Monday, August 22, 2011

Weekly Technical Analysis - August 22-26, 2011

Another crazy week in the markets has ended. US stocks dived sharply, as NASDAQ led the plunging with 6% off. The crashes came on the second part of the week, after what seemed to be as a positive opening. The fear and uncertainty in the markets are increasing everyday and many investors run to instruments that are considered as stable, such as the Swiss Franc, Japanese Yen, Gold and US government bonds (despite the downgrade).

Indices closed Friday on the bottom of the day above the support in the daily charts, which were made two weeks ago. It is hard to tell, at this point, where they are heading, and though a correction-up is necessary – it will be a gamble to count on it. NASDAQ will deal with the support at 2000 points, and we might see it at 1900 points if it keeps on crashing so aggressively. The S&P 500 has supports at 1100 & 1050 points.


The USD made a powerful correction against the CHF during the past two weeks, but a strong resistance blocked it. Investors will look forward for Friday and the KOF Economic Barometer which contains 12 indicators regarding the condition of the Swiss economy.

We estimated last week that the current levels are possible for reversing and the pattern in the daily chart fits that estimation. The 20 EMA is supporting around 0.78, and a strong break-up can slide to 0.755 and below. The high that was set at 0.80 is an important resistance that the USD will have to get through in order to rise.


The GBP made the expected bullish movement as we expected, but could not handle the strong momentum of the USD against most of the currencies. Eventually, Friday's candlestick ended with a long shadow that indicates for the strength of the sellers. Declines usually occur after such a candlestick, and if the GBP goes under Friday's low, the correction down will likely to happen. In that case, the pound might correct up to 50% of the recent risings, around the 20 EMA at 1.64. Keep updated with British GDP data on Friday.


The weakness of the GBP and the possible strengthening of the CHF, increase the probability for declines of the GBP/CHF. In fact, the pattern in the daily chart of this pair is similar to otherCHF pairs. A strong correction-up occurred here as well, and it was influenced by the strength of the GBP and the weakness of the CHF. Therefore, this correction was more aggressive. Friday was closed on the support of 1.29, and a break-up can slide to 1.25 and below. However, if the GBP crosses above 1.2 it will be a positive signal for it and a negative for the Swiss currency.