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US Dollar Index

The major trend of the US Dollar Index is still down. Last Friday, the index went to a high of 77.57 before settling at 77.37, which is down by 0.15 compared to the previous day. The low of the week is 77.33. Immediate resistance to the Index is 79.51 (13-Week Moving Average Line), followed by 80.00.

Currently the RSI is pointing downward at 28.44%, indicating that the index has lost its momentum to undergo its major “upward” retracement, hence a weakening US Dollar.

General Market Commentary (October 19, 2007) by MG Financial Group:

The Yen rallied across the board in the Friday session amid a slide in global equities. The Greenback, which initially tumbled against the Euro and Sterling, recovered amid profit taking heading into this weekend’s G7 Finance Ministers meeting. We’re not anticipating the G7 communiqué to single out Dollar weakness, but do expect increased pressure on China to hasten currency flexibility. It will be important to focus closely on post-meeting commentary from Eurozone officials as there will be scope for criticism of recent Euro strength impeding on trade competitiveness.

UK’s Finance Minister Alistair Darling said that while there was a mix of views among the G7 on exchange rates, he reiterated that forex levels should be determined by markets. Meanwhile, Canada’s Finance Minister Flaherty said he would not be surprised to see stronger language in the communiqué on China’s foreign exchange policy. Further, he expects vigorous discussion on the topic at the meeting. We look for the Yen to remain buoyed heading into the meeting, given the currency’s characteristic to trade as a proxy to China’s Yuan.

The Dollar’s near-term direction will likely remain linked to sentiment over upcoming Fed policy decisions. Earlier in the session, Fed Funds futures were pricing in a 98% chance of a rate cut at the end of the month, up from over 70% yesterday and just over 30% a week earlier. Recent economic data continues to point towards further deterioration in the housing market, but have yet to reveal any spillover effects on the consumer. Next week’s US economic calendar is light but will provide additional gauges on the housing market, with the releases consisting of existing home sales, new home sales, durable goods orders and weekly jobless claims.

Fed Chairman Bernanke said central bank predictability was important in making long-term rates respond to Fed actions. He reiterated that central banks should strive for transparency, predictability and avoid overreactions. However, he provided little insight into the FOMC’s policy deliberations in the coming weeks.

Cable edged out to a fresh multi-month high at 2.0522 on the heels of stronger than expected growth data. The report revealed robust GDP growth for Q3 at 3.3% annualized, versus 3.1% a year earlier and 0.8% q/q. The Bank of England remains in a precarious situation amid tightening credit conditions, lingering inflationary pressure and strong economic growth. We now expect the BoE to remain on hold for the remainder of the year at 5.75%.

EUR/USD

From the weekly chart, the pair is on a major “upward” move, as indicated by the Long MACD and the Moving Average Lines. Last week’s price candle was bullish and it broke the previous high of 1.4300 and reached 1.4318, indicating that the pair has lost its momentum to undergo its major “downward” retracement. Immediate support is 1.4084, with next support at 1.4025 which is the upper band of the upward channel. Immediate weekly resistance is at 1.4318, which is the pair’s historically high. Weekly Stochastic is seen crossing downward at the 83% level, indicating that the pair’s upside is still limited.

From the daily chart, the price candles are still above the 10-Day Moving Average Line. Its immediate daily resistance is at 1.4318, while daily support is at 1.4210 (10-Day Moving Average Line), followed by 1.4154 and 1.4065. The Default MACD is showing a down-trend while the two pairs of Moving Average Lines are still indicating an up-trend. Daily Stochastic is seen moving upward at the 78% level, indicating a possible upward move over the next few trading days. However, sometime this week we are expecting the pair to make another attempt for a major “downward” retracement, as its upside is limited.

From the hourly chart, the pair is currently ranging between 1.4318 and  1.4260.

We are still bearish towards the pair, as the pair’s upside is limited. However, we need to wait for a clear signal to indicate that the pair is undergoing its major downward retracement before going short on the pair.

GBP/USD

From the weekly chart, the pair is on a major “upward” move, as indicated by the Long MACD and the Moving Average Lines. Last week the price candle was bullish, as the pair moved above  2.0500, its recent high in weeks. Its immediate weekly resistance is at 2.0652, which is its historical high. Its immediate weekly support is at 2.0398, followed by 2.0267 (13-Week Moving Average Line) and 2.0140. Weekly Stochastic is seen crossing downward at the 85% level, indicating a limited upside.

From the daily chart, the price candles are still above its 10-Day Moving Average Line. Its immediate daily resistance is at 2.0546, while its immediate daily support is at 2.0401 (10-Day Moving Average Line), followed by 2.0360 and 2.0302 (40-Day Moving Average Line).The pair’s short-term moving average lines (10 and 40-Day) are still indicating an uptrend. Daily Stochastic is seen moving upward at the 76% level, indicating that the pair may continue its upward move for a few more trading days. However, we are still expecting the pair to make another attempt to undergo major downward retracement sometime this week.

From the hourly chart, the pair has broken upward above its previous trading range of 2.0307 (Hourly 23.6% Fibo Level) - 2.480, to a high of 2.0512 (Last Friday’s R1).

We are still bearish towards the pair, waiting to short the pair when it makes another to undergo its major “downward” retracement.  We will only act when the pair shows a clear downward trend.

USD/CHF

From the weekly chart, the pair is on a major “downward” move, as indicated by the Long MACD and the Moving Average Lines. However, last week the pair met a firm resistance at 1.1848 and went south after that, with 1,1642 as its immediate weekly support. Weekly Stochastic is still pointing upward at the 33% level, indicating a possible recovery this coming week.

From the daily chart, the pair is seen on a bearish move and is seen approaching the next daily support at 1.1625. Immediate daily resistance is at 1.1767 (10-Day Moving Average Line), followed by 1.1824. The default MACD is showing a downtrend while the short-term moving average lines (10-Day and 40-Day Moving Average Lines) are still indicating that the pair is on its major “down” trend. The Daily Stochastic is seen moving downward at the 19% level, indicating the pair may recover or rebound sometime this coming week.

From the hourly chart, the pair has broken two key intra-day support at 1.1760 and 1.1717 over the past two days. The pair needs to break above these two levels to indicate a strong rebound. Otherwise, it is still weak as long as it remains below these levels.

We are waiting for the pair to resume its major “upward” retracement and go long on the pair.

USD/JPY

From the weekly chart, last week the pair failed in its attempt to crawl back to its upward channel. Both the Long MACD and the Moving Average Lines are still indicating a down-trend. This week the pair met firm resistance at 117.93 (52-Week Moving Average Line) and went south after that. Its immediate weekly support is at 114.15, followed by 113.00 (Weekly 50% Fibo Level) and 112.58. Weekly Stochastic is seen going to cross downward at 72% level, indicating a possible beginning of a major downward move.

From the daily chart, the pair has broken its daily support at 115.18 and is seen approaching the 113.65 daily support level. Its short-term (10-Day and 40-Day) moving average lines have crossed downward again indicating its downward move. Default MACD is indicating a downtrend. Daily Stochastic is seen pointing downward at the 13% level, indicating a possible rebound this week before resuming its downward move.

From the hourly chart, the pair is on its downward move, breaking intra-day support levels at 115.83, 115.60, 115.20 and 114.67.

We will look for a rebound and then go short on the pair.

EUR/JPY

On the weekly chart, last week the pair met firm resistance at the upper band of its upward channel (i.e. 167.89) and went south, like its counterpart USD/JPY, and reached a weekly support level at 163.63, with next weekly support at 162.69 (13-Week Moving Average Line). Weekly Stochastic is seen crossing downward at 84% level. The pair maybe undergoing a possible major “downward” retracement.

On the daily chart, the pair broke a key daily support at 165.16 and went south towards the 163.39 (40-Day Moving Average Line). Default MACD is beginning to  indicate a downtrend. Daily Stochastic is seen moving downward at the 20% level, indicating a possible rebound this week before resuming its downward move.

On the hourly chart, the pair is currently supported at 116.80.

We are now bearish towards this pair. Watching to sell on rebound.

TNT students, please use the updated TNT charting templates that was sent to you on October 20. Any resistance or support levels not found in the charts, please manually update them yourself as we will be sending you the next updated charting templates this coming Sunday.
The above analysis can also be used by our non-TNT students as a guide to their own trading. We welcome feedback from our non-TNT students regarding the effectiveness of this Daily TNT Market Analysis for your trading.

Have a great trading day ahead!

Cheers,

Clarence

Admin of The Forex Club

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