Friday, September 14, 2012

FX: EUR, USD, AUD

There are quite a few currency indications near term that are not looking very positive for near term risk sentiment, they also are nearby technical resistance levels which could simply be technical flows, yet others which have had a strong history as leading indicators have recently broken down in a way that would not be considered good for the market, the issue still remains some of these occurrences were before yesterday so determining whether there is and will be a shift, if so what assets or if indeed as I and others have speculated, QE3 may indeed already have been priced in.

With an event as large as QE3, I'm not making any assumptions, but at the same time I'm not going to have historical biases lead my opinion (as the market/economy/global economy are all very different than at past programs and in fact new frontiers in market analysis) without charts and gathering the evidence that allows us to make a best determination of where probabilities are highest.

Currencies have strong correlations to certain risk assets, some more than others.  Lets see what we have so far...

The EUR/USD

 Here's this morning's 9:30 open, the pair or the Euro is testing the $1.31 level which is about where the Euro was at 9:30 on the New York open.

 The daily EUR/USD is showing a candle with a long upper wick indicating resistance as higher prices have for now, been rejected; conveniently we have a fairly decent resistance zone in the area.

 The Euro/FXE intraday 1 min chart has seen a leading negative divergence through the afternoon right around noon time, a case can be made for a negative position since the open as well coming from yesterday's 3C reading.

 The 3 min chart has (I forgot to draw it in) a positive divergence right at the initial F_O_M_C announcement yesterday, here it doesn't raise any suspicions, but elsewhere it does. The same leading negative divergence has migrated from the 1 min to the 3 min timeframe.

 On the 5 min timeframe, which by now should be fully caught up shows confirmation pre-F_O_M_C with a flat range and then a negative divergence just before the F_O_M_C sending prices down a bit which saw a positive divergence at the F_O_M_C. I'm not saying this is solid evidence of a leak (it could just be an opinion expressed in the market), but it does strike me as a little strange there was an event driving prices lower that was apparently accumulated in to the F_O_M_C; remember that the policy statement is embargoed, but in the hands of news organizations ahead of time, thus they instantly have the graphics to put up and can talk about the decision being very familiar with it. There has been at least 1 instance in which we saw a huge movement right before a F_E_D announcement, it was so strong and out of place, we reacted to it very quickly and when the announcement came out, we were perfectly positioned to take advantage of a surprise policy announcement that wasn't expected.

Furthermore, note this is a leading negative 5 min chart as I mentioned in the last market update; by now you are probably well aware of the risk on/Euro correlation.

$USD/UUP

 Again, on a 1 min chart of the $USD (UUP) there's a very sharp negative divergence in to the policy statement which is of course expected to be dollar negative. This morning there was an opening relative positive divergence in the Dollar.

 The $USD 3 min chart defines this divergence even more dramatically with a leading negative, again a relative positive in to the open with a leading positive forming.

 Strangely, once again, confirming the market averages and the Euro, we have that 5 min leading positive divergence.

AUD/JPY
 5 min chart

 Daily chart, although we have resistance around the August area, you may recall the AUD diverging from the SPX in our risk asset layout (yellow), again the daily candle has a long upper wick showing higher prices from earlier today were rejected, at least thus far.

AUD/FXA
 2 min relative negative at intraday highs today which morphed in to a leading negative divergence.


 3 min $AUD with the same 3 min relative negative seen in early market update charts and a leading negative since.

The 5 min is about in line or price/trend confirmation for now, yes there's another leading positive divergence in the AUD at the policy decision.

I suspect we will see some congestion/consolidation for a while in this area as the EUR/USD is at a support level.

No comments: