Here’s the best Forex trading opportunity for the next two weeks
FX:
We are back in the saddle after a quick trip out
to the North Carolina mountain country and it appears that our EUR/USD forecast
is also attempting to come back from the wilderness. After a two day plunge to
commence the “September Slide” we were looking for, the dollar has embarked on a
weeklong corrective rally back to the underside of broken channel support turned
resistance from the March lows at 88.00 which was also channel resistance from
the July highs. Considering we are now entering the most seasonally bearish
period for the dollar (last three weeks of September) a sustained move above
88.00 would be astounding. Meanwhile, a move below 87.50 would suggest further
weakness lies dead ahead.
Recall that yesterday we wrote, “The euro is
holding on at 1.2255 which marks the 78.6% Fibonacci (square of phi) rally from
1.2170 to 1.2590. With channel support crossing just below at 1.2250 we
reiterate from yesterday that traders should eagerly watch this level over the
next 24 hours to see if an opportunity presents itself to go long. As such, we
still think long EUR/USD represents the best near term opportunity for a move to
1.2750 over the coming two weeks as long as the key 1.2250 level holds.”
Yesterday’s low at 1.2250 occurred in conjunction
with a nice bullish divergence on the 4 hour charts, suggesting the euro is
trying to turn the corner this morning. But USD/CHF is not breaking down which
forced us to stand aside until the market shows a clean break. As we said
yesterday, “While it will take a sustained move above 1.2320 to be comfortable
going long EUR/USD only a sustained move above key resistance at 88.00 in the
USDX (channel resistance) would alter our stance. Therefore, traders may look to
go long EUR/USD today at 1.2260 with stops just below channel support at 1.2230
for a low risk setup. Or you may wait for a break above 1.2320 with stops just
below today’s low at 1.2255. We will opt for the later since it will show a
confirmation of our suspicions (vs. just taking a stab at calling the lows). In
addition, this is the level at which we were originally stopped out which would
allow us to make back what Mr. Market so ungraciously took from us yesterday.”
Meanwhile, AUD/EUR is screaming higher this week,
in what appears to be a “wave V” breakout. This suggests that AUD/USD will also
see further upside if the dollar does in fact take a spill in the seasonally
bearish period lasting into the end of this month. As such, there are a number
of choices for traders out there and we look to buy EUR/USD on a sustained move
above channel resistance at 1.2320 today.
We repeat: “There is no change in our outlook
from last week: We still expect a rally to 1.27 initially which corresponds to a
decline in USDX into key support at 85, where a number of technical tools
suggest we should see a bounce. While we think traders can remain short USD into
that support, we are looking to close our EUR/USD long around 1.27 and go long
USD/CHF when USDX is at 85.” As we showed in this weekend’s report, the
speculators have turned against the dollar for now, which we continue to think
will result in a decline to 85 over the next two weeks.”
Stocks:
Yesterday morning we wrote, “Stocks rallied to
the key 1,245 level today and have broken key up trendline support.” The
breakdown saw prices close on their lows at 1231. We reiterate from Monday, “The
three year rally underway is loosing momentum just as mutual fund cash reserves
reached a new all time low. The bounce we were looking for two weeks ago from
1,200 carried past normal retracement levels and is looking to test the key
1,245 level which marks the 61.8% Fibonacci retracement of the all time high to
the October 2002 lows. Only a move below here would cause us to stand aside.”
Bonds:
No change: After a decline to 4.0% as we
expected, yields bounced as the possibility of an inverted yield curve is making
it difficult to be short shorter maturity bonds and long longer maturity bonds.
There is little evidence of any major trend developing at this time.
Regards,
Jes Black
FX Money Trends
613 4th St Suite 505
Hoboken, NJ 07030
Tel: 646.229.5401
Jes
Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at
BlackFlagForex.com.
Prior
to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four
years as a senior currency strategist he went on to found
FxMoneyTrends.com – a research firm catering to professional traders.
Jes
Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces
for Futures magazine and regularly attends industry conferences to speak
about the currency markets.