Asian Open / European Preview
11.08.2011 10:49 PM EDT
Good morning traders! It was a Risk On day in the markets and USDX ended the day lower. Equities, Oil and Gold were the best performers on the day whereas commodity currencies heavily underperformed ending the day with small gains. We mentioned yesterday that we expect at least 1 more leg down in Risk after some more USDX weakness. It appears USDX has now entered final leg of the correction. We think 76.20 area will hold on a closing basis at least and USDX should get strong again in a C wave (at minimum). Please bear in mind that we are proposing the moderately bullish scenario in USDX. If the next leg up in USDX extends beyond C = A target, we wil then consider alternatives. We are proposing a W-X-Y correction in EURUSD from 1.3607 where w.W ended @ 1.3827 and w.X (triangle) @ 1.3723. As mentioned yesterday our strategy remains to sell strength into 1.3920-1.3950 area for C leg down toward 1.3400 – 1.3500. Cable (GBPUSD) correction appears to be complete or close to completing w.C down should start soon with a minimum target of 1.5880. Please remember that Cable is known for notorious corrections so don’t be surprised to see another day or 2 of choppy range trading before w.C down starts. AUD has been the weakest among the group of commodity currencies and could only manage a very weak rally at the end of the day despite strong rally in SPX500. Structure wise, there is no change from yesterday and both counts are still possible, a bearish B wave triangle or a double zig-zag correction to 1.0477 area (50% fib) before lower in w.C. Same can be said for USDCAD. Gold has been trading higher just like we proposed and as per the count that we are proposing, we believe Gold needs 2 more highs above 1802 to complete a 3 wave move (wave Y) from 1680. Our ideal target is 1825-31 area (C = A @ 76.4 fib). Oil keeps on extending its gains, it appears to be in a rising wedge (ending diagonal) structure. Oil looks toppish near term but could still see 98.00 after a pull back before we get a more significant downside reaction. SPX500 count is also working well, but we do not recommend going long at current levels as we see a cycle in SPX500 and risk in general coming to an end and we think the next move down (though short lived) could be fast and aggressive. Once again, remember patience and discipline is the key to success. It’s very easy for a trader to get frustrated during such choppy market conditions but remember it’s only a matter of time before the correction ends and markert starts trending again. So be prepared to catch that next trend move and don’t waste your energy and money trying to catch every single swing in the correction. Good Luck!