The Dollar Remains Bid as Markets Await The Next Round of Data - page 2
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Commodity Currencies On The Verge
AUDUSD:
We have been analyzing the commodity currencies fall from grace since the global sell off began a mere 2 weeks ago. The AUD which had been trading very bullish against the Greenback since early February has plummeted through the 50, 100 and 200 day MA's. We commented that .8625 was holding key Support as it represented the AUD's prior major low, as well as a bounce off the 200 day MA. Below a major level of Support is typically where Stops on a losing long position are placed and often where speculators will open new Shorts. Look at yesterday price action as the Aussie dropped more than 2 big figures. Lastly, the major MA's are beginning to converge and often a currency will attempt a surge back, only to fall further when a major cross occurs. For now we are in the early stages of a negative bias forming on the AUD's ability to recover in the short run and that more negative price action may like follow.
NZDUSD:
The NZD and AUD tend to trade in tandem as they account for each others largest import and export business. Furthermore, both countries have historically maintained high interest rates, thereby accounting for similar capital investment and risk cash flows. The NZD under went months of consolidation and now the MA's are finally coming into line with falling prices as the 200 sits above the 100 and the 100 above or just equal to the falling 50, as price depreciation accelerates. Price action fell through support near .6830 and the bottom fell out. This obviously signals potentially more weakness to come for the Kiwi.
USDCAD:
There is no doubt the Canadian Dollar is holding the most strength against the Greenback as compared to its sister currencies. As a matter of fact, the only technical saving the AUD and NZD right now is the CAD. These pairs all trade with a positive correlation and gain strength and weakness from each others moves as they react to underlying asset or commodity price action. In this case the CAD is refusing to close above the 200 day MA which is holding very firm Support near 1.0480. Traders are watching this carefully as a close above the 200 day MA coupled with weakness from its sister currencies may put an end to the CAD run. There are most likely stops north of the 200 MA, and speculators adding short CAD positions above that level could trigger major price action with a breach. It would also be last the technical keeping the commodities currencies afloat.
To read the complete technical and fundamental analysis visit the bforex blog
bforex is a world leading foreign exchange broker established on an entrepreneurial vision to provide FX traders with simple and intuitive interaction with the Forex market. We are highly valued by our customers due to our expertise in providing traders with unrivalled execution speed, 24 hour assistance, tight spreads, superior exchange rates, commission free trading and a cutting-edge trading platform.
Market Volatility and Indirection
GBPUSD:
The GBP is still holding up quite well after finding Support at 1.43. Lows several times traded below 1.4250 but were always pushed back up. We are noticing a number of long wicked candles including 3 Doji's over the last 5 sessions. Both of these observation suggest a true lack of direction in the market. On the chart below we have added Bollinger Bands. The Bands widen as volatility stirs and narrow in calmer markets. When the bands narrow substantially it suggests an over consolidation in price which usually triggers a breakout. The Bands are narrowing because the GBP has been trading a tight range since mid May. The blue arrows points to the last narrowing of the bands in which was then followed by a big break out play.
USDCAD:
We are once again seeing volatility all over the market. Normally crosses of the 200 day moving average are significant occurrences and therefore become directionally significant. However the CAD has been hugging the 200 day MA for almost 2 weeks. Yesterday's price action closed below the 200 day MA. However, it is the 100 MA that has been acting as major Resistance. A close below the 100 day MA would be important as the major MA's still favor CAD appreciation. A close above 1.06 would be the first signal of a weakening CAD, however a close above 1.07 may trigger some short CAD entries while more major Support sits at 1.0850. A close above that handle coupled with a cross of the major MA's would all but seal the deal for the CAD bears to re-enter the market.
AUDUSD:
The AUD is still in recovery mode. On the chart below we have added Bollinger Bands to highlight the AUD's fall. We mentioned above that when the Bollinger Bands narrow (see blue arrows) we expect significant volatility to follow which causes the bands to widen significantly. The AUD has found Support at the .8100 handle. A close below that level and the AUD free fall will seemingly continue. However, the AUD could firm with a close above Resistance, just north of .8500. Note the major MA's favor falling prices, and with Bollinger Bands still so wide there is certainly more volatility ahead for this pair. The increased likelihood of a break over or under these levels increases in the short term when volatility levels are high as they are now.
To read the complete technical and fundametnal analysis visit the bforex blog
bforex is a world leading foreign exchange broker established on an entrepreneurial vision to provide FX traders with simple and intuitive interaction with the Forex market. We are highly valued by our customers due to our expertise in providing traders with unrivalled execution speed, 24 hour assistance, tight spreads, superior exchange rates, commission free trading and a cutting-edge trading platform.