Currency Trading at www.Elite-Trading-Corp.com

Written by Ilya Spivak, Currency Analyst
The Euro may extend recent losses in European trading hours as Germany’s unemployment rate rises to 8.4% in July, the highest since November 2007, as the Euro Zone’s largest economy sheds 43,000 jobs. Euro Zone Economic Confidence is also on tap.
Key Overnight Developments
• Japan’s Industrial [...]

•??? British Pound Plunges as UK Industrial Output Unexpectedly Contracts •??? Swiss Franc Remains Range-Bound vs. Euro, SNB Intervention Risk Looms •??? Australian Dollar Down with Carry Trades, RBA Signals Potential for Further Rate Cuts •??? Canadian Dollar Drops Despite Jump in Canadian Ivey PMI, Building Permits US Dollar, Japanese Yen Surge as DJIA, S&P 500 Tumble to Key Levels - G8 Summit Adds to Event Risk The US dollar and Japanese yen both saw extremely choppy price action, and ultimately ended the day up against the majors as risk aversion drove FX carry trades and equities lower. However, where the S&P 500 and DJIA closed leave very mixed signals, as daily charts of both indices show head and shoulders patterns, but the former ended the day just above its neckline of 880, while the latter made a bearish break below its neckline at 8260.

Forex options markets suggest that the US Dollar may continue to rally against the Euro, British Pound, Australian Dollar and New Zealand dollar. Yet an overall downtrend in forex market volatility expectations warns that key currency pairs could remain stuck in medium-term trading ranges. It will be critical to watch for signs of breakout in major US Dollar exchange rates

The AUDUSD and NZDUSD present the clearest patterns. Both pairs have declined in 5 waves and rallied in 3 from their June 30th highs. The implications are US dollar bullish. Euro / US Dollar A triangle remains possible from above 1.4300, as does a flat (price would come under 1.3750). It is also possible that a significant top is in place above 1.4300.? Near term structure is bearish against 1.4203.? Short term Fibonacci resistance is at 1.4100. British Pound / US Dollar The drop below 1.6231 favors additional weakness below 1.5800. The rally from 1.5800 counts best as a 3 wave rally and 3 wave rallies occur in B or X wave positions, diagonals, and triangles. All of these are possible right now. The B or X wave interpretation seems most probable given the bearish EURUSD implications. Australian Dollar / US Dollar I wrote yesterday that “the decline from .8162 is an impulse (5 waves), which suggests that the larger decline has turned down.” As expected, a 3 wave advance has succeeded the 5 wave decline from .8162. Fibonacci resistance extends to .8050. A top and reversal is expected before .8162.

The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over a specific number of weeks (either 52 or 13).? A reading close to 0 suggests that a bottom is forming and a reading close to 100 suggests that a top is forming.? The readings are for the actual currency, not the currency pair.? For example, a reading of 100 on the Canadian Dollar suggests that the Canadian Dollar is close to a top (USDCAD close to a bottom). ??? Readings of 95 and higher as well as 5 and lower are in boldfaced red type to indicate potential market extremes.? For example, an increasing index is bullish until the index is extreme (near 100), at which time the risk of a reversal or pause in the trend increases.???? ? US Dollar US Dollar Index: The 13 week index has increased from 0, which indicates a bearish sentiment extreme.? Sentiment extremes occur near bottoms so expect a bottom and reversal in the USD. Implications: bottoming ? Euro EUR : The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme.? Tops tend to occur in close proximity to readings of 100.

Once again, we are starting the week with the sense that risk appetite could face a momentous shift; yet once again, the elements for a breakout are already falling apart. In the meantime, we have seen many pairs produce false breakouts (EURJPY for example) to invalidate clear range scenarios. Why Would GBPAUD Hold a Range

- EURUSD bearish below 1.4030 - GBPUSD may test 1.5800 - AUDUSD and NZDUSD bearish short term patterns Euro / US Dollar The EURUSD pattern may be clearing up (fingers crossed).? I wrote Thursday that “it is still possible that the rally from 1.3750 is unfolding as a diagonal.? Staying above 1.4000 keeps this count valid.? However, there are numerous bearish counts that would result in price dropping below 1.3750 (one shown above).? Coming below 1.4000 would favor the downside.”? While a triangle is possible from above 1.4300, so too is a flat (price would come under 1.3750).? It is also possible that a significant top is in place above 1.4300.? Near term structure is bearish against 1.4030. British Pound / US Dollar The drop below 1.6231 favors additional weakness below 1.5800.? The rally from 1.5800 counts best as a 3 wave rally and 3 wave rallies occur in B or X wave positions, diagonals, and triangles.? All of these are possible right now.? The B or X wave interpretation seems most probable given the EURUSD decline below 1.4000.?? Australian Dollar / US Dollar The decline from .8162 is an impulse (5 waves), which suggests that the larger decline has turned down.? There is potential resistance at the former 4th extreme above .8000.? New Zealand Dollar / US Dollar The short term NZDUSD pattern is the same as the short term EURUSD pattern.? The decline from .6555 is in 5 waves and 5 wave movements occur in the direction of the larger trend.? Initial resistance is at .6350 (former 4th wave extreme). US Dollar / Japanese Yen The triangle continues to play out but there is an alternate bearish count in which the drop from 101.50 is a series of 1st and 2nd waves.? 93.50 defines the trend (above is bullish and below is bearish).? There is little else to say about the USDJPY at this point.? One can not force analysis upon choppy, unclear market structure.? Sometimes (this is that time), the correct decision is to do nothing and await clarity

Consumer confidence in the U.K. is expected to improve for the third consecutive month in June, with economists forecasting the Nationwide index to increase to 55 from 53 in May, and the data is likely to encourage an improved outlook for the region as policymakers expect an economic recovery later this year. Trading the News: U.K

Fundamental Headlines • China’s Exports Signal Recovery – Wall Street Journal • EU Finance Minister Aim To Cut Risk – Wall Street Journal • Judge approves plan to sell GM assets – Financial Times • Earnings Drop Worldwide as Job Losses Hurt Consumers – Bloomberg • Biggest VIX Drop Hides Options Bets S&P 500 Will Fall Hiring – Bloomberg EURUSD – The European Sentix investor confidence indicator unexpectedly fell to -31.3 from -27 as the outlook for a robust recovery has started to dim. Concerns are growing that the level of global unemployment will make any rebound formidable and the possibility of a double dip recession is still alive. The ECB left rates unchanged and failed to add to their quantitative easing measures, but left the door open for further easing.?? Discuss the topic and your trade ideas in the EUR/USD Forum.

•?US Dollar, Japanese Yen Mixed on Low-Volume Trading •?Swiss Franc Remains Range-Bound vs. Euro as Swiss CPI Signals Deflation •?Australian Dollar, Canadian Dollar Retrace Some of Thursday’s Losses - Commodity Dollars Face High Event Risk Next Week Euro, British Pound Lag as Euro-zone, UK Data Highlight Lingering Recession The euro and British pound were some of the weakest currencies on Friday as economic data added to evidence that the recessions plaguing the Euro-zone and UK have yet to truly let up