June 27 - July 2 2010

We need to see the outcome / agreements, if any however unlikely it may seem, that may arise from this weekends G8 (and G20) meeting on how the bureaucrats plan on tackling (or try to avoid) the possibility of a double dip recession. This would be a calamitous one as the governments are already totally spent trying to recover form every recession since the mid 70's.

That said, we are looking for a Euro bounce until everyone realizes that we are in much bigger trouble than we are being told. Here are possible scenarios:
- Euro forms a double top at 1.2450-1.2475 area and drops as expected to 1.16-1.18 area.
- Euro continues to climb up to 1.31-1.3250 area, where it will face its biggest resistance.

I am leaning towards the first option mainly because we currently have a DNT of 1.19-1.25 - a Do Not Touch Options Expiry stipulating that neither of the extremes 1.1900 or 1.2500 will be touched. IF the Euro does not make it to 1.25, then the market will attempt to break the low.

And with the Euro bank stress tests coming out in July, that may blow the steam out of this move.

Let us see how this one pans out.

Levaz

This week, we will look at the behavior of the Euro near to the top end of the DNT mentioned above.

Meanwhile, we will look for this trade:
USDCAD long between 1.0140 - 1.0260, SL 1.0000 TP 1.0500

I will give you more precise numbers as the pair comes closer.

Another long term trade is the USDCHF.

USDCHF long at 1.0900 SL 1.0800 TP 1.1300

You can even lower the stop to 1.0850 or 1.0875 if you want to reduce your exposure. As they saying goes, you do not want to catch a falling knife.

We want to get in as low as possible, so dont jump the gun just as yet. Let us see how both pairs behave tonight, and what is happening to the USD in general.

Levaz

Levaz wrote:USDCAD long between 1.0140 - 1.0260, SL 1.0000 TP 1.0500
USDCHF long at 1.0900 SL 1.0800 TP 1.1300

USDCAD - we need to be patient.
USDCHF - those of you that did not wait and see are currently in trade. Stick it out till 1.0800, you are currently in the technical support area at 1.0900, with a 400sMA at 1.0855 and the Daily 50% fibo line at 1.0817. The only cause for concern is the EURCHF, which is bringing down all other CHF crosses.

Levaz

We will keep our eye on the USDCAD - it is currently in no-mans land.
The USDCHF is still alive and well. The only fear is the EURCHF which may add pressure here.

For tonight we have the following trades:

EURUSD short 1.2319 SL 1.2419 TP 1.2180

If we miss the trade and Asian session starts to take it down fast, the 18 day eMA is at 1.2267. If it breaks this line, then you may want to short it immediately after 10 - 15 pips, so at 1.2250.

Since that (1.2250) will be the least desired entry point, try and get a quick 50 pips.

Levaz

Levaz wrote:We will keep our eye on the USDCAD - it is currently in no-mans land.

This pair has moved away from our preferred entry zone, so we will let it go for now

The USDCHF is still alive and well. The only fear is the EURCHF which may add pressure here.

This one is still hanging on. We need to see a nice break above the 1.0900 area, and then we will get interested - the EURCHF is still bearing down very heavily on this pair. Conversely, we have the USDJPY just above 88.00 which is said to be heavily protected. We need to ensure that we get on the winning side of this battle.

EURUSD short 1.2319 SL 1.2419 TP 1.2180
If we miss the trade and Asian session starts to take it down fast, the 18 day eMA is at 1.2267. If it breaks this line, then you may want to short it immediately after 10 - 15 pips, so at 1.2250.
Since that (1.2250) will be the least desired entry point, try and get a quick 50 pips.

Looks like the market died in Asian trade, so those of you that took the riskier trade at 1.2250 got the 50 pips. I did not take that trade, as I want to get in at the desired entry of 1.2319. I believe that we will see the retrace to our entry point in the next 24 - 48 hours. My only concern is if it goes higher towards the high end of the 1.19-1.25 DNT, it may take out our stops before it declines to where it belongs. Not that I can see any possible news events that will help the Euro, but I could always be proven wrong, you know!! In either event, we do not extent our stop loss, we stick to the 100 pips.

The reasoning being, that we enter at 1.2319 and if we get stopped at 1.2419. Market continues to move towards 1.2500, and possibly hit a brick wall at 1.2475 ish which is where the 50 period Daily sMA will be at that time. As long as the market moves 50 pips above our Stopped out position, we place a Sell Stop at exactly where we were stopped out. So, IF we get stopped out at 1.2419 AND the market moves to at least 1.2469 or higher, THEN we enter the Sell Stop at 1.2419 with another 100 pip Stop, and TP of 1.19000 as this time it should take out the lower DNT marker.

Levaz

We will give it yet another shot today, and hopefully we will get picked up.

EURUSD short at 1.2218 SL 1.2318 TP 1.2100

Once again, we have a better entry at 1.2246, but if the Asian market does anything like yesterday, it may be unlikely that we will get picked up there.

One consideration that may work against us is the fact that there have been short coverings on both EURCAD and EURAUD as these high interest commodity currencies are getting hammered by the USD. So as the major hedge funds close their positions, it gives the Euro a boost. And if you look at the EURCAD, it has been climbing steadily even as the Euro collapsed against the Yen, GBP and the CHF - the CHF being the major cause of the Euro downfall for now.

Levaz

I almost forgot, tomorrow in month end - UK has to make their monthly ECB transfer payment, which means they have to BUY bucket loads of EUR. This may also work against us in the London session.

If you are awake for the London session, you may want to see if you can get in at a higher prices such as 1.2246 or even 1.2297!!

Just a warning, as this happens at the end of every month.

Levaz

Levaz wrote:We will give it yet another shot today, and hopefully we will get picked up.

EURUSD short at 1.2218 SL 1.2318 TP 1.2100

Once again, we have a better entry at 1.2246, but if the Asian market does anything like yesterday, it may be unlikely that we will get picked up there.

One consideration that may work against us is the fact that there have been short coverings on both EURCAD and EURAUD as these high interest commodity currencies are getting hammered by the USD. So as the major hedge funds close their positions, it gives the Euro a boost. And if you look at the EURCAD, it has been climbing steadily even as the Euro collapsed against the Yen, GBP and the CHF - the CHF being the major cause of the Euro downfall for now.

Levaz

Just an FYI, it is the short covering on EURGBP, EURCAD and EURAUD are adversely impacting our trade. But they should let up when European market closes.

Levaz

Levaz wrote:EURUSD short at 1.2218 SL 1.2318 TP 1.2100

The trade is still in play, after hovering at very close to the SL for most of the day.
We may expect another attempt at 1.2300 but that will depend on how the Asian markets react to the weak closing of the US markets, which closed lower but not significantly so, although they are very close to "panic" pivot lines. All it will take is a couple of hedge funds that want to exit some huge positions before the fall, and that may start off the selling madness all over again.

We will stick to the trade for now. If you guys are not comfortable with the market movement, move your SL to BE (or close your trades now, and set a short at 1.2280 using the same SL and TP from our original trade.


Meanwhile, we have another possible trade.

GBPUSD short at 1.4995 SL 1.5055 TP 1.4750

This will prove to be a risky trade as the 1.5000 area is a big psychological line. So the market will either bounce off of it OR carry on past 1.5100. So please start with a small lot size just in case we get blown out of the water. Notice the smaller than normal Stop loss too.

Levaz

Levaz wrote:EURUSD short at 1.2218 SL 1.2318 TP 1.2100

Hoping that you guys squeezed a few pips out of this one before the buyers showed up to take the pair higher.

short at 1.2280 using the same SL and TP from our original trade.

Our new trade has been picked up. There is risk of being taken out, as today's buyers have some very deep pockets. But that is okay, as it will only be a set up for our next trade and the SL is ONLY 38 pips which should have been partially covered from last nights profits.

Remember, if we do get taken out, simply wait till the pair hits at least 1.2368 (NO LESS) and then short the pair again on the way down - the "Iwatemmibonuty" trade as I call it. We will get our money back from the market - it is almost assured.

GBPUSD short at 1.4995 SL 1.5055 TP 1.4750

Sadly, this pair did not come as far as I wanted, but with the GBP, it is best to play safe. This currency has a bad habit of biting you in the a$$ if you are not careful. Don't give up yet, the day has barely started in Europe, so there is still a chance that it may come to us.

Levaz

short at 1.2280 using the same SL and TP from our original trade.

That order was taken out in a hurry. We are waiting for the 50 pips move above the Stop loss, so my order to short at 1.2318 is ready to be placed. We use a 100 pip Stop loss on the new order 1.2418.
Just a note, if the "Iwatemmibonuty" trade gets taken out as well, then we have not third attempt at the trade. We start afresh looking for new opportunities.
Please notice that we are closing in on the 50sMA which is at 1.2475 on the Daily charts. So this should provide a decent resistance on the upside. Additionally, the 1.2500 area has been the top for a couple of months, which will provide us with added resistance.
Levaz

Sorry for the delay. folks. Today is Canada Day, and I had an afternoon nap so that I could take the kids out for late night Fireworks!!

Today was a special day - lots of firsts:
First day of the European credit crisis came to the surface.
First time the EURUSD spanned 300 pips in a single 24 hour session.
First time since the GFC that bad US data caused the decline in the USD.
First time since the GFC that Euro and Gold broke their correlation.

If you are wondering why the Euro strengthened instead of crumbling, it is a good question.
Actually the Euro is not strengthening, what happened was a series of events. First the day started with a HUGE (absolutely huge) order from the Saudi Arabian Monetary Authority, followed by large orders from BIS (Bankers; Bank), followed by the 115Billion 6 day funding by the ECB, and the 3.5 Billilon "successful bond sale by Spain, All of which contributed to a shortage of Euros in the market.

The stock markets were sagging at this time, and the banks were short of funds to cover their positions. No European Bank would lend to the other (sound familiar) as they all know what each other is hiding in their books (as they all are showing the same doctored books to the public). This caused a credit crisis of sorts, and once the cycle starts, it only feeds off of itself. The banks had to turn to the market to buy the Euro's - so short positions in EURCAD, EURAUD, etc. where they made the most profits were closed to retrieve their Euro's. This of course lead to a flight to REAL safety and this time it was NOT Gold or the USD - it was the European favorite - the CHF and the Yen.

What does this all mean to us - nothing really. We just need to sit back and study the market for a few days. Just so as not to make mistakes and risk our money. Tomorrow if NFP Friday anyway, but it should not really have much of an impact if the Euro crisis takes hold once again.
That will be followed by July 4th 2010, holiday, so, let us hang on to our hats and enjoy the long weekend.

Levaz