The Momentum2 strategy from DailyFX PLUS has just given a signal to buy GBP/USD at current levels.
Momentum2 is a trend trading strategy that aims to catch shifts in trend using trader sentiment as an indicator. The current signal was issued because the Speculative Sentiment Index (SSI) has hit its most extreme negative level for the past 145 trading hours at -2.8833, which suggests that the GBP/USD could be trending upwards.
The Japanese Yen tends to do poorly in quiet markets and forex volatility prices are at fresh yearly lows.
[B]Forex Volatility Prices Fall to Yearly Lows, Favoring USD and JPY Weakness[/B]
[I]Source: OTC FX Options Prices from Bloomberg; DailyFX Calculations[/I]
DailyFX quantitative strategist David Rodriguez believes some of the best trade opportunities "are in the cross rates — EUR/JPY and GBP/JPY in particular. Those views are reflected in the strategy bias table shown below.
[B]DailyFX Individual Currency Pair Conditions and Trading Strategy Bias[/B]
“Our sentiment-based trading strategies have done well selling both the Dollar and Yen through recent price action, and we believe the Momentum2 trading system remains in a good position to capitalize on further Greenback and Yen declines.”
DailyFX quantitative strategist David Rodriguez believes there are 3 reasons that may send AUD/USD lower:
[B]1. The mid-month Australian Dollar rally has failed almost exactly at the 61.8 percent Fibonacci retracement of the decline from November highs to lows, and the stop and reverse warns that upside momentum is failing.[/B]
[B]2. The pullback has coincided with an important shift in US Treasury Yields and general interest rates.[/B]
The fact that the US Treasury Yield has bounced at major support is a USD-positive and an Australian Dollar-negative.
[B]3. Retail forex traders remain heavily long the Australian Dollar versus the US Dollar[/B]
Our contrarian sentiment-based Momentum2 trading system has done well selling the Aussie Dollar versus the USD and Euro (long EUR/AUD).
[I]Below is a look back at the past day of trading using movements in the Dow Jones FXCM Dollar Index (ticker: USDOLLAR)[/I]
The US Dollar slipped to a new 8-day low on Fed Chief Bernanke’s comments that the target interest rate may stay low even after quantitative easing has ended, but later three key announcements gave the greenback a boost.
The BoE minutes also reiterated that it too will not automatically hike interest rates when the unemployment threshold is hit. Retail sales came out higher than expected. Finally, Bullard commented that the ECB would consider cutting its deposit rate to -0.10%.
The SSI-based Breakout2 strategy on the Mirror Trader platform is currently giving a signal to go long the US Dollar relative to the Australian Dollar (short AUD/USD).
I don’t see the GBPUSD closing above the 1.62ish level. If the pair does break above 1.62 then it will be short lived. This pair has already pushed up to far and too fast against the USD. I view this as a pair to swing trade between 1.62 and 1.59 for now. A nice break below 1.59 and I think we’ll see a good downtrend. The reason why is that the consumers are in debt up to their eyeballs and increased borrowing is not the answer. Housing prices are too high and there is minimal bank lending taking place. If I remember correctly, their recovery was supposed to be based on exports according to the government. That’s just not happening. I look for this pair to fall heavily in the near future. Just my 2 pips. Take care!
The Momentum2 strategy on Mirror Trader has just given a signal to buy EUR/USD at current levels with a trailing stop at 1.34810. Momentum2 is a trend-trading strategy that aims to catch shifts in trend using trader sentiment as an indicator.
This signal was issued because the Speculative Sentiment Index (SSI) has hit its most extreme negative level for the past 145 trading hours at -2.7468, which suggests that the EUR/USD could be trending upwards.
The Japanese Yen remains the worst-performing major currency, and the DailyFX PLUS trading strategies based on the Speculative Sentiment Index (SSI) remain well-positioned to sell into JPY weakness.
Last week I posted about DailyFX Quantitative Strategist David Rodriguez’s 3 reasons why the Australian Dollar could fall versus the US Dollar. Since then AUD/USD has dropped over 300 pips.
Today, David gives us 3 more reasons why the Aussie Dollar decline might continue:
[B]1. A major technical break sees no significant support until the psychologically important $0.9000 mark[/B]
[B]2. Aussie Dollar correlation to gold prices leaves it at risk of further declines[/B]
[B]3. Heavily one-sided retail forex crowd sentiment has left the SSI-based Momentum2 and Breakout2 systems on the Mirror Trader platform to sell into further weakness, and indeed current readings favor AUDUSD declines.[/B]
If you have a trading account with FXCM, you can use your Trading Station username and password to log into Mirror Trader.
A scan of this morning’s best and worst performers via the Strong/Weak app shows that the British Pound is having an incredibly strong day, netting nearly +1000-pips cumulatively against the major currencies covered by DailyFX Research.
The majority of these gains have occurred during the European session, as traders continued their rotation away from the commodity currencies (which began last Thursday) and into the European growth currencies (with price action the past three days, including today, confirming this trend).
The more significant price action may be occurring in the GBP/USD, which broke above its two-month sideways range top at $1.6260. The measured move for the GBP/USD on a weekly close above 1.6260 would call for a rally into 1.6745/50, the 61.8% extension of the flag coinciding with the July 2011 highs.
"The confluence of resistance provides a workable zone of resistance: 1.4420-1.4521.
Five Waves up for EUR/CAD
“This is a shorter-term trade and is unlikely to turn the trend, but the end of a five-wave pattern should begin an A-B-C (or two-legged) pullback, which should be enough to earn a reasonable return selling at current levels.”
[I]The Reserve Bank of Australia kept its main refinancing rate on hold at 2.50% last night. After diving back to last week’s lows under $0.9060, the Australian Dollar has rebounded across the board.[/I]
Currency analyst Christopher Vecchio remains bearish on the AUDUSD "given general upside pressure on US yields past week, month, and quarter. A rebound today could offer an opportunity to resell the currency higher:
“Ideal selling zone over next few days: 0.9250/55 (21-EMA) to 0.9280 (descending TL off of October 23 and November 20 highs).”
The ADP Employment Change for the month of November beat economists’ expectations of 170K, coming in at 215K while the prior print was revised higher from 130K to 184K.
[B]USD/JPY (15-Minute Chart)[/B]
This impressive beat follows the ISM Manufacturing data on Monday that showed a better than expected employment component.
[B]Times below in GMT[/B]
If we see NFPs follow the ISM and ADP beat, we can expect renewed speculation of a small Federal Reserve ‘taper’ in December thus spurring Dollar strength and US Treasury weakness.
The sentiment-based Momentum2 strategy on Mirror Trader just gave a signal to buy the US Dollar versus the Swiss Franc at current levels with a trailing stop at 0.8995
DailyFX Currency Strategist Ilya Spivak sees an opportunity for new highs to be reach for SPX 500, the CFD that tracks the S&P: [I]"Prices rebounded from resistance-turned-support at 1778.90 (October 30 swing high).
“Resistance is in the 1813.10-17.80 area, marked by the November 29 high and the 23.6% Fibonacci expansion. A break above that targets the 38.2% level at 1842.10. Reversing below support exposes the 38.2% Fib retracement at 1749.60.”[/I]
The Speculative Sentiment Index (SSI) is a contrarian indicator, so the fact that the majority of retail traders are short gives signal that SPX 500 may continue higher. The latest SSI reading for SPX 500 stands at -5.76 meaning there are 5.76 short positions for every 1 long position.
The Momentum2 strategy on Mirror Trader recently gave a signal to buy NZD/USD. This goes along with an earlier buy signal provided by the Breakout2 strategy. Both strategies are based on our Speculative Sentiment Index (SSI) which means they are contrarian strategies.
The most recent signal was issued because the SSI reading for NZD/USD has hit its most extreme negative level for the past 145 trading hours at -1.3117, which suggests that the NZDUSD could be trending upwards. A trailing stop loss has been set at 0.82603.
In his trade update this morning, DailyFX currency analyst Christopher Vecchio highlighted the following:
"A scan of this morning’s best and worst performers shows that countertrend moves are afoot in the JPY-crosses as the Nikkei 225 has turned lower the past few days.
"Nevertheless, when we see that today’s weakest performer is the GBP/JPY, one cannot ignore the temptation to ‘buy the dip’ in context of longer-term price action.
“After having taken a look at GBPJPY from the long side on Friday (the entry remains approximately 100-pips below current price), it may be nearing the time to add in to this trade.”
The Australian Dollar took an unexpected spill this morning after Reserve Bank of Australia Governor Glenn Stevens surprised markets with overly dovish commentary:
[I]Noting that the economy won’t likely be influenced by further rate cuts, Governor Stevens suggested that the economy would fare better if the AUDUSD traded closer to 0.8500[/I]
[B]AUDUSD 1-minute Chart: December 12, 2013 Intraday[/B]
The Momentum2 strategy on the Mirror Trader platform just sold AUD/USD at current levels with a trailing stop set at 0.9047
The signal was issued because our Speculative Sentiment Index (SSI) has hit its most extreme positive level for the past 145 trading hours at 3.2464, which suggests that the AUD/USD could continue downwards.
Currency analyst Christopher Vecchio noted that a scan of this morning’s best and worst performers via the Strong/Weak app shows that while [I]"the British Pound and the Euro have been moving in near-lockstep, they are pulling in opposite directions the past several hours
“Our interest is drawn to EURGBP, which has been engaged in a short-term countertrend move the past several days:”[/I]
If resistance near 0.8460/80 holds, that would allow the descending channel to continue to develop, and a return to 0.8400, 0.8320/30, and 0.8230/50 would be eyed.
[B]EUR/GBP Daily Chart: May 7 to Present[/B]
On the other hand, a break with a daily close above 0.8480/500 could follow the sideways channel going back to January, with targets of 0.8575 and 0.8725 over the coming weeks.
