Japanese equity markets showing big signs of strength today following the open, trying to recover from 5 straight losing sessions. US home sales came out a little better than expected today, and the US rallied early on, but just as easily gave up gains late in the day. Volatility is nonstop. In most parts of the globe, signs of improvement are still very scarce, but Japan’s rebound is sending a big signal.
EUR and GBP continue to get heavily weighted by noise of recession and expected rate cuts. EUR hit a new low again tonight, but GBP is still consolidated above it’s 1.5300 level. In the case of both, I see optimistic signs of hope during the day (rises in spot value) as selling opportunities at later times. There is reluctance to sell tonight based on Japanese market data and severe movements in volatility to the upside yesterday and on Friday, but fundamentally, little has changed.
GBP feeding frenzies
GBP has levels of volatility simply no one is used to. We have been joking around that every 5 minutes, another 100 pips come and go. Fading the pair has been rather erratic though playing breakouts to the downside and upside have been working out quite well. Anytime a new base is formed, breakouts have been strong and forceful, something we wish was more frequent than not.
USD/JPY could get a short term lift
If we get more buyers, it’s likely to come in around here. Buying into the pair short term from breaks on key levels is something I’m considering, while markets could experience a rebound of instant gratification. Regardless, trend is still down, and I am more inclined to buy breakouts than pullbacks if I decide to do so.
Bottom Line:
Looking for sells on EUR/USD, GBP/USD, USD/JPY and longs on USD/CHF, at favorable levels, and will consider buying dollar breakouts on any hysteric moves. Particularly for EUR, GBP and JPY, they all face heavy weights from above fundamentally. We could get a higher move based on recent consolidation and signs of recovery from equity markets, which is something I would be careful to look out for before making any rush decisions to put on bigger positions. Macro strategy still intact.
Levels:
EUR: sells at 1.2500-10, 1.2586, 1.2635, 1.2687-1.2700, 1.2750, buys at 1.2335, EUR has a large downward sloping hourly trend line, connecting highs made on Oct. 20 and Oct. 23. Look for confluence with any major resistance levels.
GBP: has sells at 1.5700-10, 1.5880, 1.5940, 1.6060, buys at 1.5400, 1.5270, 1.5165, 1.5000
JPY has sells at 94.80, 95.90-96.00, 96.80, 98.00, buys at 91.90, 90.90, 89.20
CHF has buys at 1.5000-1.4990, 1.1400-1.1380, 1.1295, sells at 1.1700, 1.1750, 1.1785, 1.1860
