Wednesday, August 3, 2011

Daily Technical Analysis - August 3, 2011

Wall Street keeps sliding as concerns from going back to recession are increasing. The agreement on the debt ceiling did not encourage the investors and the main indices broke important supports and closed yesterday on the bottom.

The S&P 500 is about to break the strong support at 1250 points, and that would be a powerful bearish sign for the US stock markets. If the index continues diving it might fall to 1200 and even to the level of 1150 points.

As we mentioned few times before, the Gold and the Swiss currency are investors' safe shore when the markets are crashing.  Therefore, you should try to find trade-ideas in those instruments, since their direction is clearer than others are these days.  That is what we did when we brought up the idea of selling GBP/CHF on Friday- a trade that gained over 500 pip since then. Traders who followed this trade can now relax and calmly wait for a good opportunity to go in.

Most of the pairs are in overselling of overbuying status, so you have to analyze them carefully.


It is almost impossible for the EUR to rise when Wall Street falls so aggressively.  There is no obvious point for going in and most of it depends, as stated, on the US stock markets. If the plunging accelerates, the Euro might slide to the 200 SMA at 1.40. The "lower-highs" pattern is a negative signal for the Euro and it might indicate for a new downtrend.


The British pound is stronger than expected, due to the strengthening of the US dollar these days. It was weakening yesterday but the long hammer-doji candlestick shows that there is a strong support around 1.62 and investors have not lost their faith in the GBP yet. A break-up of yesterday's high will be a bullish sign for the pound that will try to go back to 1.64. The cross of the 20 & 50 EMA's is a positive signal for the pound as well.


Both currencies are trading in a bullish trend against the USD, but the correction down in the AUD/USD (which we estimated that would occur) is giving the JPY an advantage against the Aussie. The Yen made a strong move against the EUR & USD this month, and the daily chart of the AUD/JPY looks like the charts of the EUR/JPY & USD/JPY from a month ago. Meaning that the strength of the Aussie has delayed the strengthening of the Yen, but most of the chances are that the JPY will make the move against the AUD as well.

The JPY is now dealing with the support at 83.0, and a strong break up can take it to the next support at 81.0. If this pair follows the above-mentioned pairs it might fall to the historical levels around 75.0