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Fisic performance last week and look ahead to this week

December 9, 2013 in Forex Analysis

Last week trading did not go my way. Economic news from the USA was favorable with better than expected NFP and unemployment rate figures and yet the dollar responded in a v weak fashion. It may be the market just does not believe the Fed will taper and may even increase rather than decrease its bond buying in the near future. On the charts the dollar index looks like it wants to head south to 80.00 and if that support does not hold then 79.00.
Last week we also an illustration of how trades that are too obvious are obviously wrong. We saw massive short squeezes on the Yen crosses and AUDNZD. Remember there are literally millions of eyeballs looking at the same charts and playing similar strategies. Doing what every other trader does is a sure recipe for failure. Lets take EURJPY as an example. This pair was in a rising wedge which is a reversal pattern and also showed divergence even on the weekly charts (if you are not familiar with these terms I would suggest Googling them). Given these set ups, traders piled in short as you can see on myfxbook here 87% of retail traders (those on Myfxbook) are short.  EURJPY took off like a rocket last week in order to shake out these traders. Luckily, I did not have a position on EURJPY but I did have some on CHFJPY and AUDNZD and had to take some losses.
Last week performance on AVA was – 1.56%. Worst week in a long time.
But this shake out also present us with a nice opportunity here now. These squeezes have a tendency to burn out when the weak shorts are dead and then a turn comes to work off the technical extremes we are now seeing. Since it is the nature of currencies to be mean reverting these are high probability set ups and the best way to play it is to short the pullbacks when the turn is confirmed. A sell extreme from the highs would be a great signal to confirm the turn but you often don’t see that from squeezes which tend to fizzle out rather than reject price zones. However, I do like to put a small position on so as to catch a early part of the move if the turn comes suddenly.
EURUSD – Given the relatively good US economic news ( at least on the surface) and talk from the eurozone of negative interest rates and other measures, this strength in the euro is surprising many. In terms of the technical pattern, a head & shoulders pattern was visible on the 4hr chart last week and the shorts lying above that got blown out. Given how weak the dollar index is acting, I am not looking for a EURUSD short here. EURUSD actually looks like it wants 1.38 again but I think there are better opportunities that EURUSD long.
GBPUSD – Bias looks higher if we see continued dollar weakness. It is noteworthy that retailers are 73% short.
USDJPY– Bucking the weak dollar trend the Yen looks even worse. Price should break above 103.78 soon.
GBPJPY and EURJPY – Per the comments above, I will be looking for shorts here to work off the technical extremes these pairs are now showing.
CHFJPY – is both at multi year highs and at technical extremes so its worth the risk of a little top calling here.
AUDNZD – Like CHFJPY this is another pair that went to tech extremes and is at the edge of its historical relative valuation. I am long from close to the lows. Hopefully the weak long shake outs are done and we see a nice rally of a few hundred pips.

FX Daily Dose – December 9, 2013

December 9, 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


Neutral USD/JPY had fallen strongly from 103.37 and then found strong support at 101.62. The support indicates the underlying bullish sentiments but the previous resistance below 103.73 and the current sideways price action are calling to exercise caution. Considering these the immediate outlook stays neutral even though the overall outlook stays bullish. If support holds above 102.32 and a break over 103.37 takes place then a retest of 103.73 will be expected. With any failure of 103.73 resistance, USD/JPY may target 104.10/104/20 also. However if the resistance continues below 103.37 then a 102.32 support fails then deeper consolidations cannot be ruled out.


Neutral EUR/USD touched 1.3721 during the Asian session when the markets opened on Monday. Since then the pair had fallen into a narrow sideways range below 1.3714. The narrow range is clearly indicating the possibilities of a breakout soon. However the current price action is keeping the immediate outlook neutral. A break over 1.3721 should make the pair to target 1.3770/1.3785 next. However if the resistance holds then some consolidation towards 1.3615/1.3620 may take place.


bullish USD/CAD has gone been in a sideways mode since the markets opened today i.e. Monday, however if support over 1.0622 holds and a break over 1.0666 takes place then further gains towards 1.0700 or more are expected. In case the support at 1.0622 fails then a strong support will be expected in the range of 1.0580 to 1.0590.


Neutral If support holds at 96.60 then a retest of 97.09 will be expected. However the resistance below 97.11, which we had mentioned during the last update is keeping us neutral initially, though the overall outlook is still mildly bullish. For the overall view please check the previous update of November 29th. Any break below 96.60 may bring further consolidation towards 96.20 or more.


Neutral The overall outlook stays bullish for GBP/USD and we expect a test of the psychological level of 1.6500 sooner and not so quite later. However, considering the resistance faced at 1.6443 which was well below 1.6500, we stay neutral initially. Any break below 1.6293 support may bring some deeper consolidation before a recovery.


Neutral EUR/GBP is facing resistance near 55-day EMA. If that holds the it will indicate the end of the upward consolidation and that should result in drop towards 0.8315 or more. Even if the resistance of 55-day EMA fails and the pair breaks above the recent 0.8395, a strong resistance is expected in the range of 0.8415 to 0.8425. Our overall outlook stays bearish but we are neutral initially.


bullish If support holds at or above 1.5017 then EUR/AUD should move further upwards to retest 1.5163 and then possibly towards 1.5235. Our immediate outlook stays bullish for EUR/AUD.


Neutral USD/INR moved the way we had indicated during the last update and even broke the support of 61.50 to go as low as 60.64. We expect some more weakness in the near term but support at 60.54 may prove to be critical and hence our immediate outlook is neutral for USD/INR. We will also repeat what we have been mentioning previously that USD/INR is stuck between the psychological levels of 60.00 and 65.00 after failing to test 70.00. Note: Within next 6 months we expect a break below 60.00 to test 58.74/58.80 level.

Check previous entries of FxDailyDose (The short URL, for your convenience, is

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
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