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Midweek Market Analysis

Greece, Italy and Spain caused the currency bulls pain
With Greece possibly failing the EZ bailout requirements and Spain and Italy’s bond yields trading at unsustainable levels, it was easy to tell why high-yielding currencies got dragged down early this week. It was like seeing the Three Stooges hurt themselves only no one was laughing. Well, maybe except for the dollar bulls. Ha!

The Nowotny rally
ECB’s Ewald Nowotny provided the catalyst that currency bulls were hoping for yesterday when he pointed out the merits of giving the ESM banking status. Never mind that Germany hasn’t even ratified the ESM and that Nowotny was only stating his opinion. I guess when currencies are oversold as they were yesterday, any news is good news. As a result, the euro pared back some of its losses, while safe havens like the Greenback and the yen also slipped across the board.

CCC: Commodities, Central banks, and Comdolls
The comdolls are holding up nicely against the Greenback this week, probably because risk sentiment wasn’t the only mover for the Aussie, Loonie, and Kiwi. Better-than-expected Chinese data and rising gold prices are keeping the Aussie afloat, while relatively strong retail sales and QE3 bets are supporting the Loonie.


Meanwhile, the RBNZ was less dovish than expected in its latest rate decision, which is good for the Kiwi. AUD/USD is currently enjoying a 0.70% intraweek gain, while NZD/USD is also up by a nice 0.58% uptick. USD/CAD isn’t too far behind though, as it’s down by 0.35% as of writing.

That’s it for me today! Hope this review is helping your trades. Don’t hesitate to let me know if I missed anything!

Potential Trade Setups

AUD/USD: Near Channel Support
AUD/USD Rising ChannelThat AUD/USD 4-hour channel that we’ve been watching for the past few days is still holdin’ like a boss and the pair is currently crawling towards the bottom. There’s also a nice bullish divergence on the pair since stochastic made lower lows. Does this mean that the channel support will hold? See the setup

USD/CAD: Reversal Candlesticks Forming
USD/CAD Reversal CandlesticksIs USD/CAD’s rally just one giant pullback? Reversal candles are forming at the 61.8% Fib, which is in line with a former support level on the 4-hour time frame. At the same time, stochastic is in the overbought zone, suggesting that Loonie bears might need a break. Do you think the downtrend will resume soon? See the setup

NZD/USD: Support Turned Resistance?
NZD/USD Support Turned ResistanceIt looks like Kiwi bears needed to pull up for some air after that sharp dive last week! NZD/USD might retrace to the 38.2% Fib, which is in line with a former support level just below the .7950 handle. Stochastic already reached the overbought area but haven’t crossed yet, so there might be room for this pair to climb. See the setup

Comdoll Event Highlights for July 23-27, 2012


China and Canada will keep the comdoll price action alive when the China’s HSBC manufacturing and Canada’s retail sales data are released.

Australia and New Zealand will take center stage on Wednesday when Australia’s inflation is released only a couple of hours before the RBNZ prints its interest rate decision.

For the rest of the week, the economic reports will be dominated by the U.S. when it releases its home sales data, initial jobless claims, and advance GDP reports.

So which of these reports are you willing to trade? I have my eyes on Chinese data. How about you?

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
1.0275, 1.0150
1.0220, 1.0075
0.8000, 0.7870

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.

If you’ve got any trade setups you’d like to share, you know where to reach me!

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.