Directional Bias:
Nearer Term –Bearish
Short Term –Bearish
Medium Term –Bearish

Weekly Range:
High -1.3298
Low -1.2330

Eur/Usd Loss of momentum at the 1.3298 level leaves euro aiming for a recapture of its YTD low

TheLFB Nov 03 08 EuroAlthough a first weekly higher close occurred the past week since EUR tumbled off its Sept 22’08 high at 1.4867 to hit a low of 1.2330 on Oct 28’08,that strength waned Thursday and Friday ahead of the 1.3259 level(Oct 10’08 low) pushing the pair to as low as 1.2668. This is coming on the back of a failure at 1.3298 and subsequent hammer candle pattern (top reversal signal) formation. We maintain that the pair’s corrective recovery started at the 1.2330 level has halted and opened up downside weakness back towards its YTD low at 1.2330. A clearance of the latter is now envisaged to trigger its medium term decline towards the 1.2134 level, its .50 Ret (its 0.8231-1.6038 high, monthly chart) followed by the 1.1827 level, its Mar’06 low and then its Nov’05 low at 1.1640.Longer term charts remain supportive of this view.

Resistance levels are located at the 1.2728 level, its Oct 22’08 low and the 1.3005/58 area, its Oct 23’08 high/.618 Ret (0.8231-1.6038 rally, monthly chart) with a break through there targeting the 1.3259/98 level, its Oct 10’08 low/Oct 30’08 high. On the whole, having reversed its corrective recovery off the 1.2330 level, risk of a decline retargeting that level and beyond is now expected.

The dollar made a powerful start to the new week on a lot of the major pairs, albeit that most of it came via gaps in prices. Usd/Cad made an unexpected move higher as the market initially signaled for possible lower prices in this week, after we saw the triangle structure in the past week. The reasons are probably in the U.S. Rescue plan, which should have a high impact on the dollar strength in the future, either way. Investors are slowly looking to build up their confidence in the dollar, some because of need, other out of speculative interest, especially after sentences like this one from the Nancy Pelosi, the speaker of the House: “This is not a Bail-out of the Wall Street it’s a Buy-in for taxpayers to rescue the economy.” If this is true, and the markets buy into it then we can expect a stronger dollar in this and the next few weeks, which could mean for the Eur/Usd to new yearly lows. If the markets reject it, and they might, the dollar may be looking at having a hard time against the yen and the swissy. Time will tell, and in the 24 hour forex world it seems that time is a resource that many are not prepared to wait for, but these are patient times.
Today’s Charts

EUR/USD

Prices broke through a very important support line on the euro chart, which could have an impact on the euro over the next few days, either as a test of resistance or reversal point. Traders noticed a breakout point exactly at 1.4400 which could be the first resistance if the pullback appears. The support zone with the possible next target at 61.8% retracement level of the red wave B may be next. Elliott wave traders are currently searching for the bottom of wave iii which is probably in process right now. Traders that missed this short opportunity in wave iii should stay aside now, and wait for a pullback near to the trend line for the possible bounce lower in the future, as the support line should now be reacting as the resistance for new lows in a long-dollar environment. They will also need oil going under $100 a barrel and holding there, equities pushing higher and forcing Treasury yields up, and the ‘Bail-out/Buy-in’ being accepted. Tough fundamental call there, but it is technically ready it would seem if the dollar finds buyers in quick time.

USD/CHF

On Friday the Usd/Chf came onto the radar with a possible move lower, but the pair bounced higher from the support area around 1.0660 on Sep 22 08. After todays move above 1.1000 on the swissy we have moved to the swissy daily chart. The current price structure is signaling for higher prices in the next weeks, especially if we are right with this double zig-zag correction which could currently be developing in the huge blue wave 4. The markets also hit and bounced higher from the daily RSI trend line support, which could be the important signal for a possible “over-bought” area in the future. If the Bailout rescue package ‘works’, then traders can certainly expect that move.

Report written by TheLFB Trade Team, LFB Services, LLC.

U.S. New Home Sales is a leading economic indicator used to measure the annual number of new single-family homes that were sold during the previous month. While this is a monthly figure, it is reported in an annualized format. This report predominantly helps to validate trends seen in other forward-looking housing indicators, such as the Existing Home Sales.

If the Survey Comes Inline with Market Forecasts

Expectations for this month are suggesting that the U.S. New Home Sales will reach 510K in August, reflecting a 5K decrease since July. Such a result could demonstrate a shrinking housing sector in the U.S., which has been one of the U.S. economy’s greatest concerns. It is widely known that this crisis was initiated as a result of the non-covered mortgages that dropped mortgage banks one by one, and have just recently taken the 160-year-old Lehman Brothers bank to the point of filing for bankruptcy protection. A decreasing figure will most likely be interpreted by investors as yet more proof that the American people are avoiding buying new homes, and that the mortgage banks are reluctant to offer mortgages as freely as they used to. Such a scenario will probably extend the greenback’s bearish movement, and the EUR/USD might rise to test the 1.4800 level.

If the Survey Will Surprise With Bullishness

When the actual figure is higher than forecasted, traders are likely to see the USD appreciate against its currency pairs and crosses. The radical trading week we have just experienced, which included an extremely volatile trading session, concluded with significant weakness for the USD. Investors are now following the opportunity to make profits out of their open positions on the USD, and a better-than-expected figure on the New Home Sales survey, such as 540K will possibly provide them that exact opportunity. Such a figure is good because it will ease global market concerns regarding an expanding mortgage crisis. U.S. citizens feeling confident enough to purchase new homes is the best news that the American leadership can hope for, and the USD will rise in accordance. In this turn of events, the EUR/USD might correct itself down to reach as low as the 1.4400 level.

EUR-USD

Monthly charts are bearish, weekly charts are bearish, on daily charts we are still bearish. Recent upward correction stopped majority of orders out with a decent profit from the last week. This time we’ll be looking at aggressive sell around 1.4450 with a stop above 1.4610.

GBP-USD

On Friday I was stopped out with a good profit.

Now, while monthly we are bearish, weekly charts call for a move up and so do daily charts, which already gave a strong upward bar.
If to look at 4 hour chart, you’ll see that trading session ended with a price hitting previous resistance level, making symmetrical tops. RSI and Stochastic are overbought. I’ll be selling aggressively with a tight stop of 20-30 pips looking to capture some pips if it bounces back down. S/L then will be trailed tightly with each new bar. With such a small risk It is almost a free trade.

But those who don’t like any risks should stay out, because mainly I’ll be anticipating a move up now with further opportunities to buy, unless of course situation changes.
Position: jump in and Sell as soon as session is open risk no more than 30 pips.
Otherwise keep out.

AUD-USD

My aggressive entry ended with a loss, and still weekly bar is battling at 200 SMA level. Well, this time no more aggression, I’ll be waiting for the market to give me further clues.

Truly yours,
Practical Trader