In testifying before the Senate Budget Committee, Ben Bernanke, Chairman of America's Federal Reserve Bank, hinted strongly that further rate cuts would be necessary to stabilize the US economy. Last week, the Forex Blog covered an editorial which suggested that Bernanke knew something about the state of the economy that the American public did not, which his testimony seemed to confirm. Bernanke testified that the Fed is also committed to fighting inflation, but the emphasis was clearly on spurring economic growth. As a result, futures markets are pricing in a rate cut of 50 basis points, projected for the next month. The forex markets were unambiguous about the implications of this development for the Dollar.
Fed cutting rates doesn't mean USD will recover in near term. But the long term effect of it will benefits those carry pairs that rely much on overnight interest rate earnings, it will benefit those hedging correlated pairs, trading strategies that are sensitive to stock prices and yields. Cutting rates will present some nice long term opportunities. I'm not saying that global crisis is over, but it is looking like daylight may be ahead.
Bernanke Hints Rate Cuts
EUR/CHF 1.21.08 Analysis
EUR/CHF 1h chart. After a steep drop early last week, it stays in a consolidation for 3 days, ranging within 1.6196 and 1.6083. And finally broke to the downside just before the market close last friday.
Double top is formed. EMAs pointing down suggesting a continues bear.
A bigger double top formation formed. All indicators are at oversold territory, but still has room for the down side. I'm expecting it to test the 1.6033 first then reached the psychological level of 1.600 on or before the fed rate announcement on January 30. Wait for the confirmation of a reverse on the dailies before placing a buy hedge.
www.truenorthfx.com
USD Draws Support from Abroad
2008 is still in its infancy, which means the self-proclaimed forex experts can be excused for offering their projections on what the year has in store for the Dollar.
If currencies were traded in a vaccum, the Dollar would probably trend upward, since many technical factors suggest it is oversold. From a fundamental standpoint, however, it is probably overvalued, per the laws of interest rate parity and purchasing power parity.
Relative to other countries, though, it may be undervalued. From this standpoint, argue some analysts, the biggest impetus for a Dollar upswing will come not from good news emanating from the US, but rather from bad news emanating from the rest of the world. For example, the British economy, balance of trade, and monetary policy outlook is even more bleak than the US. The CEO of Airbus, one of the EU's most important companies, has threatened to shift production away from the EU if the Euro remains expensive. Finally, the Central Bank of China is allowing the Yuan to appreciate at a faster pace against the Dollar. As far as Dollar bulls are concerned, it might be best if the US government simply sits tight.
Read more on BBC.
I'm expecting the US dollar to drop more, down to 1.5 against the Euro before a recovery up to 1.4 or 1.3 by year end.
On the eur/chf side. after a small rebound, it dropped below the lower trendline before the market close last friday. Maybe due to the war tension building between US and Iran. Bullish is off for a meantime for the carrys, probably will plunge same number of pips from the neck to the head of previous swing up, unless we hear some good news from US. Again, I might be wrong...
1.9.08 EUR/CHF Analysis
From my last report, EURCHF bounced off the lower trendline as expected. Supported by the news announcement the US will soon cut their tax rate, and a possible 50 basis point cut on interest rate next meeting, which help the carrys make a nice rebounds after last friday slump.
The above chart is EURCHF dailies at 1.6400. I'm expecting it to touch the upper trendline or at least in the middle of the last swing down in the a couple of days to come. Breaking of the upper trendline will confirmed a bull trend, which is good for truenorthfx hedge. While a bad news can pull the price down to at least 1.6200 or even lower.
1.4.08 EUR/CHF Analysis
EUR/CHF Daily Chart
A side by side double top that I missed. Dragging the price down to the lower trendline. Stoch & CCI both are oversold but ADX showing strong bearish volume. Are we gonna see a reversal here?
If it bounced, expect price to touch the upper trendline. If it broke below, expect target or reversal at 1.6218. 2nd target or reversal point is at the round number 1.6000.
The above chart is a daily chart for long term view. Don't expect to see price reached targets in a single day trade.
EUR/CHF Up or Down?
Will EURCHF trend up or down next week? Fundamental views is up while the daily chart shows mixed signal.
EUR/CHF 12.21 Analysis
Zooming in to the 1h chart, EURCHF caught in a range within a channel. Break of the lower channel will test the previous strong support at 1.6550, thats the 61.8 fib of the 12/05/07 low to 12/14/07 hi swing. Breaking the upper channel will test the major trendline I mentioned on my earlier post.
Right now, 1h and 4h are in bear bias with 72EMA so flat showing to clear direction. Daily chart showing a possible bull forming, but Stoch and CCI curved up at the middle of OB & OS, which makes me hesitate to conclude a bull. 1h to daily ADX shows no (low) momentum since monday. I will still stay aside while holding some drawdown positions.
This next analysis has nothing to do with true north hedge trade. Just pointing out how to use the template I sent out to our members. 
NZDUSD dailies is also within a uptrend channel. Stoch & CCI about to crossed up. Price having a hard time breaking the lower channel. If broke, target would be the 50% fib (.7290). Enter at 0.7420 confirmation, set SL at the lower channel.
However, if price bounced from the lower channel. Set entry at 0.7640 with TP at the upper channel, SL at 0.7420. This is a long term trade which moght take days to reach the target. Trade it at your own risk. Not recommended to included this trade with your hedge trade account.
EUR/CHF 12.18 Analysis
EURCHF daily chart- It broke the (minor) support trendline yesterday with great volume suggesting a bearish trend formed.
Price now at 1.6550, 50% fib of Oct. 29 high to Nov. 23 low. Confluence with the 72EMA (purple line). I think price will bounce a bit from here before go down further.
Game Plan: If it make a upward correction today, and your positions reached breakeven, close it. Stay away from the market 'til the upper trendline (orange line) on the daily chart is broke. Lower trendline is a good level to start a long hedge, if you still have enough margin left to risk. But before that, watch out on 1.6500 to 1.6450 level, another minor support level before the lower trendline.
EUR/CHF 12.11 Analysis
Short term (Intraday)
Now at 1.6595. EUR/CHF broke 1,6575 resistance. EUR/CHF is in an uptrend supported by daily chart's indicators. The volatility is high. 72EMA 1H, 4H are in a bullish configuration. 1H, 4H, dailies Stochastic indicate a bullish pressure on EUR/CHF.
The uptrend should continue to gather momentum. Wait for a minor retrace on 1h chart before entering a long hedge. Use True North Hedge Calculator to determine the number of lots to buy on EUR/USD and USD/CHF pairs,
Weekend EUR/CHF
On my previous post. I stated that EUR/CHF pair should continues its bear trend once price on 4h chart closed below the 74.6% Fibo of its major swing up at around 1.6330.
I have to make a correction there. Since the Fibonacci we are looking at is from a major swing, it is appropriate to check the price action at a bigger time frame.
Price did closed below that level on 4h chart, but on the daily chart... it didn't. The last candle/bar on the dailies ended with a pin bar. If on monday, the closing bar is higher than last friday's closing price. The pin bar will be confirmed.
However, I also placed a sell stop order 5 pips below friday's low. This is to safeguard if ever EUR/CHF continues to drop on Monday.
On friday, the fundamental standpoint supports the further carrys unwinding view. However, just yesterday I heard Brazil central bank start to intervene by purchasing massive quantities of Dollar-denominated assets in the open market. Canada and Japan are at risk, hope they follow suit.
11.14 Analysis
EUR/CHF
1,6439. EUR CHF is in an downtrend directed by 1H exponential moving averages. It is in a consolidation after the last bearish movement. The volatility is low. Bollinger bands are flat. 4H Trend Indicator is in a bearish configuration. 4H Stochastic crosses and gives a positive signal. The price should continue to consolidate. The price should find a resistance below 1,6470. If the resistance is broken then the target will be 1,6550.
Resistances
1,6450 - 1,6470 - 1,6500
Supports
1,6420 - 1,6380
EUR/USD
1,4611. EUR USD is in an uptrend supported by 4H exponential moving averages. EUR USD is in a range between 1,4510 and 1,4750. The volatility is high. Oscillators are neutral. The price should continue to consolidate. I won't take a position.
Resistances
1,4630 - 1,4730
Supports
1,4570 - 1,4520
EUR/CHF, EUR/USD & GBP/USD Analysis for Monday
EUR/CHF- Might find a way to touch 61.8 fib of the previous up swing. 1.6422 to 1.6400 before a possible nice rebound.
Resistances
1,6505 - 1,6560
Supports
1,6470 - 1,6450
EUR/USD- Just bounce off a major trendline. an uptrend supported by 1hr Stoch and CCI. The volatility is high. A parallel channel can be drawn to form a trend. My trend indicator 4hr and daily is in a bullish configuration. The price should continue to consolidate with bias to the upside. The price might continue to move in 1,4660 - 1,4730 range. I won't take a position. The risk/reward ratio is too high to take a position.
Resistances
1,4730 - 1,4750
Supports
1,4670 - 1,4615
GBP/USD- Just fomed a pin bar 3hrs before the market close of last week. Trend bias is bull on higher TimeFrames. 1hr Stoch and CCI crossed significant levels up.
Trade suggestion: Open a long position as soon as the market open, set TP at 38.2 fib and 2nd TP at 50 fib of the last swing down. That's 2.0977 and 2.1009. SL at 2.0800. Adjust SL to breakeven if price passed 2.0940. Trail stop the 2nd position if you want. Trade at your own risk.
Best time to use the True North Hedge. Learn it HERE!
EUR/CHF Outcome
A few days back, I said it here that eur/chf has a greater chance to drop to the 50% or 68.1% fib of its last major swing up.
Here's the same chart I posted last Nov. 6:
And here is the outcome of that analysis. A perfect double top formation.
The graph shows big players are cutting their risk appetite to high yielders. A steep decline with great momentum can pull the price down to 68.1%. Break of 76.4% fib will curtail the bull.
Price is now at the 50% fib, might bounce off from here for awhile before continues its bearish trend. ..... I hope not.
So, traders who are using (long) inverse hedge strategy. If you are trading more than 20% risk, cut your losses by 50% and hold the rest. If it is less than 10% risk you're trading, Take a vacation! Come back in a week.
These are normal. It is the much needed correction after a long way up.
To know more about the inverse hedge, Click here.
EUR/CHF 11.8 Analysis
1,6595. EUR CHF is in an downtrend directed by 1hr 72EMA. The volatility is low. My trend incicators are in a bearish configuration. 1hr Double timeframed Stochastic indicate a bearish pressure on EUR CHF. The price should find a resistance below 1,6610. The downtrend should continue to gather momentum. The target is expected at 1,6550.
Resistances
1,6610 - 1,6640
Supports
1,6570 - 1,6550
11.6 EUR/CHF Short Term Analysis
This is a continuation of my post below. Short term analysis of EUR/CHF trend.
EUR/CHF 1hr chart:
Price just bounce off the neckline of the double top on daily chart. It might play around the channel (2 yellow lines) for awhile.
Slow but consistent profit, learn it HERE!
Carry Trade Restrain from Bear Stearns Woes
Source: Bloomberg
By: Agnes Lovasz and David McIntyre
July 18 (Bloomberg) -- The yen rose as losses on Bear Stearns Cos. hedge funds prompted investors to reduce purchases of financial assets funded by borrowing in Japan.
The Japanese yen advanced against 15 of the 16 most-actively traded currencies as investors scaled back so-called carry trades. The dollar touched a record low against the euro earlier after Bear Stearns told investors in two of its hedge funds they will get little if any money back after losses related to U.S. subprime mortgages.
``Risk appetite is starting to pull back and the potential is that it starts to hurt the carry trade,'' said Ian Stannard, a currency strategist at BNP Paribas SA in London. ``That's positive for the yen.''
Against the dollar, the yen climbed to 122.13 as of 7:19 a.m. New York, from 122.34 late yesterday. It also gained versus the euro, to 168.35 from 168.59. The dollar declined to an all- time low of $1.3833 per euro from $1.3781 in New York yesterday, and last traded at $1.3785.
The yen recovered from a 21-year low versus the New Zealand dollar to trade at 96.58 from 96.63. It rebounded from a 15-year trough against the pound to 250.28 from 250.40 late yesterday.
Investors have favored New Zealand and the U.K. for carry trades because the two countries have interest rates as much as 7.5 percentage points higher than Japan's 0.5 percent rate, the lowest among industrialized countries.
Dollar Declines
The dollar fell to a 26-year low of $2.0548 per pound and weakened to 87.85 cents against the Australian dollar, the lowest since February 1989.
Defaults on loans by homeowners with poor credit histories have deepened a housing market slump that threatens to curb U.S. economic growth. Data later today will show U.S. builders broke ground at an annual pace of 1.45 million new homes last month, down from a 1.474 million rate in May, a Bloomberg survey showed.
Financial industry losses caused by subprime mortgage defaults and the housing slowdown may be addressed by Federal Reserve Chairman Ben S. Bernanke at his two-day semi-annual testimony to Congress starting at 10 a.m. in Washington
A Fed trade-weighted index measuring the dollar's foreign- exchange value fell this week to the lowest since its inception in 1971. The U.S. Trade Weighted Major Currency Index, measuring the currency's performance versus seven currencies, fell to a record low of 77.24 on July 16 and was at 77.29 yesterday.
``Breaking through those levels marks a new stage of the weak dollar trend,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities. ``The dollar's depreciation may accelerate.''
Euro May Stall
The euro's gains against the dollar may stall, according to charts traders use to predict future price movements.
The 14-day relative strength index against the dollar was 75.19 today. The index has been above 70, a level which signals the currency is overbought and may be due for a reversal, for a seventh session.
The common European currency faces resistance at $1.3816 and $1.3886, where sell orders are clustered, said Sundararajan Srinivasa, a technical analyst at Lehman Brothers Holdings Inc. in London, in a note to clients.
Any yen gains may be limited by speculation the Bank of Japan will delay raising interest rates while it gauges the impact of subprime loan defaults. The U.S. is Japan's largest export market.
Some BOJ board members said it's necessary to watch the U.S. housing market, according to minutes of the June meeting released today. While some officials said consumer prices excluding fresh food will rise in the long term, others said lower oil prices will exercise ``stronger downward pressure'' on core prices, the minutes showed.
The central bank's board voted unanimously to keep rates unchanged at that meeting. The BOJ decided 8-1 to keep policy on hold on July 12.
``The market has priced in a rate increase in August, but the BOJ may not move until September,'' said Kengo Suzuki, a currency strategist at Shinko Securities Co. in Tokyo.
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I'm still waiting on the sideline. Only 1 set of buy hedge opened that is near breakeven. EUR/CHF is at overbought zone on 1h chart, back to the previous lower channel support turned resistance. 4h chart indicators pointing up, might still have some room for the upside before making a correction down. Long term or the daily chart is still bear bias.
If you look closer to EUR/CHF 4h chart, you might see a semi-declining channel forming, and price is at the top channel.
