If you consult W.D. Gann theory (the spring-equinox), you’ll see that the downturn has already begun. My model is now short all of the foreign currencies futures except for the Swiss franc.
The short-term outlook for the European and commodity currencies is bearish or half a day and sideways for the yen. The medium-term outlook is sideways for all the foreign currencies futures.
Of notice:
• Fed Chairman Bernanke said government bailouts of big financial companies are unconscionable and must be ended as part of a regulatory overhaul following the worst financial crisis since the 1930s.
• John Lipsky, first deputy managing director of the IMF warned that the G7 economies face acute challenges in tackling high public debt and unwinding existing stimulus measures will not come close to bringing deficits back to prudent levels.
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Analysis based on:
“Trading in the Global Currency Markets” - Prentice Hall Press, 3rd edition 2007
“Technical Analysis Applications” - McGraw-Hill, 2004
Overnight:
• US: No data
• Canada: Consumer prices rose 0.4% in February after +0.3% in January, and 1.6% on the year following a 1.9% increase in January. The core CPI rose 2.1% from 2% the previous month.
• Canada: Retail sales expanded 0.7% in January from +0.5% December.
Today’s economic calendar:
• Australia: No data
• Japan: No data
EUR- March
Luca Model: Short since March 18 (reversing long since February 26)
The June euro extended its losses since late Wednesday and remains in the shooting distance from the low of the downtrend. The short-term outlook remains slightly bearish for half a day despite the oversold condition. The medium-term outlook is sideways and my model reversed its long position.
CME CoT: Euro shorts declined by 19K contracts following a rebound in the currency.
Initial support is at 1.3489. Further support lies at 1.3433 from a pivot low.
Immediate resistance is at 1.3600. The 21-day moving average resists at 1.3659. Distant resistance is at 1.3740.
INDICATORS
Fast stochastics: Bearish (oversold)
MACD: Bullish (overbought)
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish for half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
JPY - March
Luca Model: Short since March 5
The June Japanese yen continues to lack direction in an inside range after closing down on Thursday and Friday. The short-term outlook is sideways. The medium-term outlook remains sideways and my model is short.
CME CoT: The net long yen position fell sharply in line with the Bank of Japan’s monetary policy easing and the Prime Minister’s comments that the government must take firm measures against yen strength.
Initial support is at 110.22. Below 109.84, distant support lies at 109.24.
The 21-day moving average caps at 110.95. Above 111.56, distant resistance is at 112.49.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Bearish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Sideways
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
GBP - March
Luca Model: Short since March 19 (reversing long since March 11)
The June pound remains soft after collapsing on Friday for sustained economic weakness. It is testing the support line rising since March 1. The short-term outlook is slightly bearish for half a day. The medium-term outlook is sideways and my model reversed its long position.
CME CoT: The pound suffered another increase in net short positions.
Immediate support is at 1.4971. The next support is 1.4864. The bottom of the downtrend is 1.4772.
Good resistance is 1.5079. The next cap is 1.5172. The 21-day moving average lies at 1.5208.
INDICATORS
Fast stochastics: Bearish (oversold)
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish for half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
CHF - March
Luca Model: Long since February 26
The June Swiss franc is consolidating after closing only slightly down on Friday. The short-term outlook is slightly bearish for half a day. The medium-term outlook is sideways and my model is long.
Initial support is at .9399 from the 21-day moving average. The next support follows at .9338 from the bottom of its rising channel.
The 55-day moving average resists at .9461 and the 100-day moving average resists at .9517. Further resistance is at .9557 and .9603.
INDICATORS
Fast stochastics: Bearish
MACD: Bullish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Slightly bearish for half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
CAD – March
Luca Model: Short since March 19 (reversing long since February 26)
The overbought June Canadian dollar remains under pressure after falling on Friday from a new high for the uptrend. The short-term outlook is slightly bearish for about half a day, now that the loonie has for two consecutive days for the first time during its steep rally since February 26. The medium-term outlook is sideways and my model went short. Be careful, the loonie is in a steep rising wedge!
Below .9803, further support is at .9776 and .9733 from the 21-day moving average.
Immediate resistance is at .9876. Above the high of the uptrend at .9938, further resistance is seen at .9970.
INDICATORS
Fast stochastics: Bearish
MACD: Slightly bearish
Ichimoku: Slightly bearish
OUTLOOK
NEAR-TERM: Slightly bearish for about half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
AUD – March
Luca Model: Short since March 19 (reversing long since February 26)
The June Australian dollar is marking time after falling on both Thursday and Friday. The short-term outlook is slightly bearish for about half a day. The medium-term outlook is sideways and my model went short.
Below .9030, the 21-day moving average follows at .9002. Distant support is at .8885.
Initial resistance is at .9094. The new high of the uptrend is .9164. Strong resistance follows at .9218. Distant resistance is stacked at .9275.
INDICATORS
Fast stochastics: Sideways (overbought)
MACD: Bullish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bearish for about half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
