Friday, August 19, 2011

Daily Technical Analysis - August 19, 2011

The panic is back to the financial markets. If anyone thought that the sharp declines from last week are over, yesterday was the proof that August is one of the most awful months for the investors. The plunges occurred on the background of disappointing data: unemployment claims were higher than expected; existing home sales were less than analysts' estimations; Philly-manufacturing index fell by almost 31 points.
However, do not think that the disappointing data is the cause for this hysteria. The impact of the US ranks downgrade has not faded away yet, and the risings in the beginning of the week were nothing but short positions covering.
All indices have broken their important supports and though a correction-up is likely to occur, stocks might keep crashing. The next significant support in the NASDAQ index is at 2000 points; Supports in the S&P 500: 1050 & 1000 points.

The crashes of the stocks support the US dollar against most of the currencies, but the British pound is showing an impressive strength. The MPC meeting minutes that were published on Tuesday, indicated that the bank of England is not going to raise the interest level in the foresee future. Investors were encouraged by this news and the pound has a positive momentum since then.
The GBP is dealing with the resistance of 1.65 and it might hit 1.67 if it overcomes this obstacle. On the other hand, a break-down of 1.64 will be a negative sign for the GBP.

The Euro was weakening because of the bullish momentum in the USD, but it is still stamping in the daily chart of the EUR/USD. The JPY has not made any significant move, but it is still stronger than the EUR, and therefore the EUR/JPY slides down. The current support is at 109.5 and a strong break-down can fall to 108-108.5. If the Euro crosses above 111, it will be a positive signal for this currency.

The NZD/USD went down aggressively yesterday, whereas the USD/CHF remained almost unchanged. The combination of these two facts causes declines in the NZD/CHF, which created a reversal pattern in the daily chart. The NZD got a resistance in a former break-down level – at 0.67, and now it is supported at 0.65. A break-down there can slide all the way down 0.62, which is exactly 50% of the recent rally.