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USD/CHF 2014 outlook – who is winning as the safe haven currency?

December 30, 2013 in Chart Alert

USD/CHF is not stopping to prove the bearish sentiments. The race seems to be continuously on to prove which is the safe haven currency and which is “THE” safe haven currency. The last week’s move to 0.8799 was just a “touch and go back” move but there was a lot to read between the lines.

Between the lines

Well, what we mentioned about “reading between the lines” was not just an figurative expression. In USD/CHF’s case it has been literally the case. The pair has been moving between two definite lines for long. A lot of big moves spanning close to a thousand pips but practically without any real direction. This sideways price action had been contained for past over 2 years between the 38.2% and 61.8% retracement levels of the fall from 1.1731 of the week of May 31, 2010 to 0.7069 of August 9, 2011.

Before we go ahead, we wish to mention that this update is the second followup of the first alert “Is USD/CHF Heading For A Nosedive?“. The first followup of that post can be checked here. We may re-post some of the charts from the previous updates for the ready reference and convenience.

USD/CHF literally between the lines

USD/CHF weekly chart - The pair has been in the sideways range but has been trying to break out from the range

A closer look on the price action of USD/CHF for the past 3 weeks.Three weeks back the first sign came for a possible wake-up call. Or shall we say that a sign came for a deeper sleep. Whatever, we can play around with the words but the actions have been simple. Let’s put those in bullet points:

  1. Week of December 9: USD/CHF touched a low of 0.8840 (9 pips below the 0.8849 level)
  2. Week of December 16: After some recoverly, USD/CHF touched 0.8832.
  3. Week of 22: The pair touched 0.8799.

The attempts for breaking out from the long standing support are evident. And even if the tails are long i.e. the gaps between the lows and the open/close prices for these weeks were very wide (which indicate uncertainty for the further drop) but one thing is clear that the lows have been getting lower. At least we take it as continued bearish pressure and the indication that the pair may be heading for much deeper dives. Don’t you? But then, let’s have a look on the overall trends of USD/CHF.

USD/CHF in a long-term downtrend

USD/CHF historical chart of past 10 years - A long-term downtrend

The above 10-year historical chart of USD/CHF shows that the pair has been in a long-term downtrend. We also notice an approximate double-top chart pattern and the price action is breaking below the neckline, which is another technical indication for possible deeper declines.

Safe Haven Currencies – Who will be the winner?

The above historical chart clearly indicates that the Swiss franc has been continuously gaining weight over the U.S. dollar. The strength of the Swiss franc and hence the fall of USD/CHF does not seem to stop. By all means the franc seems to weigh over the dollar as a safe haven currency.

What about the fundamentals?

We will touch base with some of the indicators here as a brief comparison for the economical factors which have been driving forces behind the long-term downtrend favoring CHF’s strength over the USD.

Unemployment – United states versus Switzerland

United States historical unemployment status

United States unemployment (historical data) - Unemployment in the U.S.A. before and after Lehman shock

Switzerland historical unemployment status

Switzerland unemployment (historical data) - Unemployment in Switzerland before and after Lehman shock

The average unemployment in the U.S. during 1948 to 2013 has been 5.83% (Source: U.S. Bureau of Labor Statistics). Post Lehman Brothers collapse and the global economic turmoil the U.S. had seen a steep rise in the unemployment. The situation started improving from 2010 beginning and there has been a steady decline in the unemployment but its is evident that the current status is far worse than what it used to be before the Lehman shock. The unemployment in the U.S. was 7.30% during October 2013 and in November 2013 it again slightly improved to 7.0%. On the other hand the unemployment in the Switzerland as reported by the State Secretariat for Economic Affairs has been much less in comparison. The average unemployment from 1995 to 2013 has been 3.40% and the October 2013 figures were 3.10%. The other thing to be noted is that though Switzerland had also seen a steep rise in the unemployment after the global economic turmoil of 2008 but the current figures are not so much different that those were at that time. Switzerland balanced itself faster.

Annual GDP Growth – U.S.A. versus Switzerland

United States annual GDP growth (historical data)

United States - annual GDP growth historical data

Switzerland annual GDP growth (historical data)

Switzerland - annual GDP growth (historical data)

The 3rd quarter of 2013 saw 1.9% year to year GDP growth in the Switzerland and 2% in the United States. Overall the GDP growth in the U.S. has been more stable during the past 13 years but though Switzerland has seen some deeper bottoms than the U.S. during this time, the peaks have also been higher than those of the United States. Since 2006 Switzerland has seen some attempts to cross over 4% annual GDP growth but that has not been the case in the states.

Trade Balance – U.S.A. versus Switzerland

U.S. Trade balance historical data

Continuous trade deficit in the United States - Historical data

Switzerland Trade balance historical data

Switzerland - Balance of trade - continuous surplus - historical data

As we all know and as clear from the above charts that though since 2009 the trade balance situation in the U.S.A. has seen some improvement but the country has been in continuous trade deficit with imports of goods and services much higher than the export. Switzerland, on the other hand has been in trade surplus and though there has not been a steep increase but a gradual increase is also evident.

Current Account – U.S.A. versus Switzerland

Historical current account situation in the U.S.

United States Current Account - Historical data - continuous deficit

Historical current account situation of Switzerland

Switzerland - Current Account - Historical data - continuous surplus

As the current account of the nation is basically the difference between the income/savings and investments, the trade balance is a major part of it even though it factors the net income from abroad and the cash transfers. As America has seen some improvement in the trade balance situation the same has been the case for the current account. However, there has been a continuous current account deficit in the U.S.A. and a continuous current account surplus situation in Switzerland. The situation has been further improving after 2008.

The bottom line – Government debt to GDP ratio

U.S.A. – Debt to  GDP ratio

United States - Government Debt to total gross domestic product (GDP)  ratio

Switzerland Debt to GDP ratio

Switzerland - Government Debt to total gross domestic product (GDP) ratio.

Government Debt To Gross Domestic Product in the U.S.A, reported by the U.S. Bureau of Public Debt averaged 60.3% From 1940 until 2012. In 2012 the ratio was 101.60 of country’s total GDP. Switzerland, on the other hand, presents a much healthier situation. The historical data of the debt to GDP ratio shows an opposite picture than the United States. There has been a continuous reduction and the figure recorded in 2012 indicated a national debt of  just 35.3% of the gross domestic product.

USD/CHF 2014 outlook

The four things which are clear from what we mentioned above are:

  1. USD/CHF has been in a long-term downtrend.
  2. The economic fundamentals indicate Switzerland in a much better position to have it’s currency better placed as a safe-haven currency.
  3. On technical front the recent break of long standing supports indicate that further declines are highly probable.
  4. The approximate double-top chart pattern of the monthly chart also supports the above outlook.

Where next?

USD/CHF - outlook for the year 2015. The fall may extend to complete 50% retracement.

If the resistance holds at or below 0.9250 then the year 2014 should see further declines first towards 0.8611 to 0.8640 support zone, however there are all the indications that the declines may extend towards the 0.8568 support witnessed During October 2011 and then most likely 0.8520 to complete the 50% Fibonacci retracement of the gains from 0.7069.

Can USD/CHF break below 0.8500?

Well, considering the overall downtrend the possibilities of a break below 0.8500 are quite high. If the double-top chart pattern works as those are supposed to then the fall may extend to 0.8200 or below. However as mentioned above that the first level support from the longer-term perspective, is expected near 0.9250. Any failure of that support will start neutralizing this outlook but a better indication for a near-term bottoming will only come if the resistance at 0.9455 fails.

We remain bearish for USD/CHF.

Please share your thoughts and opinions in the comment box below. You may also like to check the USD/CHF outlook which is updated weekly.
Connect with the author on Google at: +Himanshu Jain

This is part 2 & part 3 for a series of short videos describing the journey in going from an amateur to pro trader.

December 29, 2013 in Miscellaneous

In part 2 of this series I describe how forex robots & systems sold over the internet are time-bombs. Never believe any performance claims unless they are independently verified. Ignore fantasy claims of huge profits month after month.  I give examples of some scammers I have bumped into along the way.

In part 3 I talk about the key to making money is to understand trader effects and how to exploit them.  At the end of the video there is an interesting perspective on the world we live in.

USD/JPY 2014 Outlook – Is 110 a question of “when” not “whether”?

December 28, 2013 in Forex Analysis

USD/JPY had remained under pressure of the psychological barrier of 105.00, for a long time, after touching 103.73 during May 2013. The price action was contained in a triangular pattern for 6 months before the pair ultimately broke out of that pattern recently. The long awaited hit took place last week when the pair broke over 105.00 key level first time after October 2008 i.e. in more than past 5 years. In doing so the pair has almost completed the 61.8% reversal of the great fall of past 10 years i.e.from 123.67 to 75.36.

USD/JPY’s Price Action During Past 10 Years

USD/JPY historical chart for past 10 years

The 61.8% retracement of the above mentioned fall is at 105.21. USD/JPY is just below that level after touching 105.18 during the last week.

Japan Economy – Local Issues

Global economy has been in a depression since Lehman Brothers collapse and the shock it brought. Japan has been has been having it’s own local issues apart from the overall global economic depression.

Earthquake and Tsunami of 2011

Tohoku area earthquake and the devastating Tsunami which had hit Japan on March 11, 2011 had added to the bearish pressures. According to the estimates of World Bank the natural disaster was the costliest natural disaster in the history of the world with an estimated economic cost of US$ 235 billion. The bearish sentiments and the economic pressures continued with over 1,000 aftershocks since then. The largest of these aftershock was of 7.9 magnitude on the Richter scale and  80  of those over 6.0 magnitude. The issues due to Fukushima Daiichi Nuclear power plant melt down and the radiation concerns kept on adding the bearish pressure on the economy.

Tensions with China and South Korea

The territorial disputes with China and South Korea  over the claims for the ownership of  the Senkaku and Takeshima islands respectively have been putting added pressures on the economy. The recent visit of Prime Minister Abe to the controversial Yasukuni shrine which honors the World War-2 dead, out of which many are convicted war criminals, have again fueled these tensions. Last week’s visit of Prime-Minister Abe was the first visit to Yasukuni shrine by a Japanese PM since the year 2006.

Planned increase in the consumption tax

Consumption tax or the sales tax in Japan was last raised in the year 1997 from 3% to 5%. On April 1st, 2014 another increase has been planned from current 5% to 8%. There are thoughts to increase it further to 10%, depending on the economic conditions during October 2015.

Let’s check what happened during the previous consumption tax hike.

USD/JPY price-action just before and after the last consumption tax hike

USD/JPY price action during the previous hike in the consumption tax during 1997

The previous tax hike, 16 years back, had also come in a planned manner. As the above chart indicates the yen kept on weakening before the hike was implemented on April 1, 1997. The weakness continued for the next one month i.e. till April end. A consolidation then took place but the recovery, after that, continued for next 16 months and took USD/JPY to the high of 144.77 during August 1998.

What to expect in the year 2014?

The bearish sentiments for Japanese yen are evident. The break over 105.00 key level has broken one more psychological barrier. The year 2014 is expected to see further weakness in the yen and hence further strength in USD/JPY and also other major JPY crosses.

The weakened yen will help exports but an increase in the consumption tax will affect the domestic consumption with the prices of everything going higher. Any drop in the domestic sales and the consumer sentiments will go against the yen further. We would expect USD/JPY to take out the barrier of 110.00 during 2014. We can not even rule out the possibilities of a move to 112.25/112.40 as a move to 112.26 will complete Fibonacci retracement of 74.6% for the currency pair.

Do share your opinions and thoughts to discuss about the outlook for the year 2014 further. Please also check the USD/JPY outlook which is updated weekly.

Connect the author on Google at +Himanshu Jain

EUR/USD 2014 outlook – The pair is at two years high but is it done?

December 28, 2013 in Chart Alert

EUR/USD has not only broke over the high of 2 years but also broke over the 61.8% retracement of the great fall from 1.4940 to 1.2041 by jumping to 1.3894.

Though a strong resistance was witnessed before the pair could enter 1.3900 ranges and hence the psychological resistance territory of 1.4000 but this break strengthens the bullish outlook further. Some other points to be noted from the above chart that the 76.4% retracement, which we get by deducting 23.6% Fibonacci retracement from 100.00, is just 3 pips above one of the very strong previous resistance level.

EUR/USD weekly chart – the break over 61.8% retracement

EUR/USD brings more bullish outlook by breaking over the 61.8% retracement - Weekly chart

Let’s also have a look on the bigger picture by checking the past 10 years’ price action.

EUR/USD’s price action during past 10 years

EUR/USD's historical chart of past 10 years.

The above chart is indicating the fact that the price-action had clearly missed forming a double-top chart pattern when the pair bad missed retesting the low of 1.1877. Any break below 1.1877 would have formed an approximate double-top formation by one top at 1.5144 and another slightly below that at 1.4940.

EUR/USD 2014 outlook

With only 2 trading days remaining in the year 2013, it’s time to see what we can expect in the year 2014 from the point of view of pure price-action analysis.

The bullish sentiments are clearly strong for the euro. The break over 1.3500 during September 2013 was the first indication and the recent jump which took the pair to 2 year’s high and also over the 61.8% retracement came as another strong indication for the underlying bullish sentiments. A break over 1.4000 should now only be a question starting with “When” and not with “Whether”.

Targets above 1.4000

Any decisive break over 1.4000 should take EUR/USD to at least half way through to the next psychological level of 1.4500 i.e. towards the resistance zone of 1.4240 to 1.4250. As mentioned above, it is interesting that the 76.4% retracement of the fall from 1.4940 is just 3 pips above the resistance level of 1.4947. If the pair breaks above this resistance then it should target 1.4500. This level will not be just a psychological resistance but will also bring in the resistance of the trend-line as indicated in the 10-year’s chart above.

What may change the above outlook

The trend line support for EUR/USD

A support trend-line has emerged as indicated in the weekly chart above. Any failure of this support would be the first indication of a near-term topping. This support should hold near 1.3560 which is also important because of the support of the psychological ranges of 1.3500. However, overall a failure of 1.3500 support will indicate that EUR/USD might have already done it’s best .

Please share your opinions in the comment box below to discuss the price action and possibilities further. You may also like to check the EUR/USD outlook which is updated weekly.

Connect the author on Google at +Himanshu Jain

FX Daily Dose – December 26, 2013

December 26, 2013 in FX Daily Dose

Daily Forex Outlook“Forex Daily Dose” presents a quick snapshot of the price-action of EUR/AUD, EUR/GBP, USD/INR, USD/CAD, EUR/USD, GBP/USD, USD/JPY and AUD/JPY for the immediate and medium-term outlook. Please note that the daily outlook is for current pairs in focus and we may add or remove some of the currency pairs accordingly.

Do not hesitate in contacting us if you wish to know about our view for any specific currency pair.

USD/JPY

bullishUSD/JPY jumped up sharply with the opening of Monday morning session. The pair went over the previous high of 103.63 to touch 104.84 before losing the momentum.USD/JPY finding resistance below 105. The hourly candles are clearly reflecting an uncertainty and confusion because of the evident bullish sentiments against the fear of overcoming the psychological resistance of the 105.00 level. However, the break over 104.63 clearly indicates that we should be able to see the break of 105.00 barrier soon. As we have been mentioning in the previous update that a break over 105.00 should target 105.60 next. On the downside the first support is expected to hold at or over 104.57. Any failure of that support will be the first indication for a delay in targeting 105.00 but even in such case a strong support should come at 104.36. Any failure of 104.36 may bring some more consolidation before a recovery. Even with a break of 105.00, a drop in the upward momentum will be expected over 105.00. This is not just for today but even a sustained price action over 105.00 should bring a consolidation towards 102.00 or lower before hitting 107.40.

EUR/USD

NeutralEUR/USD has been in a sideways range since December 19th EUR/USD breaks the support of the trend line but stays above 55-day EMA supportafter failing to sustain over 1.3811. The price-action had broken the support of the short-term trend-line but has been staying over the 55-day EMA support. Further downward consolidation cannot be ignored but as long as the prices stay over the recent 1.3625, we stay neutral. Any decisive break below 1.3625 will also represent the failure of the 55-day EMA support. Even with such a move another immediate support will be expected near 1.3615. However, any break below 1.3615 will turn the focus downwards for 1.3543 or more. On the upside the first level of resistance should hold in the range of 1.3717 to 1.3723. Any failure of this resistance will be the first indication that the consolidation might be over and another test of 1.3800 should be in the pipe-line.

USD/CAD

bullishUSD/CAD’s fall after touching 1.0737 had broken the expected support of 1.0620 but the pair had found a strong support at 1.0581 i.e. well over the previous support level of 1.0561. We remain neutral till the price action is below 1.0653 but the overall outlook stays bullish. If the immediate resistance at 1.0653 fails the a retest of 1.0737 will be expected and with any break over 1.0744 to 1.0750 resistance zone we would expect USD/CAD to target 1.0854 of the week of May 24, 2010. Before the pair had touched 1.0854 during May 2010, an extremely strong resistance had continued to be in the range of 1.0744 to 1.0750. The recent resistance was felt just 7 pips below this range and that indicates that this resistance may prove to be critical. On the downside the first support is expected at 1.0606 and any failure of that will be the first indication that the pair may go for some consolidation but a better indication will only come if the support at 1.0561 fails.

CAD/JPY

bullishCAD/JPY rose again after finding support at 98.01 but there has been some loss of momentum with a resistance at 98.51. Further gains towards the resistance of 99.02 of the week of May 27, 2013 are now expected, however we will stay cautious because of the approaching strong psychological resistance level of 100.00. Even if CAD/JPY breaks above 99.02, a strong resistance will be expected at 99.38. This level had proved to be a minor support during May 2013 and now we expect it to turn into a resistance. The psychological pressure of 100.00 will also make this level critical. On the downside the support will be expected to hold at 98.01 but a failure of that will start neutralizing the bullish outlook for the short-term..

GBP/USD

bullishGBP/USD has fallen into a sideways range but overall bullish outlook remains intact. The pair had jumped strongly form the expected support zone as we had indicated earlier at “GBP/USD enters the zone of strong supports“. If the minor resistance of 1.6394 fails then a retest of 1.6484 and then a test of 1.6500 is expected. And break above 1.6500 should continue the gains towards 1.6545 to 1.6555 resistance zone. However if the immediate resistance holds then any break below 1.6316 will indicate a breakout of the channel on the downside and such a move my bring some consolidation towards 1.6250 i.e. towards 55-day EMA support. We wills stay positive as long as the support at 1.6217 remains in place.

EUR/GBP

NeutralEUR/GBP had failed to sustain over the resistance of 84.63 even after a slight breach of that resistance when it had touched 84.66. The slight recovery after the strong fall has found a resistance at the 55-day EMA. Even though the downward move is lacking any good momentum, we expect the fall to extend if the support at 0.8330 fails. However we are staying neutral till the price is over 0.8330. A failure of this support may find another support at 0.8274 but if that support also fails then deeper declines first for a retest of 82.52 and more will be expected. As we had mentioned in the previous update also, on the upside a break above 0.8414 is required to indicate any possibilities for further gains.

EUR/AUD

bullishEUR/AUD had fallen strongly after meeting the target mentioned by us during the last to last update. The fall from 1.5579 had extended to 1.5287 before a recovery to 1.5408. We remain in favor of further recovery towards 1.5477 first and then 1.5500 or beyond. However we will stay neutral till the price action is below 1.5411/1.5420 resistance.

USD/INR

NeutralUSD/INR remains in sideways mode between 61.31 and 62.44. We remain neutral initially and our outlook stays same as we have been mentioning earlier i.e. “Any break below 61.33/61.30 will be the first indication of topping. Overall we remain in the favor of further drop in the near-term and the only thing which is sustaining USD/JPY from further downward consolidation is the psychological support of 60.00. On the upside the first resistance is expected below 62.00 but overall only a break above 62.40 to 62.50 resistance will indicate the possibilities that a short-term bottom is in place.”.

Check previous entries of FxDailyDose (The short URL, for your convenience, is http://bit.ly/FXDailyDose).

You may also check the daily and weekly analysis for 8 currency pairs on the following pages:

Daily Analysis:

  1. EUR/USD daily analysis
  2. USD/JPY daily analysis
  3. GBP/USD daily analysis
  4. USD/CHF daily analysis
  5. AUD/USD daily analysis
  6. EUR/JPY daily analysis
  7. GBP/JPY daily analysis
  8. AUD/JPY daily analysis

Weekly Forex outlook

  1. EUR/USD outlook
  2. USD/JPY outlook
  3. GBP/USD outlook
  4. USD/CHF outlook
  5. AUD/USD outlook
  6. EUR/JPY outlook
  7. GBP/JPY outlook
  8. AUD/JPY outlook

FX Daily Dose – December 19, 2013

December 19, 2013 in FX Daily Dose

Forex daily analysis

“Forex Daily Dose” presents a quick snapshot of the price-action of EUR/AUD, EUR/GBP, USD/INR, USD/CAD, EUR/USD, GBP/USD, USD/JPY and AUD/JPY for the immediate and medium-term outlook. Please note that the daily outlook is for current pairs in focus and we may add or remove some of the currency pairs accordingly.

Do not hesitate in contacting us if you wish to know about our view for any specific currency pair.

USD/JPY

bullishUSD/JPY went up to hit the first target range i.e. 104.30 to 104.40, which we had indicated in the Forex Daily Dose of December 16th. The pair went up to 104.36 and found some resistance. Some more consolidation may take place but in such case we will expect a support at the previous resistance zone of 103.16 to 103.29. If this support holds then any break over 104.36 should take USD/JPY towards 104.70 to 104.80 resistance and then 105.00. The resistance of 105.00 may prove to be very strong but as the pair has face a long-term resistance before testing this level, we expect a break of that and any move above 105.00 should target 105.60. On the downside if the support at 103.16 fails then it may cause a short-term topping to extend the consolidation slightly more towards 102.90 but in such case also we would expect a test of 105.00.

EUR/USD

NeutralEUR/USD’s broke the support of 1.3709 and then moved as EURUSD trend line supportwe had indicated yesterday. The consolidation extended to 1.3649. Though the strong fall brings some bearish sentiments in the picture but the current price is at the support level of a short-term trend line. Just below this trend line the support of 55-day EMA is currently at 1.3617. With these support we expect a recovery towards the first resistance zone of 1.3723 to 1.3740. Any decisive break over 1.3740 should target 1.3800/1.3810 first then possibly the strong resistance zone of 1.3832 to 1.3858. However, any break below 1.3615 will turn the focus downwards for 1.3543 or more .

USD/CAD

bullishUSD/CAD found support at 1.0609 i.e. 34 pips above the support mentioned by us yesterday and then after breaking over 1.0660 did break over 1.0700 to touch 1.0725. This is the highest point after May 2010 i.e. of past three and a half years. We now expect it to target 1.0854 of the week of May 24, 2010. Even if such case the resistance should start coming into the picture from 1.0800. On the downside the support is expected to hold in the range of 1.0669/1.0660. A failure of this support will delay further gains by extending the consolidation towards 1.0620.

CAD/JPY

BearishCAD/JPY went as low as 96.48 which was 3 pips above the downside target which we have been mentioning during past couple of updates. Some recovery from there had taken the pair to 97.51 before another drop. Our outlook for short-term is mildly bearish as we had mentioned yesterday also. If resistance at 97.22 holds then we expect a retest of 96.48 and then possibly towards the 55-day EMA support i.e. 96.10/96.20 support. If support at 96.48 holds then focus will turn back towards upside for a test of 97.61/97.66. We would like to repeat what we have been mentioning previously also: a decisive break over July 24th’s 97.66 is required as an indication that bullish sentiments are not dying.

GBP/USD

bullishGBP/USD jumped up from 1.6217 strongly to touch 1.6484 before dropping to 1.6371. We now expect a support over 1.6336 and with that, we expect GBP/USD to overcome the psychological resistance of 1.6500. And break above 1.6500 should continue the gains towards 1.6545 to 1.6555 resistance zone. Do also check the chart alert which we had posted a couple of days back i.e. “GBP/USD enters the zone of strong supports“.

EUR/GBP

NeutralEUR/GBP broke below the 0.8350 support to go as low as 0.8339. The strong fall suggests that the upward consolidation might already be over at 0.8466 and the pair may continue the downward move. However, we remain neutral till a decisive break below 0.8274 support does not take place. On the upside, now, a break above 0.8414 is required to indicate any possibilities for further gains

EUR/AUD

bullishEUR/AUD touched 1.5579 i.e. 1 pip below the first target we had mentioned yesterday. A strong resistance was witnessed there which caused a drop to 1.5423. If the support over 1.5384 holds then we would expect a retest of 1.5579 and then possibly 1.5620. Any decisive break below 1.5384 may extend the consolidation to 1.5332.

USD/INR

NeutralUSD/INR found support at 61.31. The support came just 2 pips below the support we had indicated yesterday. We remain neutral initially and our outlook stays same as yesterday i.e. “Any break below 61.33/61.30 will be the first indication of topping. Overall we remain in the favor of further drop in the near-term and the only thing which is sustaining USD/JPY from further downward consolidation is the psychological support of 60.00. On the upside the first resistance is expected below 62.00 but overall only a break above 62.40 to 62.50 resistance will indicate the possibilities that a short-term bottom is in place.” .

Check previous entries of FxDailyDose (The short URL, for your convenience, is http://bit.ly/FXDailyDose).

You may also check the daily and weekly analysis for 8 currency pairs on the following pages:

Daily Analysis:

  1. EUR/USD daily analysis
  2. USD/JPY daily analysis
  3. GBP/USD daily analysis
  4. USD/CHF daily analysis
  5. AUD/USD daily analysis
  6. EUR/JPY daily analysis
  7. GBP/JPY daily analysis
  8. AUD/JPY daily analysis

Weekly Forex outlook

  1. EUR/USD outlook
  2. USD/JPY outlook
  3. GBP/USD outlook
  4. USD/CHF outlook
  5. AUD/USD outlook
  6. EUR/JPY outlook
  7. GBP/JPY outlook
  8. AUD/JPY outlook

Follow up on USD/CHF price action

December 19, 2013 in Chart Alert

We had recently talked about the possibilities that USD/CHF may be heading for deeper declines in the near future. You may please check it at “Is USD/CHF heading for a nosedive?“.

There has been a strong upward jump recently which took the pair to 0.8859. Slight resistance is being faced around this level which is also near the 22-day EMA.

USD/CHF’s upward jump

USD/CHF near 22-day EMA

USD/CHF near 22-day EMA

Considering the strong jump some more upward consolidation can not be ignored but lets check out what we can expect.

USD/CHF and expected resistance levels

USDCHF and expected resistances

Some further gains towards the 55-day EMA i.e. 0.9020 can not be ruled out but a strong resistance will be expected there. This resistance will be a combined effect of the following 3 forces:

  • 55-day EMA
  • The short-term trend line resistance
  • The psychological resistance of 0.9000 ranges.

In fact the gains can even extend to 0.9060.

With the above resistance if the prices fall below 0.8849 again and manage to sustain below it for sometime then further declines, as indicated in the previous post as quoted above will be expected.

To quote it for the ready reference: “A drop towards 0.8568 to 0.8630 support and then lower can be expected. Considering the overall price -action we do not rule out the possibilities of a fall even towards 0.8240 or more in the days to come.”

Do share your opinions in the comment box below.

You may also like to check the  USD/CHF weekly forecast and the USD/CHF daily analysis.

FX Daily Dose – December 18, 2013

December 18, 2013 in FX Daily Dose

Forex daily dose

“Forex Daily Dose” presents a quick snapshot of the price-action of EUR/AUD, EUR/GBP, USD/INR, USD/CAD, EUR/USD, GBP/USD, USD/JPY and AUD/JPY for the immediate and medium-term outlook. Please note that the daily outlook is for current pairs in focus and we may add or remove some of the currency pairs accordingly.

Do not hesitate in contacting us if you wish to know about our view for any specific currency pair.

Currency pair

Near-term Outlook

Comments – Overall Outlook

USD/JPY

Neutral USD/JPY has been continuing with the support pattern just above the 22-day EMA and though this support pattern combined with the recent break over 103.73 has been keeping the bullish outlook intact but the recent price action has been a sideways range since the markets opened on Monday and is also indicating some short-term bearish pressure. Considering this some downward consolidation can not be ruled out. We are staying neutral till the price action is stuck between 102.50 and 103.29. a sustained resistance near 103.23 may result in a correction towards 102.15 first and then possibly 101.62

EUR/USD

Neutral EUR/USD has been in a narrow sideways range since the markets opened this week. Though the overall outlook stays bullish but we are staying neutral initially till the price does not break out from the range of 1.3709 to 1.3810. Our outlook stays same as day before yesterday. Any failure of 1.3709 support should bring further consolidation towards 1.3680 or more. Any break over 1.3810 should take the pair for a retest of 1.3832 and then possibly further gains towards 1.3858 will be expected

USD/CAD

Bearish USD/CAD’s price action has fallen into a short-term descending channel. The current price is near the resistance trend-line. If this pattern continues then some more consolidation can be expected towards 1.0575 or more. However the support at 1.0572 may prove to be critical. And failure of this may extend the consolidation towards 1.0525 to 1.0535 support zone of 55-day EMA. This support is also near the support trend-line of above mentioned channel. On the upside any decisive break over 1.0625 will be the first indication of the possibilities of further gains but in that case the resistance of 1.0660 is required to see a retest of 1.0700 or a break above that. We are staying neutral initially.

CAD/JPY

Bearish Our outlook for CAD/JPY remains exactly same as day before yesterday except that the possibilities of a downward consolidation are more now. We will quote what we had mentioned day before yesterday: ” CAD/JPY seems to have stuck up below 97.61. Overall outlook remains mildly bullish as the lows are still getting higher but till a break above 97.61 takes place we remains neutral of upside. 97.61 is just 5 pips below July 24th’s 97.66 resistance and hence not just a break over 97.61 but a decisive break over 97.66 is required as an indication that bullish sentiments are not dying. If such a move takes place then the focus will turn towards 98.20/98.37 resistance first and then possible for a move towards 99.02. The recent support had come in the support range which we had mentioned in the previous update of Friday, December 13th and our views still remain same that the first level support is now expected in the range of 96.87 to 96.98. In case this support fails then further drop towards 96.45 may takes place before another recovery. The near-term outlook will stay bullish as long as the price-action stays above 96.30.”

GBP/USD

Neutral GBP/USD moved exactly as we had indicated in the day before yesterday’s “Forex Daily Dose”. Resistance came 6 pips below 1.6355 and then the fall took place to the indicated support zone of 1.6210 to 1.6220. The pair found support at 1.6217. This support was also just above the 55-day EMA support. We are staying neutral for the pair initially. If the resistance at 1.6355 continues and a break of the support zone i.e. 1.6210 takes place then further consolidation towards 1.6125 to 1.6140 can not be ruled out. However please note that the current price action is in a very strong support zone. Please check the chart alert GBP/USD enters the zone of strong supports.

EUR/GBP

Neutral EUR/GBP found resistance 10 pips below the resistance indicated in the day before yesterday’s FX Daily Dose. The pair should find support at 0.8390 and if that support holds then further gains towards 0.8466 will be expected. In case this support fails then it will indicated a topping and that should result in further falls 0.8350 or more.

EUR/AUD

Neutral EUR/AUD should find support at 1.5390 but if this support fails then further consolidations will be expected towards 1.5330. The recent drop indicates that the psychological resistance of 1.5500 is coming into the picture and that keeps us neutral for upside. In case a break over the recent 1.5484 but more importantly 1.5500 takes place then further gains towards 1.5580 or even 1.5620 will be expected.

USD/INR

Neutral USD/INR found support at 61.43. Our outlook stays same as day before yesterday and we will repeat that as: Any break below 61.33 will be the first indication of topping. Overall we remain in the favor of further drop in the near-term and the only thing which is sustaining USD/JPY from further downward consolidation is the psychological support of 60.00. On the upside the first resistance is expected below 62.00 but overall only a break above 62.40 to 62.50 resistance will indicate the possibilities that a short-term bottom is in place.

Check previous entries of FxDailyDose (The short URL, for your convenience, is http://bit.ly/FXDailyDose).

You may also check the daily and weekly analysis for 8 currency pairs on the following pages:

Daily Analysis:

  1. EUR/USD daily analysis
  2. USD/JPY daily analysis
  3. GBP/USD daily analysis
  4. USD/CHF daily analysis
  5. AUD/USD daily analysis
  6. EUR/JPY daily analysis
  7. GBP/JPY daily analysis
  8. AUD/JPY daily analysis

Weekly Forex outlook

  1. EUR/USD outlook
  2. USD/JPY outlook
  3. GBP/USD outlook
  4. USD/CHF outlook
  5. AUD/USD outlook
  6. EUR/JPY outlook
  7. GBP/JPY outlook
  8. AUD/JPY outlook

GBP/USD enters the zone of strong supports

December 18, 2013 in Chart Alert

You may be getting bored that for many months we have been talking about the same resistance and support trend lines for GBP/USD. But then, if we have been talking about the same lines for long, those same lines have been in the existence for over 4 years. So can’t help. You may like to check one of the previous updates about the same at “GBP/USD broke 4 year old resistance trend line” before we move ahead with this GBP/USD chart alert.

As we had mentioned in the previous post, the pair had broken over the long-term resistance trend line when it had broken over 1.6260. As was expected, the break form the containment had brough further upward gains. GBP/USD had moved as high as 1.6467. The resistance there was a natural phenomena because of the strong psychological pressure of 1.6500 level. Well, the resistance had worked and the pair had moved down to as low as 1.6217 for a consolidation.

What is expected is that the old resistance support line should act as support now.

GBP/USD weekly chart with the trend lines

GBP/USD weekly chart - the resistance trend line is now acting as support.

As evident from the above chart, the pair is acting as expected. The old resistance trend line is now acting as support.

What adds to this support zone is the support from the 55-day EMA. Let’s have a look on the daily chart:

GBP/USD daily chart with 55-day EMA.

What is expected?

The combined forces of these two support forces may keep the pair in check. As we have been mentioning the our “FX Daily Dose” section that sooner or later we expect GBP/USD to overcome the psychological resistance of 1.6500, however if the current support breaks and a move below 1.6200 takes place then further consolidation towards the next support zone of 1.6125 to 1.6140 can not be ruled out. Even if the fall extends, we would expect it to be limited to 1.6160/1.6180 zone where the strong support of the lower trend line would come into the picture.

If the current support holds then the pair should reverse back towards upside.

Do share your opinions to take this discussion forward.

You may check the weekly GBP/USD forecast and the daily GBP/USD analysis.

Fisic performance & the importance of a flexible strategy 16th Dec 2013

December 16, 2013 in Forex Analysis

As we head into the holiday period, liquidity will shrink and the price action should get pretty random with a few stop runs thrown in. One complicating factor is that FOMC is up again this week so need to be cautious ahead of that especially since the thin liquidity conditions may exacerbate price moves.
Performance last week was 0.83% but draw-down is close to my limit now of 20% so I need to manage that carefully. I was looking for some reversals to kick off last week to melt that draw-down away but unfortunately it did not go my way. However, the plan is to stay focused. keep my eye on the ball, manage the risk and eventually the moves will go my way. It is not easy to make money in these market conditions but I am focused on the long term growth of the equity curve and it is important not to become distracted by ever changing market conditions which blunt performance at times.
Last week the dollar index looked like it want to break down and head towards 79 only to turn and blow out traders shorting the pullback to 80. This morning it looks headed back to 80 and is unlikely to do anything decisive into the end of the year unless we get a big surprise from the Wed FOMC meeting.
EURUSD – Same story as last week. Really hard to get a directional bias with confounding fundamentals and too many shorts in the market. About 80% of retail traders are reported as being short. It is usually not wise to be on the same side.
GBPUSD – This pair is in the buy zone for bulls so it is a question of seeing if they win the battle here. CPI news is out on Tuesday so lets see if that is in the bears or bulls favor. My bias is long for now.
USDJPY – I took some profits on the run to the daily chart top at 103.75. which turned out to be a good call as it turned there. Now we wait to see if bulls buy one of the pullback points at say 102 or 101.60.
USDCHF – This pair has been a thorn in my side. Late last week it looked liked it wanted to turn higher back into the daily chart range but retraced all of the move this morning which is not a good sign for my longs. Traditionally both the dollar and the Swiss franc have been regarded as safe haven currencies. It may be that the franc is being repriced as a ‘safer’ haven than the dollar despite the Swiss central banks attempts to keep the lid on the currency. Lets wait & see what Wed brings.
For trading perspective this week, this is an interesting story with a lesson for all of us as traders,
describing the downfall of Eric Sprott as a ‘golden’ hedge fund manager.  A well known gold bug Sprott had $3billion under management in 2008 and this has fallen to about $350 million due to a combination of both redemption and losses.  The investment company, Sprott Inc., is phasing him out of the investment decisions and has already added co-chief investment officers to all of the funds. So easy to read between the lines there.
The Richard Dennis story is similar. In the early 1970s, he borrowed $1,600 and reportedly made $200 million in about ten years with his famous ‘Turtle’ trend trading strategies. The famous 1983 movie “Trading Places” with Eddie Murphy and Dan Ackroyd was related (though not directly connected) to this story at http://en.wikipedia.org/wiki/Richard_Dennis
But Dennis fell from Grace also. Via Wikipedia – ‘Dennis managed pools of capital for others in the markets for a while, but withdrew from such management in the spring of 1988 after his clients suffered heavy losses. In the Black Monday stock market crash of 1987, he reportedly lost $10 million, with a total of $50 million reportedly lost in 1987-88. In 1990 his firm settled investor complaints of his failure to follow his own rules, for over $2.5 million, without admitting or denying any wrongdoing. He also managed funds for some time in the mid and late 1990s, closing these operations after losses in the summer of 2000’.
The moral of the story for all of us as traders – stay flexible, your trading strategy must suit the underlying market conditions of the time   – a lot of traders look for some ‘system’ that works under all conditions.  I suspect this is a search for fools gold.  Both Richard Dennis and Eric Sprott had a winning formula for a while but then where too slow to recognize that the market had changed and did not suit the old winning formula.
People who are new to trading often have a desire to make money every day or every week and certainly every month. If only the market would let us do that. For example, the PSAR 4 hour chart add strategy I like to use does not suit typical December conditions as the market thins out and trends are unlikely. However, it does suit a sentiment index fade strategy (Fisic FSI strategy) as there is a lot of stop running in these choppy thin conditions.

FX Daily Dose – December 16, 2013

December 16, 2013 in FX Daily Dose

FX Daily Dose

“Forex Daily Dose” presents a EUR/AUD, EUR/GBP, USD/INR, USD/CAD, EUR/USD, GBPUSD, USDJPY and AUD/JPY for the immediate and medium-term outlook. Please note that the daily outlook is for current pairs in focus and we may add or remove some of the currency pairs accordingly.

Do not hesitate in contacting us if you wish to know about our view for any specific currency pair.

Currency pair

Near-term Outlook

Comments – Overall Outlook

USD/JPY

bullish USD/JPY again found support just above the 22-day EMA. This support pattern has been in the picture for the third week now and though it suggests that the bullish sentiments are in the picture, we will wait for any decisive break over 103.39 as confirmation. Such a break should take the pair towards retesting 103.73 first and then possibly take it to 104.30 to 104.40 resistance thru 103.92 resistance. However, a sustained resistance near 103.39 may result in a correction towards 102.15 first and then possibly 101.62. Overall we stand by the view that sooner or later USD/JPY should be moving up to test 105.00.

EUR/USD

bullish EUR/USD has tried to break over 1.3769 resistance and that suggests that further gains may take place before a downward consolidation. More than that, the break of 1.3737 had found support 14 pips over 1.3695 and that keeps the outlook positive. First support in now expected at 1.3728 and even if that fails then at 1.3709. If these supports hold then will expect another test of 1.3800. Any break over 1.3810 should take the pair for a retest of 1.3832 and then possibly further gains towards 1.3858 will be expected. Any failure of 1.3709 support should bring further consolidation towards 1.3680 or more. However, till the price action remains over 1.3618 critical support, the near-term outlook will stay on bullish side.

USD/CAD

Bearish USD/CAD is still above the 1.0561 support but the price action is now indicating a bearish pressure for some more downward consolidation. If the support of 1.0561 fails then we would expect further consolidation 1.0520/1.0530 support zone. This zone does not only represent a previous support but also the 55-day EMA and the psychological support of 1.0500 level. In case and decisive break below 1.0500 takes place then it will indicate a short-term topping. On the upside a break over 1.0660 is required to see a retest of 1.0700 or a break above that.

CAD/JPY

Neutral CAD/JPY seems to have stuck up below 97.61. Overall outlook remains mildly bullish as the lows are still getting higher but till a break above 97.61 takes place we remains neutral of upside. 97.61 is just 5 pips below July 24th’s 97.66 resistance and hence not just a break over 97.61 but a decisive break over 97.66 is required as an indication that bullish sentiments are not dying. If such a move takes place then the focus will turn towards 98.20/98.37 resistance first and then possible for a move towards 99.02. The recent support had come in the support range which we had mentioned in the previous update of Friday, December 13th and our views still remain same that the first level support is now expected in the range of 96.87 to 96.98. In case this support fails then further drop towards 96.45 may takes place before another recovery. The near-term outlook will stay bullish as long as the price-action stays above 96.30.

GBP/USD

Bearish GBP/USD has recovered slightly with the market opening on Monday, however we still expect a resistance near 1.6355. If this resistance holds then a retest of 1.6262 and with a break of that support further consolidation towards 1.6210 to 1.6220 range will be expected. As we have been saying that the overall outlook stays positive for a test of 1.6500 in the coming days but we expect some more consolidation before that. On the upside the resistance at 1.6418 is critical and only a break above that will indicate that the sentiments favor further gains before a consolidation takes place.

EUR/GBP

bullish EUR/GBP found support over the support zone indicated by us during the previous update of Forex Daily Dose. We remain in favor of further upward consolidation but a better indication of the same will only come if a break over 0.8440 takes place. The sentiments are all set for some upward consolidation but the resistance of the approaching 0.8500 psychological level seems to be keeping EUR/GBP in check. A break over 0.8440 should take the pair towards 0.8475 thru 0.8462/0.8463 resistance. However the resistance at 0.8477 is critical and if that holds then another fall should take place. Considering this we will remain cautious before any break of 0.8500 psychological level takes place. The support is again expected in the range of 0.8380 to 0.8390 and a failure of that will signal the topping.

EUR/AUD

Neutral EUR/AUD had broken below the first level support indicated by us during the previous update i.e. 1.5350 but found support at 1.5312 and then moved to 1.5413. We remain in favor of further gains if there is a break of the 1.5432 resistance. However, considering the resistance of the psychological level of 1.5500, we stay cautious and neutral. a break over 1.5432 should take the pair further up for a retest of 1.5462 of May 2010. Our near term outlook stays bullish as long as the price -action stays above 1.5180/1.5189 support zone.

USD/INR

Neutral USD/INR dropped to 61.72. During the previous update for “Forex Daily Dose” we had mentioned that we will remain cautious as long as the price is below the resistance zone of 62.40 to 62.50. We remain neutral for USD/INR. Any break below 61.33 will be the first indication of topping. Overall we remain in the favor of further drop in the near-term and the only thing which is sustaining USD/JPY from further downward consolidation is the psychological support of 60.00.

Check previous entries of FxDailyDose (The short URL, for your convenience, is http://bit.ly/FXDailyDose).

You may also check the daily and weekly analysis for 8 currency pairs on the following pages:

Daily Analysis:

  1. EUR/USD daily analysis
  2. USD/JPY daily analysis
  3. GBP/USD daily analysis
  4. USD/CHF daily analysis
  5. AUD/USD daily analysis
  6. EUR/JPY daily analysis
  7. GBP/JPY daily analysis
  8. AUD/JPY daily analysis

Weekly Forex outlook

  1. EUR/USD outlook
  2. USD/JPY outlook
  3. GBP/USD outlook
  4. USD/CHF outlook
  5. AUD/USD outlook
  6. EUR/JPY outlook
  7. GBP/JPY outlook
  8. AUD/JPY outlook

Is USD/CHF Heading For A Nosedive?

December 16, 2013 in Chart Alert

The strong downtrend which had started from the week of May 31, 2010 had taken USD/CHF from 1.1731 to 0.7069 during the week of August 8, 2011. The recovery to 0.9315 from the low of 0.7069 had a very strong momentum and had come as quite promising but then the momentum slowed down even though the pair managed to touch 0.9972. The resistance came just shy of the psychological level of parity i.e. 1.0000 but also just 22 pips above of the 61.8% retracement of the great fall from 1.1731. Since then the pair has been in a very volatile sideways range between the 38.2% retracement support and 61.8% retracement resistance level. In fact we can say that this sideways price action has been in place for over 2 years.

USD/CHF’s journey during the past three and a half years

USD/CHF weekly chart - the price action during past three and a half years.

USD/CHF weekly chart – the price action during past three and a half years.

And then the story reverses – Highs going lower and so the bottoms

Let’s have another look on the same chart

USD/CHF chart for past 3 and half years with change in the direction

USD/CHF chart for past 3 and half years with change in the direction

This is evident that The first resistance during the recovery was a minor one at 38.2% retracement level. The break came soon and the pair, then found resistance below the 50% retracement level. Till USD/CHF finished the 61.8% retracement, the peaks were going higher and the lows were too. The story seems to have reversed from there. The peaks started going lower and so the bottoms too. However, the one thing which was keeping the pair in check was the support at 38.2% Fibonacci retracement level. The price action was contained above that support.

What’s new

The 38.2% retracement is at 0.8849. The pair just touched 0.8840. It was just a touch and go situation as the support was felt immediately, nevertheless it was a break. And then sometimes initial small indication end up in big moves.

The larger picture and what is expected

Let’s have the larger view of the historical price action of USD/CHF during past 10 years

USD/CHF historical chart for past 10 years indicating an overall downtrend.

USD/CHF historical chart for past 10 years indicating an overall downtrend.

It is clear that the pair has been is a strong downtrend for over 7 years now. The failure at the 61.8% retracement and then the recent slight break below the above mentioned support may have very strong implications for a continued downtrend. It is not just that USD/CHF might have just finished the consolidation by retracing to 61.8% level and finding the resistance below the parity level but another look tells us that the previous support trend-line seems to have turned into a resistance trend line.

The bearish sentiments have been there in the larger picture but have started coming back into the near-term picture as well. If the price action sustains below 0.8849 for sometime then a drop towards 0.8568 to 0.8630 support and then lower can be expected. Considering the overall price -action we do not rule out the possibilities of a fall even towards 0.8240 or more in the days to come.

Safe Haven and “The Safe Haven”

The U.S. dollar and the Swiss franc both have been in the safe haven currency  category for long. It is clearly evident that the dollar is losing the grounds the franc  in this battle for the status of “The safe haven currency”.

Do share your opinions in the comment box below to take this discussion forwards.

You may also like to check the weekly USD/CHF outlook and the daily USD/CHF analysis.