Month: December 2010

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Simple Tools for Competent Trades

Improve your Financial Decision-Making Skills with Guidance from EWI Chief Commodity Analyst Jeffrey Kennedy.

By Elliott Wave International

Improve your Financial Decision-Making Skills with Guidance from EWI Chief Commodity Analyst Jeffrey Kennedy.

As a high school freshman, I had a friend over to do math homework after school.  It was cold in the room, so I stood on my chair and jumped up and down to try and bat open a closed heating vent.

My dad walked in and commented on the geometry problem we were working on, as I continued to struggle, unsuccessfully, to open the vent. Then, he handed me a ruler from the table and said:

“Simple tools are what separate us from the animals.”

Without another word, he left us to finish our homework.  Sadly, I don’t remember any of the geometric formulas that I was trying to master on that winter’s day.  But you can bet that I have never failed to reach for a simple, practical tool since.

Here at Elliott Wave International, our technical analysts provide you with simple, practical tools that can help your analysis and trading.

EWI Senior Analyst Jeffrey Kennedy has spent years using and mastering — among many other technical trading tools — several well-known moving average techniques. In the process, he has even developed his own personal moving average method that he calls the “Stoplight System.”

For a limited time, the first two chapters of “How You Can Find High-Probability Trading Opportunities Using Moving Averages” are available FREE when you join Club EWI.

In these excerpts, Jeffrey will teach you about:

  • Defining the Moving Average and Its Components
  • The Dual Moving Average Cross-Over System
  • Moving Average Price Channel System
  • Combining the Crossover and Price Channel Techniques
  • The Most Popular Moving Averages

Like any good mentor, Jeffrey’s insights are meant to help you become more successful and highly evolved in your endeavors.

Here is one of the charts showing how moving averages are similar to the Wave Principle in signaling buying opportunities:

Tools for Competent Traders

This chart of Corning shows how each time the market moves into the price channel (marked by the short vertical lines), it signals a buying opportunity.  When Corning’s price breaks through the price channel (indicated by the short diagonal line), the trend has turned to the downside.  So, we have a clear uptrend followed by a clear downtrend.

Remember, “Simple tools are what separate us from the animals.”

We have extended our special offer — for a limited time, the first two chapters of “How You Can Find High-Probability Trading Opportunities Using Moving Averages” are available FREE — through December 6th.  Sign up for a free Club EWI membership and gain instant access to the excerpt by clicking here!

This article was syndicated by Elliott Wave International and was originally published under the headline Simple Tools for Competent Trades. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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Google Wins GSA Contract, Partnership with Yahoo in Japan Approved

Market News Video – Google (GOOG) has won a contract to provide the US General Services Administration with email, and Japanese regulators have approved a partnership between Google and Yahoo in Japan. Google, in partnership with Unisys, beat out Microsoft (MSFT) for a $6.7 million contract for cloud-based email and collaboration tools that the GSA said will lower costs 50%.

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ECB Extends Loans Deadline For EMU Members

This afternoon the President of the European Central Bank Jean-Claude Trichet has told journalists that he intends to offer unlimited loans to members of the EMU until the end of Q1 2011.

The decision – made at today’s ECB press conference to announce the bank’s latest interest rates – will reassure investors that the bank will not abandon indebted euro zone members such as Portugal and Spain. Indeed following the decision the euro made steep gains against the dollar – moving to a session high of 1.3217.

Furthermore Mr. Trichet confirmed that the ECB has been aggressively buying Portuguese and Spanish government bonds in an attempt to tighten bond yield spreads. These measures are intended once more to reassure markets that the EMU periphery members remain viable investments – and in fact following the announcement Portguese bond yields tightened 0.5%.

The decision to rapidly purchase government bonds has been controversial inside the ECB. Officials have commented that the policy involves blurring the line between currency and fiscal union, increasing the chances of an EMU political entity. The ECB was never intended for this function; yet circumstances have forced the bank to take action.

In the short term though Mr. Trichet’s press conference has had a positive effect on the euro, and given indebted EMU members some much needed breathing space.

By Peter Lavelle with foreign currency exchange specialists Pure FX.

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Banks Reportedly in Talks with SEC on Mortgage-Bond Settlement

Market News Video – Several major Wall Street banks are in preliminary talks with the Securities and Exchange Commission regarding settlements to resolve investigations of their sales of mortgage-bond deals that led to the financial crisis, the Wall Street Journal reports. The Journal said the SEC has begun negotiations following its investigation of pools of mortgages and other loans, called collateralized debt obligations, or CDOs, that were packaged and sold to investors.

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The S&P 500, Gold, Oil, & the Banks – What a Conundrum

By J.W Jones – www.OptionsTradingSignals.com

Sellers were in control most of the trading session on Tuesday, however an overnight buying surge pushed the S&P 500 back up to overhead resistance as the directional battle raged on between the bulls and the bears. For over a week we have had relatively choppy trading as the S&P 500 has remained in a tight range between the 20 and 50 period moving averages. By the open Wednesday, the U.S. financial markets demonstrated their resiliency yet again. It is critical to note that we received our first and second official tests of the 50 period moving average on the S&P 500 daily chart.

While recent analysis has offered that prices are consolidating and that a significant move is likely to play out, it is too early to be making market prognostications about what is to come. However, the S&P 500 is leaving us with a few clues about potential direction which is apparent through the lens of technical analysis. While the 50 period moving average was tested both Monday and Tuesday, price action early Wednesday morning was extremely bullish on the heals of a solid ADP employment report and a slight pullback in the U.S. Dollar. As stated in my previous analysis, we will remain in a technical uptrend until we get sustained prices below the 50 period moving average on the daily chart of the S&P 500.

As most veteran traders realize, key price levels weaken each time they are tested until eventually they break. Time and price will line up and we will either have a strong sell-off, or the equities market will bounce and test the recent highs. Now that we have had a second test of the 50 period moving average, the 3rd test may see the support level give way to lower prices. If prices break below recent support and we lose the 50 period moving average, it is likely price will correct to the S&P 1150 level with the possibility of testing the 200 period moving average. In contrast, should the S&P 500 price breakout over recent resistance we could challenge new highs. At this point in time, price action should be monitored closely to see how the S&P 500 handles these key levels.

S&P 500

Gold

Gold and silver had strong advances higher on Monday and Tuesday with the U.S. Dollar continuing its rally. While not a frequent occurrence, a simultaneous rally in the U.S. Dollar and precious metals is typically the result of abnormal market conditions. The crisis unfolding in Europe was likely the force behind the mutual rally in precious metals and the U.S. Dollar as central bankers and asset managers fled the Euro seeking safe havens. The dollar continues to sustain bullish price action and has the potential to go much higher than many traders and money managers may expect.

Gold and silver have had monster sized runs and appear to be consolidating before making their next move. While the ominous head-and-shoulders pattern is apparent on GLD’s daily chart, the potentially more negative aspect regarding the metals is their widespread acceptance as a safe investment by the retail crowd. While gold and silver could continue higher, at some point it would be healthy to see a pullback and with so many retail investors long gold and silver, a strong correction would wash out emotional bullish traders before ultimately heading higher.

At this point, I am sitting back and watching the price action unfold, but should the neckline of the head and shoulders pattern break to the downside, I will likely get involved with some downside exposure.

XLF (Financials)

U.S. banks have been under pressure as a variety of headwinds faces the sector. Most of the banking concerns of which traders are aware are increased regulation, foreclosure nightmares, capital formation issues, and commercial real estate and development problems. Has anyone given any thought to whether U.S. Banks have any exposure to the European banking/sovereign fallout? It is without question there is exposure, the more appropriate question should be who is exposed, and how much risk did they take on? Since we will likely not prospectively know who is exposed until price action confirms their identity, the safest way to play that potential risk is through trading the financial ETF XLF.

Through the use of this ETF, traders can broaden their horizon and focus more on the price action without worrying about which specific banks are exposed to heightened risk. XLF has already broken down below its 50 period moving average on the daily chart. While a bounce is likely, if the 50 or 20 period moving average hold XLF down, it is likely we will see prices roll over and XLF could potentially challenge new lows. Should this take place, the S&P 500 will likely follow in the XLF’s footsteps.

USO (Oil)

Traders moved oil prices higher on Monday, but Tuesday saw market participants take profits and push USO lower by the closing bell. USO, much like gold and silver is a mixed bag when looking at the daily chart. On one hand, we can see that Monday’s action pushed prices above the 20 period moving average. During intra-day trading on Tuesday, price tested the 20 period moving average and support held firm. Wednesday morning energy traders pushed oil higher, but as of the writing of this article oil was trading at resistance. While there are clearly bullish signals on the USO daily chart, USO appears to be forming a head and shoulders pattern similar to gold. With conflicting technical information, sitting on the sidelines and waiting for price and direction to be confirmed is likely a sound decision, at least that is the way I am playing it.

Goldman Sachs

Goldman Sachs (GS) is offering two interesting trading setups that option traders could use which have a different directional bias. The daily chart places Goldman in a descending channel and provides traders who want to get short with defined risk. Those who remain bullish could get long and use the 50 period moving average as a stop. At this stage in the December option expiration cycle, utilizing time decay (Theta) as either a profit engine or a way to reduce the cost of a spread is a sound trading strategy.

With less than 3 weeks until expiration, time decay (Theta) accelerates rapidly on its inevitable path to 0 at expiration. This process increases dramatically the final two weeks leading up to expiration. Option traders that utilize time decay (Theta) to reduce the cost of a spread or as the primary profit engine of a trade construction (credit trades) are capitalizing on an inevitability.

Clearly there are inherent risks such as an increase in implied volatility, but without question at option expiration the time value of options will be reduced to 0. Time decay (Theta) and implied volatility are the two most likely culprits as to why novice option traders consistently lose money trading options. Understanding a few basic principles regarding option Greeks is critical in order to produce profits. The daily chart of Goldman Sachs is shown below.

Those who are bullish with regard to Goldman Sachs could use a call vertical (bull call spread) with the following strikes:

Long 1 December 160 Call Contract
Short 1 December 165 Call Contract

Through the use of a hard stop well below the 50 period moving average, an option trader could define his risk while having a quality risk / reward trade. The maximum loss on this trade would be less than $180 per leg while the maximum gain would be slightly over $320 not including commissions as of Wednesday morning. The use of a hard stop would reduce risk further and could potentially lead to a nice profit in days to come.

For traders who want to press the downside, a put vertical (bear put spread) could be used with a contingent stop around the $161/share price level. The trading setup is as follows:

Long 1 December 160 Put Contract
Short 1 December 155 Put Contract

The maximum loss per side for this trade would be around $230 while the maximum gain is $270 as of the Wednesday morning. Similarly to the call vertical spread listed above, the use of the contingent stop reduces the intra-day risk even further. While these setups are about as basic as it gets regarding option trading, they can really produce some nice profits. Again, these are not recommendations, but simply an example of the profitability that options can add to your trading if they are used appropriately.

In closing, we are seeing a lot of head and shoulders patterns developing in a variety of trading vehicles. While these patterns can mean substantial downside is ahead, there is always the potential that they could fail. Failed patterns result in fast, potentially devastating moves. If the head and shoulders patterns we are seeing in the S&P 500, gold, and oil fail a fast paced rally will likely unfold. In contrast, if the patterns play out a nasty sell-off could take place. At this point in time, a significant move is likely to unfold, but as usual which direction prices will eventually go remains unknown.

I am giving away my free analysis & book on how to find and trade the right options strategy  This short and to the point guide is full of my trading techniques and tips which will help you not only protect your portfolio but grow it.

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J.W Jones – www.OptionsTradingSignals.com

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Forex Daily Market Commentary

By GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

FX markets were generally quiet during the Asia session as news flow was in short supply. EURUSD traded 1.3088-1.3150, USDJPY 84.05-84.35. Nevertheless, risk seeking sentiment has clearly enjoyed a modest revival over the past 24 hours. Tightening European sovereign bond spreads have helped and, justified or not, expectations are rising that a significant European policy announcement may be in the pipeline.
Asian equities are ahead at the time of writing, and US stocks finished stronger earlier, helped by unconfirmed reports of potential US backing for a larger European rescue effort via IMF funds. ISM Manufacturing edged down as expected but it still continues to signal above-trend growth. The ADP private payroll estimate beat consensus and supports our economists’ above-consensus +175k forecast for the upcoming nonfarm private payroll estimate. The Fed’s latest Beige Book reflected responses before November 19 but nevertheless sounded more positive than the prior report.
EUR

The ECB is due to announce its latest policy decision today. While market participants may think the ECB will introduce significant policy measures, our fixed income strategists think ECB President Trichet’s press conference runs the risk of disappointing those expectations. This would likely put renewed pressure on the euro again.
A Spanish 10-year auction is due and could be significant for the euro, although the nature of the auctions means that the results could be misleading, as primary dealers tend to go short in the run up and, as a consequence, the auctions themselves can be well bid. Yesterday, the Portuguese 12month bill auction passed largely without incident though funding costs obviously remain elevated.
Ireland’s manufacturing PMI rose slightly to 51.2 but the export balance retreated a little to 54.7. With the country highly dependent on the fortunes of its export sector going forward, our European economists note that they are unlikely to achieve the Government’s GDP growth forecast of 1.75% for next year. On the other hand, German and French manufacturing PMIs were relatively better as they showed evidence of a strong manufacturing recovery. But Spanish PMI was down to 50, with the French reading of 57.9 the highest since September 2000.
GBP

The PMI print for November provided a very strong reading of 58.0, driven by an employment index which is at the highest level since the survey began in 1992. UK Nationwide house price inflation fell by -0.3% y/y, in line with consensus, and continuing the recent downward trend.
AUD

The AUD slipped when October retail sales came in weaker than expected, falling -1.1% m/m (cons. +0.4%, prev. +0.1%). This is the fastest pace of contraction since July 2009.

TECHNICAL OUTLOOK
EURCHF 1.3229 resistance.
EURUSD BEARISH Clearance of 1.2988 exposes 1.2796 ahead of 1.2588. Resistance at 1.3150.
USDJPY BULLISH Recovery held at 84.41; breach of the level would expose 85.40 reaction high. Initial support at 82.79.
GBPUSD BEARISH Sell-off from 1.6299 found support at 1.5485; move below the level would expose 1.5297. Near-term resistance at 1.5773.
USDCHF BULLISH Next big resistance lies at 1.0183. Near-term support at 0.9926.
AUDUSD BEARISH Currently holds support at 0.9537 ahead of 0.9477 Fibonacci level. Resistance at 0.9712.
USDCAD BULLISH Remains constructive above 1.0076 keeping our focus on the upside. Initial resistance lies at 1.0287 ahead of 1.0374.
EURCHF BEARISH While resistance at 1.3229 breakout low holds, expect losses to target 1.2933 and 1.2766 next.
EURGBP BEARISH Focus is on 0.8329; a break here would expose 0.8202. Resistance at 0.8449.
EURJPY BEARISH Decline through 108.35 and 107.73 would open up the way towards 105.44 key low. Near-term resistance at 111.98.

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.

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Crude Oil Trades Near $87 a Barrel

By Anton Eljwizat – Crude oil traded near the highest in almost three weeks after greater-than-forecast growth in U.S. private employment bolstered optimism fuel demand will increase in the world’s biggest crude-consuming nation. However, there is much technical data that supports a bearish move for today as described below. Forex traders involved with commodities like this can take advantage of this knowledge by going short on Crude Oil now, and at a great entry price!

• Below is the daily chart for crude oil by ForexYard.

• The technical indicators used are the Slow Stochastic, Relative Strength Index (RSI) and Williams Percent Range.

• Point 1: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.

• Point 2: The RSI signals that the price of this pair currently floats in the over-bought territory, suggesting downward pressure.

• Point 3: The Williams Percent Range has peaked near at the 0 marker, which means that there may actually be a strong level of downward pressure.

Crude Oil 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.

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Afternoon News Set to Shake Up Markets

While the markets have already experienced a certain level of volatility this morning, the news set to be released this afternoon promises to shake things up to a considerably higher level. The EUR/USD pair is already up around 80 pips from this morning, while the GBP/USD pair had shot up some 75 pips before dropping back to this morning’s levels. At the moment the pairs are trading at 1.3186 and 1.5617, respectively.

Investors are eagerly anticipating today’s US Unemployment Claims and Pending Home Sales figures. While analysts are predicting a slight increase in the number of people filing for first time unemployment insurance in the past week, the number of pending home sales is predicted to rise. The seemingly contradictory pieces of economic news have left traders puzzled as to where the USD is heading for the rest of the day. High unemployment is likely to cause risk aversion, which would be good news for the safe haven dollar. On the other hand, a positive home sales figure could cause investors to turn to more volatile currencies like the euro.

In addition, traders will want to pay attention to the ECB Press Conference, scheduled for 13:30 GMT. Given the erratic movement seen by the euro as of late, investors will be eagerly awaiting any news on how the ECB plans on stabilizing the currency.

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.

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ECB Press Conference Expected To Stabilise Euro

Could the nosedive in the value of the euro come to a conclusion today?

This afternoon the European Central Bank is to hold its December press conference, and ostensibly is set to announce the new EMU interest rates. In fact though the real issue is whether the ECB President Jean-Claude Trichet will announce an expansion of the bank’s programme of buying foreign government bonds (called the Securities Market Programme.)

The markets are hopeful that he will do so. If he does, and begins pre-emptively buying government bonds from insolvent EU nations such as Portugal and Spain, it provides a longer term solution to the European debt crisis. This could stabilise the euro and, on the back of this expectation, sentiment toward the common currency has improved in the last day.

Furthermore the euro has also benefited from US announcements that it intends to support the EMU. The US is the biggest shareholder in the International Monetary Fund meaning, in the event that Portugal or Spain request bailouts, they can expect support from the world’s biggest debtor.

The US announcement is of course self-interested: officials there hope to prevent the EU debt crisis from expanding worldwide by pumping funds into Europe. But the announcement also succeeded in improving optimism toward the euro.

Elsewhere, economics group Markit Economics yesterday reported the single biggest rise in UK Price Managers Index figures since 1994. On the back of increased exports and job creation the British PMI rose to 58.0 in November. This is positive news for the UK economy and suggests the recovery is on course.

However the close ties between sterling and the euro means this positive news did not affect the value of sterling for too long. In fact commentators expect that GBPUSD exchange rates in particular will be affected most by the ECB press conference this afternoon.

In the US meanwhile the last 24 hours have been light on economic data. This will change tomorrow with the release of non-farm payroll figures – revealing the number of new jobs created outside the agriculture sector. These are critical in determining the success of the US recovery and will be watched closely by the markets.

Stay tuned.

By Peter Lavelle with currency exchange specialists Pure FX.

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Euro and Equities Rally Signaling Potential Shift in Trader Sentiment

Source: ForexYard

Strong private payroll numbers boosted equities today as well as higher yielding assets such as the Aussie dollar and crude oil. The dollar and the yen sold off sharply while the euro rose versus the greenback for the first time in seven days.

Economic News

USD – Dollar Rally Stalls

The US dollar fell versus the euro for the first day in more than a week as risk appetite increased significantly. Today’s trading was influenced heavily by the release of better than expected ADP Non-Farm Unemployment report. The private payrolls data came in at 93k with market expectations of 70k.

Traders also received some reassurance as rumors spread of an increased contribution by the US to the IMF stability fund. This provided much needed support for the euro and other riskier currencies versus the dollar such as the British pound and Aussie dollar. However, this rumor was later denied by US officials and most currencies came off of their daily highs following the denial.

The EUR/USD traded higher today at 1.3130, up from an opening day price of 1.3009. The GBP/USD was up at 1.5615, after opening the day at 1.5580. The AUD/USD was up sharply at 0.9670 following an opening day price of 0.9569. Equities were significantly stronger with the Dow Jones Industrials Average rising 2.3%.

Weekly unemployment claims highlight the US data releases set for tomorrow. Expectations are for an increase of 425k new jobless claims. Last week saw 407k new claims filed. Also due to be released are monthly pending home sales. Economists predict a decrease of 0.7% with last month’s numbers falling 1.8%.

Yesterday’s bounce in the EUR/USD may have been a temporary correction in the downtrend, or could it be something larger that correlates with the rise in oil prices and equities? Support and resistance for the EUR/USD come in at 1.2960 and 1.3310.

EUR – Euro Receives Relief from Slide

The euro experienced a temporary respite from its sharp slide over the last week and a half as negative risk sentiment waned and traders brought higher yielding assets.

Despite the uptick for the euro more negative news was released from Europe compounding Europe’s financial difficulties. Portugal’s sovereign debt was put on a negative warning by rating agency Standard & Poor’s.

Europe has once again been engulfed in a financial crisis and contagion fears have compelled traders to sell the euro for the last two weeks. However, today the 16-nation currency received a bounce. The rally in the EUR/USD may not be an isolated event as the rise in the currency pair also coincides with the sharp appreciation in equities, crude oil, and other higher yielding assets.

Today traders will be following the release of the Minimum Bid Rate from the European Central Bank (ECB) along with a speech to follow by ECB President Jean-Claude Trichet. Any comments by Trichet that signal further assistance may be on the way for Ireland or other European nations in financial troubles may help to push the euro rally further. Speculations are for an announcement of an ECB bond buying program. Should this occur it should be a positive for both the euro and equities.

JPY – Yen Falls and Aussie Dollar Rise as Market Fears Ease

The yen continues to weaken in the face of the European debt crisis. Yesterday the Japanese currency was down sharply as traders looked to riskier, higher yielding assets.

The USD/JPY rose to its highest level in 3-months to a price of 84.38. The pair ended the day up at 84.15 from an opening day price of 83.52. The EUR/JPY was up sharply at 110.43 after opening at 108.67.

With risk trading on, the Aussie dollar was also a strong performer yesterday. The AUD/USD rose to a high close to 0.9700. However, the pair shed much of its gains and fell to 0.9640 following the release of less than expected retail sales. The monthly data shed 1.1% on expectations of a 0.4% increase.

Both the yen and the Aussie dollar will be affected by the US data releases later today. Events in Europe will also influence the movements of the Asian currencies. As such, traders should be following the US weekly unemployment data and comments from ECB President Jean-Claude Trichet. USD/JPY support and resistance are 83.35 and 84.40.

The daily chart shows the AUD/USD tested but failed to breach the bullish trend that begins in early June. This may be a good spot for traders to go long with a protective stop underneath the trend line.

Crude Oil – Spot Crude Oil Jumps 2.5%

The price of spot crude oil skyrocketed by 2.5% in trading yesterday as traders put the European fiscal crisis behind them at least in the short term and focused on an improving US economy as well as a rumor of the US supporting the IMF in any European financial solution.

A high of $86.94 was reached yesterday; the highest price spot crude oil has traded in two weeks. Spot crude oil finished the day at $86.37, up sharply from its opening day price of $84.40.

US economic data was a heavy influencer on traders as US private payrolls reported better than expected numbers as well as an increase in US productivity. Also helping to drive the price of crude oil higher was a weaker dollar. The combination of positive economic data and a falling dollar pushed traders into the high yielding commodity.

Surprisingly, weekly crude oil inventories disappointed traders with inventories rising by 1.1m barrels on expectations of a decrease of 0.8m barrels. The negative reading however failed to halt the rally in spot crude oil prices.

In order for spot crude oil prices to continue the rally the price will need to breach the $87.10 resistance level on its way to test the yearly high of $88.34.

Technical News

EUR/USD

Yesterday the pair broke a 7-day streak of declines. The jump in the rate should be short lived with more euro selling on the way. Traders may want to target the lower channel line of the lows of mid-November as a support which comes in at 1.2890. A further target should be the 61.8% retracement level from the June to November move.

GBP/USD

The pair’s downtrend appears to have stalled at 1.5500, the 38.2% retracement level from the May to November move. Short term resistance is found at the October low and yesterday’s high of 1.5650. Should the pair close above this resistance level further bullishness may be seen with a target the mid-November low of 1.5840.

USD/JPY

The pair failed for the second time to breach the resistance level at 84.40. Should a solid close be put in above this line, a lack of a significant resistance level on the charts could propel the pair to the post intervention high of 85.90.

USD/CHF

Bears appear to have drawn a line in the sand at 1.0040, the 50% retracement level from the August to October move as the pair has tested and failed to break the resistance line 4 times. A close above this level may take the pair to the next resistance at 1.0180, the 61% retracement level for the same time period.

The Wild Card

Gold

Tuesday’s trading ended with a shaved head candlestick which signals potential bullishness in the commodity. This is in contrast to the head and shoulders pattern that appears on the daily chart. The chart pattern signals a potential reversal. Forex traders should remain long on gold until a close below the neckline signals confirmation of the head and shoulders pattern.

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.