Monday, August 22, 2011

Daily Technical Analysis - August 23, 2011

Wall Street opened the week on the green territory. Indices were up 2.5% on the beginning of the day, but the investors saw it as an opportunity to sell more stock, and the indices closed on the bottom. All indices are now close to their daily lows, and a break-down might cause panics again. On the other hand, if Wall Street rises above yesterdays’ high, there might be a short-squeeze of 2-5 percents.


The Canadian dollar showed few weeks ago, signs for possible strengthening against the USD. However, it failed to break-down 98.0 and the USD went up again. The negative momentum in the US stock markets supports the USD, and therefore the CAD has difficulties to gain power.

The 200 SMA supports the US dollar at 0.982 and set a new significant support there. Long shadows extended from the last two candlesticks, and that indicated that the investors believe in the USD at the moment. Likewise, the 20 EMA crossed above the 50 EMA, which is a powerful signal for the USD. If it continues rising, it will have to face the strong resistance at 1.0, which it had failed to break two weeks ago.


Yesterday we mentioned the pound as a weakening currency against the CHF (This analysis is still relevant). The GBP showed some signs that it might rise again, but it still looks more bearish than bullish.

The Japanese Yen broke the historical low at 76 against the USD but corrected immediately. The risk of trading the Yen’s pairs these days is the possibility for another governmental interfering. However, the technical trader cannot be speculative and has to follow the technical analysis principles. That means that the JPY will be considered as a strong currency until the charts tell us different.

The GBP/JPY has been moving in a short channel during for the last couple of weeks. A break-down of the lower boundary at 126 might take the price down to 123 and complete the inverted “Cup & Handle” pattern. A surprising break-up at 128 will be a positive signal for the GBP.


Those of you who followed our chief analyst’s trade idea of buying the gold at 1770$/oz has made a great amount of money in just one week. The Gold does not seem like it is going to stop rising soon, but remember that the more it rises the more are the chances for correction-down. The price is getting close to 1900$/oz, which is a psychological resistance number. If the uncertainly in the markets continues, the gold can easily jump over that resistance and hit 2000$ within just few weeks. However, it will be wiser to look for correction and reversing patterns, rather than buying the gold in such extreme levels.