Sunday, August 7, 2011

Daily Technical Analysis - August 8, 2011

The panic in the markets continued during the weekend as S&P downgraded the perfect rank of the US. Asian markets reacted aggressively and Wall Street will probably follow them and drag the financial markets to its roller coaster. Analyzing the supporting & resisting levels of the stocks’ indices will be pointless in this stage, since the technical analysis does not have much of weight in these situations. However, experienced traders can make a lot of money due to the extreme volatility of the markets. Inexperienced traders might get too stressful and make wrong decisions. Therefore, if you cannot handle this extraordinary situation, you should just watch the monitors and try to learn for the next time.


The Euro reached on Friday to the area of the supporting 200 SMA and started correcting there. It is hard to predict the direction of the USD after the downgrade, since it will be influenced by contrasting forces. The interest rate and the FOMC statement on Tuesday will be attractive than usual, as the financial markets will wait for the words that will come out of Bernanke’s mouth. If the Euro continues rising, it will have a resistance at 1.43 on the way to 1.45. However, a powerful movement of the USD and a break-down of the 200 SMA at 1.40 might take it to 1.38-1.385.


The British pound is keeping its strength in spite of the strengthening of the US dollar. Besides the downgrade that will impact all of the currencies, that pound will be also influenced by the manufacturing data on Tuesday and by the inflation report on Wednesday.

A break-up pattern appears in the daily chart, which looks like the inverted “Head & Shoulders” or the “Cup & Handle” patterns. The names are meaningless, but the idea behind them is that the buyers are pressuring the price up, and increase the chances for a strong break-up that might hit the pick at 1.6750. The GBP is supported by the 50 EMA at 1.622 and a break-down there would be a negative signal for the pound.


The gold is acting as we expected it to act in the storming markets. Investors like to feel that they are buying something real and therefore they look for commodities. However, the Gold is not safer than any other instrument and it might decline as well. The current support is at 1640$/oz, and a break-down can slide to 1600 $/oz. If the gold continues rising and strongly breaks-through 1670$/oz, it might set a new high at 1700$/oz.