Months after the saga started, European leaders are still divided over bailout for Greece. Some time ago an agreement in principle was reached, that the Union would help a member in need. As things stand right now, it is not a done deal, or even anywhere near. German Chancellor, Angela Merkel, was quoted saying that Greece should solve financial problems alone, without EU bailout. According to her no immediate action is necessary. In contrast, Italian Prime Minister Berlusconi, is in favor of aiding Greek government. Of course, he should be, since Italy could be next in line for financial help.
This should make for an interesting EU summit later on this week. Strong divisions among block leaders should result in more uncertainty for Euro leading to the meeting. And who knows what will happen once some consensus is reached, if it is reached. The way things have been going, nothing might get resolved on Thursday, and few weeks from now EUR can still jump like a yo-yo because of that. Well, at least this should make for interesting trading.
Canadian Dollar remained strong last week, but Australian Dollar failed to keep up. As a matter of fact, it looks like it could finally crack. I find relationship between the two interesting. Daily chart of AUD-CAD more deterioration of Aussie. Right now price is stuck in a range, but is slowly drifting down and approaching support area. Breaking through his level might accelerate sell off and push this cross much lower.
The 0.9200 support level seems to be the key here. If it breaks, price can easily drop another 300-400 pips. Given large time scale, it will not happen today or tomorrow, but next 1-3 weeks should decide what happens here. More weakness in AUD-CAD can easily spill over to all other AUD crosses, so I’ll be watching this chart with interest.
Yesterday’s post described fake breakout trading strategy. Intermediate term chart of GBP-CHF currently presents just such situation. Late on Friday price dipped under previous low, but reversed and closed higher, creating very distinctive hammer. One could go long here at market open, with a small stop just under the low of last candle. For me, any entry right now is complicated by possible gaps, which might change the picture to some degree. But I like the chart and, if opening action supports buying, I should be long this pair looking for 100 pips.
For all the uncertainty facing Euro, the Kiwi looks even more precarious right now. It sold off sharply late last week, after posting strong advance earlier. EUR-NZD is building possible bottom, at least in short term. Here also I want to wait for the open and see what happens, but chart looks like potential buy, for about 100 pips. Hopefully next few days will be better than last week, which proved challenging, even though mildly profitable.
Mike K.
You are right that opening gaps can put a wrinkle in the analysis. Gbp/chf gapped down, but are you still bullish? Also, what is your take on nzd/usd gap, if you don’t mind? Worth the trouble?
Yes, I’m still bullish GBP-CHF. Want to see gap close, pull back and then any upside breakout could be a buy. Depends on how the chart looks like. Kiwi-Dollar gap is playable, but for small pips. If 10-15 pips are fine with you, than it looks promising.
Does fxmadness follow march madness? You must be happy with UW! Cheers!
Jess, yes, to some degree. In these parts it UW is a talk of the day, especially now that Zags are out. Huskies already want farther than expected. Good for them!
[...] the gap” trades. However, gaps played a role in trades mentioned in the last post, most notably GBP-CHF, which I intended to buy. Price gaped down at the open, not buy much, but that typically indicates direction of first move. [...]
[...] mentioned in the last post, I also closed the long standing AUD-CAD trade, which was based on daily chart set up. The level of 0.9200 was [...]