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Midweek Market Analysis

Traders are placing their QE3 bets
Will the central bank of the world’s largest economy pull the trigger on its QE3 program? That question has been sending the dollar into a see-saw trading against its counterparts this week. But maybe we’ll get the answer this weekend when the Fed conducts its Jackson Hole meeting.

Whether the Fed launches its QE3 or waits for a few more days to do so is sure to influence the major currencies’ price action so you better be careful in placing your trades!

Good vibes from the eurozone
Thanks to better-than-expected peripheral bond auctions and rumors that the ECB is on to something with its bond-buying program, the euro has been holding up pretty well against its counterparts. After taking hits early in the week, the euro bulls stepped up and pushed the common currency higher yesterday. Will the euro-lovin’ continue for the rest of the week?

CAD leads the comdoll pack!
Unlike the Aussie and Kiwi bulls, the Loonie bulls have mostly been shrugging off risk aversion this week. As Forex Gump pointed out in his article, rising oil prices and QE3 prospects are bullish for the oil-related comdoll.
Right now USD/CAD is trading 0.09% down from its week open price, while AUD/USD is already struggling with a 0.29% intraweek downturn. NZD/USD has the shortest end of the stick with a 0.73% intraweek loss thanks to Fonterra, the world’s largest dairy exporter, cutting its payout to farmer-shareholders more than what analysts were expecting.

Let’s see if the high-yielding currencies continue to trade without a clear direction, or if the Jackson Hole meeting this weekend finally gives us some decent price action. Is anyone here planning to keep positions open during the meeting, or are we all sitting out? Let me know!

Potential Trade Setups

AUD/USD: Retracement in the Works?
AUD/USD RetracementI’ve always been a fan of retracement plays so this short setup on AUD/USD definitely caught my eye. The pair just broke below support around 1.0375 but seems ready to pull back. Now the 38.2% Fib level is right in line with that former support, which could act as resistance later on. See the setup

USD/CAD: New Range Forming
USD/CAD New Range As I always say, if there’s one thing that USD/CAD loves to do, it’s to move sideways inside a range! Right now, it looks like the pair is forming a new range between .9895 and .9945. Note that .9895 acted as resistance earlier on, which means that it probably switched gears and will act as strong support from now on. See the setup

NZD/USD: .8000 Still in Play?
NZD/USD Retracement SetupHere’s an update on the daily chart that I was watching last week. NZD/USD is still lingering around that potential support zone near the .8000 major psychological handle. Coincidentally, that’s also around the 50% to 38.2% Fibs, which acted as resistance levels in the past. See the setup

Comdoll Event Highlights for August 27-31, 2012


We’re starting the week with a chill pill as there are no major data scheduled for release from the U.S. or any of the comdoll-producing countries. Economic reports get heavier as the week progresses though, as we start to see reports like the U.S. preliminary GDP, Australia’s building approvals, and Canada’s monthly GDP numbers.

Then, traders will wait for sparks to fly later in the week as the Fed’s Jackson Hole meeting is conducted. For those who aren’t in on the buzz yet, this is the meeting where many analysts are expecting more concrete plans about the Fed’s QE3 program. A lot of traders will probably tune in on this, so make sure you don’t miss it!

Now that we’re done with the fundamental bit, let’s take a look at the chart levels that you need to mark!

Significant Levels to Watch Out For

Week Open (WO)
Previous Week High (PWH)
Previous Week Low (PWL)
Top Weekly ATR (tWATR)
Bottom Weekly ATR (bWATR)
Other significant levels
1.0420, 1.0300
0.9940, 0.9890
0.8185, 0.8080

In case you’re wondering what ATRs are all about and how I computed those figures, make sure you check out my entry explaining my trading strategies.

Have fun and good luck trading this week, friends!

Happy time

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.