Month: December 2010

By J.W Jones, OptionsTradingSignals.com

Life has a funny way of reminding a person that he is not really in control of what is going on around him. While he may be proficient in a few specific areas, his overall knowledge is limited. Last night my hot water heater decided to go on vacation and I thought I’d try to be a real man and fix it. I have a general knowledge of how a hot water heater works, but it dawned on me that knowing how it works and fixing it are two totally separate things.

I immediately realized that I was in over my head and made arrangements to have a repair man come and fix my hot water heater. He arrived first thing this morning and I asked if I could watch not only out of curiosity, but to understand how my hot water heater worked and to learn about the man that was fixing it. He was gracious and took the time to explain my issue thoroughly and as I am writing this he is replacing my heating elements.

The interesting thing about this whole chain of events is that he brought up investments with me. Not because he wanted to talk to me or thought I knew anything, but simply because he knew I worked in that field. When you live in a relatively small town and people knew what you do for a living, they are generally quick to ask questions. He told me what he was doing with his retirement accounts and his plans for retirement in great detail.

I immediately respected him for his general knowledge and it was apparent he had done his own homework. He had made wise decisions, saved money, and invested wisely. Clearly the man working on my hot water heater was planning for a quality retirement lifestyle and it sounded as though his planning was going to pay off. He brought up that he had purchased the copper ETF $JJC when he noticed that copper pipe was becoming more difficult to acquire and he was paying more for it.

Then the conversation changed dramatically as he explained to me that he had recently bought gold coins and the gold ETF GLD. Immediately my ears perked up as I follow gold and oil quite closely as regular readers are aware. He wanted to know if I thought he should buy more on dips and if he had purchased gold at a good price. He told me he thought he had bought around the $1,200 an ounce price level. I replied that I was not qualified to offer investment advice, but that I expected gold was likely going to go through a mild pullback in coming days and weeks.

He did not really ask any questions, but he said he was planning on adding to his position in GLD as he indicated that acquiring physical gold today is quite difficult. I told him that longer term I think gold will be an outstanding asset class to own, but I would be patient and wait to buy when the weakest gold bulls bow out. This conversation went on for about 15 or 20 minutes and eventually he got back to his work and I got back to my screens. I immediately looked at the GLD chart and this is what I saw this morning.

GLD Hourly Chart:

My previous article, A Correction in Gold is an Option discussed the overwhelming bullishness that gold and silver were garnering with the retail crowd. After publishing that article last week I received more than a dozen emails that I would classify as hate mail. I was called names, I was sent a poorly written manifesto of the future collapse of fiat currency, and finally my favorite email which was just two words in the subject line, mother ($#$$@# – I’ll let your imagination try to figure out that one). I have written about a variety of asset classes and none of them have the near vigilante bullishness associated with gold.

Gold bugs believe that the world as we know it is going to collapse. They believe that in a few months they will be bartering their gold for food, land, and valuables. Some of them believe the central bankers are working together to create a giant world order. The emails that I have received speak for themselves. There is a growing fear among the retail / middle class investor and the war often discussed between the haves and the have-nots wages on.

When sentiment is running this high and the repair man working on my hot water heater is discussing with me his gold ownership and his desire to own more, it would seem bearish. I have heard and read countless stories about taxi cab drivers talking about the stocks they were trading during the dot-com bubble. I vividly remember having coworkers who had no experience in real estate buying multiple homes to “flip” during the housing boom. Today the man working on my hot water heater is telling me about his gold ownership and how he plans on buying more.

I do not need to remind readers what happened after the technology bubble or the housing bubble, but what if commodities are in bubble? Some have argued they are, others say they are only beginning to rise as hyperinflation is on the way. It seems the real argument in this discussion is more about inflation versus deflation. I for one am not an expert in this field or any other based on my experience last night with my hot water heater, but financial markets tend to operate in the opposite of the herd’s expectations.

The gold trade is full, physical gold is hard to purchase, and the dollar has declined significantly in the past 10 years. There are many expert economists that are screaming inflation is coming and that commodity prices such as precious metals, grains, and energy prices are going to skyrocket. It seems that is the rally cry coming from economists and the herd’s investment habits seemingly back up this notion. I am a contrarian trader and investor as I have struggled to make money following the herd. Is the herd leaning toward inflation right now?

Gold can hold its value during a deflationary period so long as that period of time is relatively short. However, a long term deflationary period could be troublesome for gold bulls. Again, I am not an expert in these matters, but it sure seems as though there is a growing battle between the deflationists and inflationsists and the herd appears to back the inflationists. While that does not necessarily mean that inflation will not rear its head, it just might mean a period of deflation will occur prior to that move. It would appear to me that a mild correction in gold is possible and I intend to use that correction as a buying opportunity. The U.S. Dollar Index futures chart is listed below.

GLD Daily Chart:

With sentiment running this high, retail investors crowding into precious metals, and the dollar receiving no love – this is a perfect contrarian storm. This situation is the very reason that gold could correct deeper and longer than what many investors might expect causing the retail crowd who was buying around the $1,425-$1,450 price level to get nervous and sell, just when price is about to change direction. This seems to be an ongoing situation that inevitably happens in almost every asset class at some point or another.

While I do expect lower prices in gold in the short run, I still remain bullish in the long term. At the end of the day, I have always made more money trading against the herd than trading with it. If my hot water repair man is discussing buying gold, it would make sense that the smart money would be selling into the retail investors and traders during price peaks and buying from them near the intermediate lows. Interestingly enough, the chart below illustrates the heavy volume selloffs that have been taking place in gold.

In closing, I’m sure this article will arouse more gold bugs from their slumber and fill my email inbox with more hate mail. I will shrug it off as I always do, but the real question I have is am I going to have hot water tonight?

If you would like to receive my Free Options Strategy Guide & Trade Ideas join my free newsletter: www.OptionsTradingSignals.com/profitable-options-solutions.php.

J.W Jones

The US dollar declined versus its major rival in overnight trading session on Friday despite the improved economic data for United States.

The dollar index DXY which measures the greenback’s performance versus its major counterparts dropped to 79.78 in overnight trading session as compared to 80.167 on late Thursday North American trading session.

Most of the economists believe that the US dollar witnessed the correction after a buying spree of last one week however analysts are still optimistic about the US dollar and US economy. Moreover US gross domestic product of 4% is expected for the current quarter.

Strategist at Royal Bank of Scotland commented, “Fiscal policy and stronger economic momentum have been the U.S. dollar drivers over the last 6 weeks, the U.S. dollar has responded to rising U.S. rates, and we expect stronger U.S. momentum and higher rates to support a more rapid U.S. dollar gain during the first half of 2011.

The Euro gained to 1.3290 against the US dollar as compared to $1.3217 as on late Thursday. The investors gained confidence in Euro as the European leaders decided to find a permanent solution for European countries with sovereign debt crisis. The European council will announce is framework on how to bail out the European countries with debt crisis on Friday.

The US dollar also declined to 83.85 against the US dollar as compared to 84.17 on Thursday. Currency Strategist at BNP Paribas said, “as well as being supported by changing liquidity dynamics, we expect the U.S. dollar to be increasingly supported by signs of the U.S. recovery gaining momentum over the coming year, the best way to position for further positive surprises coming from the US economy is via long U.S. dollar/Japanese yen strategies in our view.”

Daily forex trading news written by Rehan from DailyForexTrade.com

By Greg Holden

The discussions taking place at the EU Summit in Brussels has taken an interesting turn. News has been leaked that the ministers are discussing the possibilities of implementing a permanent bailout mechanism to help the region avoid future debt crises like those of Greece and Ireland.

The result has been a short-term boost to the EUR against its primary currency rivals.

As we can see from the chart below, the EUR/USD has been range-trading between the 38.2% and 50% Fibonacci levels.

The MACD on the chart below also shows a bullish cross and an ascending price movement, suggesting bullish pressure is building on the pair.

With the EU Summit’s leaked discussions, a potentially positive reading from the German Ifo Business report today at 9:00 GMT, and the technical indicators shown below, all evidence seems to point to an upward price movement.

Traders may want to keep this in mind today as the week comes to a close and look to enter long positions on the euro ahead of these movements.

EUR/USD – Daily Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

This morning two events in the EMU look likely to exacerbate the ongoing debt crisis:

Credit rating agency Moody’s has downgraded Ireland’s debt five notches to Baa1. This means that Moody’s has less confidence Ireland can pay back its debt and has reduced its value.

The German IFO Business Confidence survey has revealed that Germany’s economy is shooting ahead. In 2011 the Germany economy is expected to grow 3.5% (double the EU average.)

The first event is bad news for the EMU for obvious reasons. It suggests that even after the EMU-IMF bailout the markets should be wary about Ireland’s finances. This has reflected badly on other indebted euro members (following the downgrade credit default swaps rose in Portugal and Spain too.)

The second event is bad news for more obscure reasons. On the surface the positive German IFO results ought be positive for the EMU: they indicate the Germany can buoy the common currency even though several of its members face defaulting. The markets can rely on Germany to keep the euro stable.

In the present political climate though the German IFO results highlight the difference between the storming German economy and those of indebted members. The German Chancellor Angela Merkel for instance is under intense domestic political pressure to avoid implicating Germany in the debt problems of other members. Hence the IFO results can only intensify these pressures.

In the short term the euro might fare positively from the German IFO results. However in the long term the figures provide new ammunition for people that advocate ending the euro. This can only be negative for the common currency.

By Peter Lavelle with foreign currency exchange specialist Pure FX.

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

The rating agency Moody’s lowered its rating for Ireland from Aa2 to Baa1. It should have been obvious to everyone that Aa2 was no longer sustainable, but a step of this magnitude is nonetheless surprising. The timid attempts of a EUR-USD uptrend were thus stopped in their tracks this morning. We do not expect to see a further attempt of an upwards correction prior to the publication of the Ifo index. Even a moderately positive surprise for the Ifo index is unlikely to create any new momentum – after all it is not concerns about the German economy that are putting pressure on the euro, but other factors.

The summit of the EU heads of government and state in Brussels did not bring any surprises yesterday. As expected the main elements of the permanent crisis mechanism, which had been drawn up by the Finance Ministers two weeks ago, were confirmed. The EU treaty was adjusted with the help of a “small amendment” so that it endorses the stability mechanism. This approach towards a change of the treaty entails only limited implementation risks. As expected the President of the Council Herman van Rompuy’s press release does not contain any further details on the extension of the crisis mechanism (EMU bond or extension of the EFSF guarantees). Should the risk premiums for bonds of the peripheral countries rise again following the period of low liquidity over the holidays attention would no doubt return to these possibilities.

For EUR-USD the result of the Brussels summit means above all that event risk was reduced. Fears of the summit which were probably responsible for a good part of the slide on Wednesday turned out to be unfounded. So there is no need for any major reallocations during the period of low liquidity over the holidays. Market participants can hope for a quiet Christmas period.

Medium term the New Year might provide new momentum for EUR-USD. Despite the new round of the EMU debt crisis speculative market participants are only moderately exposed in EUR shorts in our view. Tonight will bring the publication of the latest CFTC statistics on the positioning of speculative IMM traders, which is unlikely to change this fact. This reservation is probably partially due to the nearing year-end. It will then be decisive whether markets have already got used to corner stones of the crisis mechanism. If that wasn’t to be the case EUR-USD might come under pressure.

EUR

European Union President Van Rompuy said that EU leaders have agreed to conduct new stress tests in the banking sector and that they stand ready to do whatever is needed to ensure the stability of the Eurozone. European Commission President Barroso said the euro is very stable despite current difficulties.

Ahead today, the Ifo business climate survey for December will be released. Investors’ expectations are high given the latest improvement in manufacturing activity as suggested by yesterday’s PMI release. Nevertheless, our economists expect the survey to fall slightly short of expectations.

GBP

The Bank of England’s half-yearly Financial Stability Report said the domestic financial system has strengthened, but threats have risen since June. It noted that banks are more worried about an economic downturn and property prices than in May.

Yesterday, retail sales were stronger than expected at 1.8% y/y, though the m/m print was in line with expectations. Retail sales are likely to strengthen in December and then plunge in Jan because of the VAT hike in Jan. However, the BoE’s MPC is likely to be unmoved by this data.

The BoE released its inflation expectations survey and year-ahead expectations is now at 3.9% vs. 3.4% previously.

TECHNICAL OUTLOOK

EURUSD BEARISH Focus is on 1.3181/65; move below the support zone would expose 1.3060. Resistance at 1.3382

USDJPY BULLISH Currently holds resistance at 84.51 ahead of 85.40. Support at 83.60

GBPUSD BEARISH Abrupt decline found support at 1.5531 ahead of 1.5485. Initial resistance at 1.5676

USDCHF BEARISH Momentum is negative; expect losses to target 0.9562 and 0.9463 key low.

AUDUSD BULLISH Decline through 0.9841/33 exposes 0.9725 and 0.9625. Resistance at 1.0029

USDCAD BEARISH Pressure building on 0.9978/31 support zone; initial resistance defined at 1.0141

EURCHF BEARISH Bear trend extends; next support at 1.2676 ahead of 1.2649. Resistance at 1.2871

EURGBP NEUTRAL Move above 0.8598 would trigger bull trend. Support at 0.8451

EURJPY NEUTRAL 113.67 and 110.49 mark the near-term directional triggers

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By Forex Signs, Inc.

GBPUSD has gradually formed a minor bullish channel after price fell to a low 1.5529 last Tuesday. Looking at the H1 time chart, price has gradually risen and now consolidates between support level 1.5613 and resistance level 1.5643. Today, bias for the pair is a buy position. Price is now testing the support level. If price falls below support level, this could be a bearish correction, testing the bottom line of the minor bullish channel. If price breaks below bottom line of the bullish channel, a continuation of the bearish channel from last Tuesday may continue. If price breaks above the resistance level, a continuation of the bullish channel is possible. RSI (14) for the H1 time chart shows price is within the neutral zone, suggesting that the pair may sustain its current bullish trend.

US Expected to Bounce After US Congress Approves Tax Deal

The US dollar is expected to rally against other currencies after the US congress approved the extension of the expiring tax cuts. Though economists sees this a gamble, the US officials deem it necessary to create jobs despite widening the US debt. The House of Representatives, on a 277-148 vote, passed the $858 billion package of renewed tax cuts and more unemployment benefits in an economy saddled with a nearly 10 percent jobless rate. The bill marked the second time in nearly two years that Congress rammed through a massive economic stimulus. The first one, President Obama’s $814 billion spending bill, was opposed by Republicans who complained about its impact on annual deficits, now hovering at about $1.3 trillion annually. With the economy performing poorly and a year-end tax increase looming, there were none of the customary congressional hearings that normally precede debate on major legislation, and few if any complaints that lawmakers had not had enough time to review the legislation.

Though there are no market moving data for the upcoming session, reports from the euro zone may offer pieces of information which could trigger another round of risk aversion that may push the dollar up against other currencies.

About the Author

Forex Signs, Inc., Founded in 2006 in Wall Street, New York City, FSI relentlessly strives to be the premier Forex brokerage company in the industry by providing exclusive and unmatched trading and investment related services while constantly developing innovative solutions that cater to the vast requirements of both individual and institutional market participants.

By Forex Signs, Inc.

The pair AUDJPY has formed a minor bearish channel. As of this writing price is consolidating between immediate support level 82.949 and immediate resistance level 83.186, but price is testing the immediate support. If price makes a break above the immediate resistance level a continuation of the bullish trend may happen, testing 83.299. A break above 83.299 will confirm the bullish trend and buy bias is possible in the medium term. A sell bias is possible if price breaks the immediate support, testing 82.848. A break below 82.848 level and the bottom line of the major bullish channel may signal a bearish reversal. RSI (14) in the H4 chart shows price is within neutral range, suggesting a bearish trend can sustain its momentum and confirm the sell bias.

Japan Doing Extra Measures to Boost Economy

The Japanese yen has a big chance of appreciating today against euro as Japan is already doing extra measures to improve their economy. Bank of Japan purchased 14.2 billion yen worth of exchange-traded funds yesterday as part of efforts to facilitate corporate financing and help boost economy. Aside from that, another asset to Japan has come to light as Japanese Airlines and American Airlines successfully closed a deal that will transpire come 2011.

Digging further on ETF purchases, it is the first time that the central bank ventured to this kind of investment. ETFs are riskier in terms of price volatility than government bonds and other financial products that the BOJ normally buys. Meanwhile, their recent tie up with American Airlines can help improve their trade in the United States. Come January 2011, the JFK will already have direct flight going to Tokyo’s Haneda airport. This project can boost more investors in Japan.

However, one significant problem can transpire. Since Japan is trying hard to weaken their currency, their measures on boosting economy might do that. Investment in yen can take long term as it is incontrollable to appreciate once economy is doing great.

Anyhow, for the meantime, the yen can look at a win against euro but only with small volatility. Aside from the newly acquired assets of Japan, the currency can take advantage from euro’s critical condition in the market.

About the Author

Forex Signs, Inc., Founded in 2006 in Wall Street, New York City, FSI relentlessly strives to be the premier Forex brokerage company in the industry by providing exclusive and unmatched trading and investment related services while constantly developing innovative solutions that cater to the vast requirements of both individual and institutional market participants.

Source: ForexYard

The euro continues to capitalize on the news that the EU may create a mechanism in order to prevent any future debt crises like the ones recently seen in Greece and Ireland. Since last night, the EUR/USD has gone up 60 pips and is currently trading around the 1.3270 level. Whether or not the bullish trend will continue remains to be seen, but traders will want to pay careful attention to the EU Economic Summit for clues as to any new policies within the euro zone.

Economic News

USD – Dollar Tumbles Despite Positive US News

The US dollar took some fairly substantial losses in overnight trading, despite positive news out of the US yesterday. In addition to the EUR/USD moving up, the greenback has taken a hit against both the Japanese yen and UK pound. Since reaching a peak at 84.43 yesterday afternoon, the USD/JPY pair has fallen more than 50 pips to its current level of 83.89.

The GBP/USD pair saw a steady bullish run yesterday that is still going strong. Currently trading around the 1.5640 level, the pair has moved up around 100 pips in the last 24 hours.

With no significant US economic indicators scheduled to be released today, dollar values are likely to be determined by the news out of the EU Economic Summit. Investor confidence in the euro zone has been boosted as of late, which in turn has led to a large amount of risk taking in the forex market. The safe-haven dollar will likely continue to take losses as long as faith in the EU economic recovery continues to increase.

EUR – EU Economic Summit Generating Heavy Volatility for EUR Pairs

Since rumors began to spread that EU ministers will likely create a mechanism in order to prevent any other euro zone debt crises, the euro has seen gains against the USD, but has seen little movement among its other currency rivals. The EUR/GBP went up a mere 16 pips in overnight trading, and is currently at the 0.8485 level. Similarly, the EUR/JPY pair has seen only slight gains since last night, and is currently trading at the 111.40 level.

Analysts attribute the euro’s mixed performance to questions about whether the euro zone can actually stave off another debt crisis. Investors will be looking for concrete measures out of the EU summit to increase confidence in European economies. At the same time, the poor employment situation in the US has limited any dollar gains, and has generally helped the euro maintain an overall bullish trend against the greenback.

In addition to the EU summit, traders will also want to pay careful attention to today’s German Ifo Business Climate figure, scheduled to be released at 9:00 GMT. As the largest economy in the euro zone, Germany tends to play a significant role in euro values. The figure is the result of a survey given to various businesses throughout Germany, and consistently leads to market volatility. A better than expected figure will likely help the euro close out the week on a positive note.

JPY – Yen Recoups Losses against Dollar

After tumbling against the US dollar for the last several days, the yen began to recoup its losses in yesterday’s trading session. Since yesterday afternoon, the USD/JPY pair has dropped close to 50 pips. Currently trading around the 83.87 level, it now looks like it may be a good time for traders to begin shorting the pair at a great entry price.

Analysts have attributed these yen gains to mixed US economic data, as well as continued fears about the long term prospects for the US economic recovery. Today, with no significant economic indicators out of Japan, yen values are likely to be determined by any news out of the EU Economic Summit. While the euro recorded some small gains against the yen in overnight trading, confidence in the euro zone still remains low. That being said, should the summit yield any concrete steps toward full economic recovery, the yen could hit a bearish trend to close out the week.

Crude Oil – Oil Prices Spike Following Solid US Data

The price of crude oil soared in overnight trading as investors turned to the commodity as an alternative to the weak dollar. With the price of oil currently approaching $89.00 a barrel, analysts are predicting a strong figure to close out the week. Additionally, the prospect of real steps being taken at the EU Economic Summit has caused investors to turn to riskier commodities like oil, as opposed to the safe-haven dollar.

Today, traders will want to pay careful attention to news out of the euro zone. In addition to the summit, the German Ifo Business Climate figure will give a clear indication regarding the direction the euro zone is taking. A positive figure will likely further increase risk taking, which in turn could lead to another boost for oil.

Technical News

EUR/USD

Technical indicators are showing that bearish movement is likely to occur for this pair today. The 8-hour chart’s MACD has formed a bearish cross, indicating downward movement may occur. Furthermore, the daily chart’s RSI is approaching overbought territory. Traders will want to pay attention to this indicator. Once it breaches the resistance line, the pair could move down.

GBP/USD

Most technical indicators show this pair trading in neutral territory. At the same time, traders will want to pay attention to the Stochastic (slow) on the 4-hour chart, as it seems that it could form a bearish cross. Until then, taking a wait-and-see approach may be the preferred strategy.

USD/JPY

A bearish cross is forming on the 4-hour chart’s MACD, indicating downward movement may take place in the near future. A similar trend can be seen on the daily chart’s William Percent Range. Going short with tight stops may prove to be profitable today.

USD/CHF

The Williams Percent Range on the 8-hour chart is currently in the oversold territory, meaning an upward correction could take place today. Similarly, the Relative Strength Index (RSI) on the daily chart is showing that a bullish move may take place in the near future. Going long is the recommended strategy for today.

The Wild Card

CHF/JPY

The Williams Percent Range on the 8-hour chart shows the pair in the overbought territory. This theory is supported by the RSI on the daily chart. Now may be a good time for forex traders to enter into sell positions for potentially significant profits before the downward breach occurs.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

USDCHF stays below a falling trend line on 4-hour chart and remains in downtrend from 1.0066. As long as the trend line resistance holds, downtrend is expected to continue and one more fall to 0.9500 is still possible. Only a clear break above this trend line resistance could indicate that the downward movement from 1.0066 has completed at 0.9561 already, then the following uptrend could bring price to 1.0200 area.

Daily Forex Forecast

RISK DISCLAIMER

Forex trading involves high risk. Before any trade, you should consider carefully the investment objectives and the level of risk. The data sent by mail is not necessarily real-time data or precise. Real-Forex is not liable for the losses resulting from the utilization of the data. Real-Forex (Finnocorp Trading Solution Ltd.) is not liable for losses or damages as a result of reliance on the information provided by e-mail or on the overall data, quotes, charts, signals buy / sell. It is hereby clarified that the investor must be aware of risks involved in trading in financial markets, which is a form of investment that may contain potential risks.

EUR/GBP

Daily graph: http://www.real-forex.com/charts-daily/DEC2010/EUR_GBP_DAILY_171210.JPG

For the last three weeks, the pair is moving aside between 0.8528 and 0.8348. During the previous session, the resistance 0.8528 was broken up but the pair decreased back during the same day and closed below the resistance.

That was a vain breach. Today, the pair kept moving below the resistance. With today’s session, the pair completed a “parking” of two sessions. This template suggests a reversal, whose consequence is the creation of an opportunity to go “Short”.

However, this opportunity requires a confirmation trough the identification of a decreasing configuration on 1H scaled graph.

Potential trade

1H graph: http://www.real-forex.com/charts-daily/DEC2010/EUR_GBP_1H_171210.JPG

The required configuration should appear after the pair will break down the resistance at 0.8457.

–        “Limit” order on “Short” position 10 pips below the resistance mentioned, which means: 0.8467.

–        “Stop Loss” order on the last peak occurred: 0.8496.

–        1^st degree of “Take profit” on the following support: 0.8433

CAD/JPY

Daily graph: http://www.real-forex.com/charts-daily/DEC2010/CAD_JPY_171210.JPG

For about a month and a half, the pair is moving on uptrend, and broke up the resistance of 84.01 during the last session. The breach was done trough a strong bullish candle. However, that breach was vain since the pair decreased back below the resistance a little later.

The behavior of the pair against the resistance will determine the future trend:

1. If the resistance is broken, a new uptrend will start, creating the opportunity to go “Long”.
2. If the pair is stopping below the resistance for about 2 sessions, a reversal causing a new downtrend, opening an opportunity for a “Short” trade.

In addition to the behavior, the strength of the candles will show who between the bulls and the bears is more powerful, potential indicator of how strong will be the new trend resulting from the evolution of the pair.

Have a profitable day!

Real-Forex team