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

ECB Hold Rates

The European Central Bank (ECB) maintained its benchmark interest rate at 4.00% at its meeting this Thurday. The Bank of England is also expected to hold its lending rate in place, at 5.75%. While these two moves should be seen by Dollar bulls as acts of clemency, they are more akin to a stay of execution than to a commutation of its death sentence. The reasoning is that it is inevitable that the US-EU interest rate difference will be bridged over the next few months, as the Fed continues to lower rates while the ECB is in the process of hiking them. The only question is when. Accordingly, analysts will be paying close attention to the language employed by the heads of the various Central Banks at their next meetings to get a sense of timing.

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USD: Another Record Low

The beleaguered dollar continues to plumb new lows across the board, hitting 2.0904 against the sterling and 1.4570 versus the euro. Sentiment for the greenback remains heavily bearish despite recent US economic not pointing towards the worst-case scenario of an imminent recession.

The latest string of upbeat reports included Q3 GDP, a robust labor market as evident in the October non-farm payrolls and yesterday's stronger than expected non-manufacturing ISM - which suggests another 25-basis point Fed rate cut may not be forthcoming. Deterioration in the housing market and credit concerns continue to be the Achilles heel for the US currency as investor nervousness over banks' balance sheets remain heightened. Uncertainty about the extent of further write-offs stemming from the subprime debacle will likely plague the greenback over the quarter.

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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.

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11.6 EUR/CHF Analysis

This post is for those who are trading the True North Concepts and/or FreedomRocks Hedge.

Image below is a EUR/CHF "daily" chart. This might take days or a week to complete its formation.




- Double top is forming (1 & 2), which means a strong reverse down is about to happen if price break and closed below the neck line (orange line).

- Short & long term Stoch is pointing down.

- CCI just entered its oversold zone.

- ADX shows rising of bearish momentum and volume.

If price broke and "closed" below the neckline, we might see the price down to 1.6500 or 1.6425. That's 50% and 61.8% fibo of the previous swing up.

However, if it fell to break the neckline and bounce off the 32.8 and 72EMA (lavander line), we might see a continues uptrend. Pay attention to the 2 tops levels then, for it might form a flag (wedge) formation from there.

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Volatility Threatens Carry Trade

Advocates of the carry trade have long argued that the only thing that could possibly put an end to their fun would be a significant rise in Japanese interest rates, which seems quite unlikely at this point. However, a new threat to the carry trade has emerged: volatility. Global capital markets have see-sawed over the last few months as credit concerns have surfaced, often related to America's housing bubble. This month, the Australian Dollar and New Zealand Kiwi have been the two worst performers among the world's 17 most actively-traded currencies. This is notable because these two currencies are most likely to be on the long end of carry trades.

Bloomberg News reports:
"The currencies also slid against the U.S. dollar as Citigroup Inc. said it will report as much as $11 billion in additional writedowns, reducing demand for so-called carry trades".

source: Forex Blog

With all this noises coming out lately, I think we should go easy now with our inverse hedge positions.

Decline in the GBP May Hurt Carry Traders

by: John Jagerson (PFX)

Bad news in the UK is driving the GBP down in value against the other majors. However, the decline has temporarily stopped at the doji from Thursday's market action, which is encouraging that we may have seen the worst of it already. The movement is pressuring some of the more popular carry trading pairs but does not look like a runaway market yet.

The issues stem from a disappointing Industrial Production number. The actual results were a monthly decline of -0.5% and a year over year decline of -0.3%. What this means is that the UK's economy is showing more signs of slowing. This is an interesting information as we prepare for a monetary policy announcement from the UK later this week. Although I am still not expecting a change, traders may begin looking for one in the near term. This release is coming on the back of very disruptive news from Citibank last week that could contribute to a perceived change in the risk environment.

I am reading a lot this morning about this impacting carry traders, which really depends on your perspective. For example, if you are solely invested in a carry trade portfolio consisting of the GBP/JPY then it may be true. On the other hand, if you are invested in a diversified portfolio (including currencies like the AUD, NZD, SEK, JPY and CHF) of other crosses, offering strong interest rate differentials, then the damage is not as bad. The difference between a major correction and a bump in the road can be attributed to managing risk rather than trying to maximize profits only.