Daily Archives: July 7, 2010

USD and Opex (by Springheel Jack)

By -

A strange day yesterday, with ES breaking out above the short term
declining channel but falling back in a real show of weakness in the
afternoon.

I did mention yesterday morning that I thought that the USD currency
pairs didn't look quite ready for an equities rally and that's still the
case this morning, though that may change very soon.

My expectation is that by opex we will have seen ES rally to the 1070
area, EURUSD to the 1.28 area, and USD should fall to near the 83.5
area. We may well take a winding path getting there though. After opex I
am expecting the main bear event of the summer to begin, with a fall
over the next four to eight weeks to 870 on SPX while USD is in a strong
wave up. Here's the big picture USD chart to illustrate why we should
find very strong support at 83.5:

100707_DX_60min_BA_Wedge

In the event that ES fails to stop at resistance, and USD fails to stop
at support, then I would expect just the opposite, with the USD rally
over and ES recovering most or all of the losses over the last few
weeks, but that is definitely the secondary scenario until and unless
that happens.

In the short term ES has been finding some support at the range support
level at 1016.5, and that may well hold. We may be seeing the formation
of an extremely ugly and unimpressive IHS and I am expecting that the
range support/resistance levels marked will continue to be important:

100707_ES_60min_Range_SR_Levels_and_Poss_IHS

EURUSD was testing overhead rising resistance hard yesterday, but has
since fallen almost a hundred pips. I'm expecting further weakness, but
am doubtful that we will see a return to the lower trendline of the
rising wedge. I've marked in the two strong support levels where it is
likely to find support instead:

100707_EURUSD_60min_Rising_Wedge

GBPUSD is my favorite channel for the moment, as it is in a strong
rising channel which is extremely tradeable. The two scenarios that I am
seeing here is either a return to the lower trendline of the channel in
the 1.5025 – 1.505 area today, or if strong support at 1.509 holds,
then a touch of the lower channel trendline at or above there late
tomorrow or on Friday:

100707_GBPUSD_60min_Rising_Channel

I'm going to be away much of tomorrow and possibly all of Friday so
there may not be a Friday post.