DailyFX Analysts Scour Markets For Setups After Volatile Open To The Week

Daily Forex Technicals | Written by DailyFX | Oct 27 08 15:14 GMT |

It was another dramatic open to a new trading week; but this time around, gaps were replaced with a record breaking ranges that revealed sharp reversals in both directions for nearly ever pair. Is this an exhaustion move or merely a catalyst for the next extension of maturing trends? Read on to see what the DailyFX Analysts think and what pairs they are looking for set ups from. Currency Strategist - John Kicklighter My picks: Pending USDCHF Breakout Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week It is difficult to find any pairs that are abiding by the normal laws of fundamentals and technicals in current market conditions. With the volatile open to the week, the congestion that was borne from the calm of last week was subsequently broken. At the same time, the massive ranges and back-and-forth price action hasn't necessarily supported the revival of already-extended trends. Looking for a sense of normalcy - and therefore an opportunity to setup for a trade that has yet to unfold - I have been monitoring USDCHF for some time. Though holding a pretty consistent rally since taking off on a bull run in July, the advance has been relatively constrained lately just when fears over a global recession and ongoing credit crisis have hit a new gear. This buffer is partially due to the fact that both the US dollar and Swiss franc are considered safe haven currencies. However, through the back and forth, we have seen that the dollar is finding greater interest in terms of liquidity and now as a carry currency. What's more, given the presence of a Fed rate decision and 3Q GDP numbers from the US docket his week, we may finally get some event risk to spark a breakout from this pair. Technically, this pair is at a crossroads for trends. A major six-year falling trendline (beginning in September of 2002) is being tested by recent highs around 1.1750 and is further backed by the 38.2% retracement from the range of the same period up at 1.18. Shorter-term however, the momentum behind the bullish advance is apparent with a clear rising trend arising from the September 22nd swing low. With support now seen around the 1.1480/90 pivot level, our key levels are clearly defined. Optimally, a higher time frame close above or below these levels would be best to confirm a breakout; but considering the levels of volatility recently, a price target may be more realistic. Currency Analyst - David Rodriguez My picks: Short-term GBP/USD long Expertise: System Trading Average Time Frame of Trades: 2-10 weeks After a week away from trading, I'm really trying hard to find good opportunities in currently unbelievable market conditions. I'm so unwilling to sell dollars that I think it's an ideal time to do so. If everyone is unwilling to sell dollars, it means that they must either 1. be already long or 2. will not trade through current market conditions. We see that in the Speculative Sentiment Index, which shows that traders are heavily net-short the GBP/USD, with short positions outnumbering longs by 1.5 to 1. I'm willing to take a contrarian position according to the SSI and my own unwillingness to buy dollars. I'll buy now at market (1.5448), setting a stop below previous spike-lows of 1.5265. Currency Analyst - John Rivera My picks: EURUSD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 4-8 Days I must maintain a bearish outlook for the EURUSD as troubles in the European emerging markets countries continues and German banks remain at risk for further failures. Germany and the upstart Eastern European countries have been responsible for the majority of the growth in the region before the current downturn. As they begin to falter the concerns of a deeper than previously expected recession grow. This should remain a weighing factor on the Euro and if the ECB shows signs of embarking on an extended easing policy then parity could be insight for the pair. The next level of support is 1.2132 the 50.0% Fibo level of the0.8232-1.6057. Currency Analyst - David Song My picks: Pending Short CHF/JPY Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days Fading demands for carry trades paired with increased fears of a global recession continues to favor the Japanese yen, and has pushed the CHFJPY to its lowest level since 2004. After trading within narrow range between 86.50 and 91.25, the pair broke below the stated level to hold near 80.25. The huge downturn in the pair has triggered an oversold RSI signal, which suggests that a near-term retrace could be in the works. I anticipate the pair to bounce higher over the next day or so to retest the 85.00 level, and if the pair fails to move above this level, a short CHFJPY trade will be favorable. Over the next few days, I project increased selling pressures to drag the pair lower, and we may see the swissie-yen move towards the 3/7/02 low of 75.74 by the end of the trading week. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. 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