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Daily Spot: Currencies – If, Then… Market Timing

Daily Spot: Currencies

By Rod David | November 29, 2010 - 7:48 pm

A weekly summary of one complex, including daily updates of other developments elsewhere.

Dollar Basket Dec (DXZ) Monday was the first day since Friday fulfilled the pattern’s 80.50 target. The second consecutive gap up to new highs is stretching the rubber band tightly.

It should be noted that the potential for a bottom was discussed for several weeks as price ranged sideways. The recovery of 76.65‘s test for 77.00‘s recovery to trigger the rally has already lasted almost four weeks. This rally is not new, despite it being recognized only recently.

So long as 80.70 holds as support, the rally remains intact and next targeting 82.35 and 83.00. Otherwise, a correction back down to the 78.50 area would be likely.

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Gold Feb (GCG) Still testing the lower-end of 1367.00-1374.00 (1365-1372 basis Dec). There’s potential to fill the gap back up to 1374.00, but its not required before resuming the decline. A close above 1374.00 would not necessarily trigger a rally leg.

30-year Treasury Mar (USH) The bounce limit’s room to 126’18 (128’00 basis Dec) was fully tested Monday. The session closed while in the process of testing it. Its immediate rejection is needed to resume the decline next targeting a test of 124’18 (126’00 basis Dec). And having delayed 124’18‘s test makes it likely to break lower instead of holding. Otherwise, not resuming the decline at Tuesday’s open would extend the bounce to test 129’16.

Crude Oil Jan (CLF) Monday’s gap up corrected early and filled the gap back down to Friday’s close. The opening gap attracted price back up with plenty of time to extend higher, which it did. Almost any weakness at this stage would be credible for extending down sharply, provided that the weakness comes intraday and not from gapping down.

Natural Gas Dec (NGZ) Monday’s gap up was suspicious since Fridays usually repeat and this was not Friday’s action. In fact, the session soon reversed down and extended sharply lower. The earlier that Tuesday can recover 4.31, the likelier that Monday’s sell-off was only a correction. The rally need not extend higher immediately from there – it is only important to quickly reject most of Monday’s drop.

Share your questions and comments on this post in the blog, or in the chartroom…Daily Spot coverage schedule is: Currencies (Mon), Metals (Tue), Energies (Wed), Rates (Thu), Softs (Fri, coming).

Posted in Daily Spot