BEST BET: SELL GBP/AUD

 

USD will be weak, and GBP will also be weak, so.....

 

Let us take a look at Friday's GBP/USD movement to see how the ups-and-downs of USD and news on GBP itself influencing the GBP/USD

Cable rallied to near 1.5750 in early European trade thanks to BoE MPC hawk Andrew Sentance's reiteration of his desire for higher UK interest rates and an article in The Sun headlined "We will survive spending cuts". Those gains were lost rapidly as fix-related selling dropped GBP/USD to what would become day lows at 1.5660. Better-than-expected German IFO came to the rescue, sinking the dollar, and turning cable back up. The rally stalled below 1.5730, however, as the dollar picked up the bid once more in the US morning, and held it much of the remainder of the day. GBP/USD ended back near its lows. EUR/GBP, though, sustained the IFO initiated rally, moving up from 0.8850 to nearly 0.8900 in the US afternoon.

 What the above is telling me is that if one merely looks at the USD side,the big test for cable is the 1.5650 level and whether it will hold. If it does, we'll like the prospects for the market to rally back up toward 1.60. If not, however, we'll look at 1.55 as the likely initial target.

 

So, why don's we look at GBP/AUD instead? At least the downward trend of this will not be influenced by the "weak USD" (as when USD goes down, the GBP/USD may go up). With GBP/AUD, when USD goes down, AUD/USD will go up, and will go up more thant the GBP/USD.

 

Strategy: SELL GBP/AUD at any rally

 I started recommending SELL GBP/AUD when above 1.6200, the close Friday was below 1.6000 psychological level for the second time within a week. I did target at 1.5850 previously, but the Friday movements were more convincingly that this pair will go a lot lower. At this stage, I will revise down the target towards 1.5500.

 It's a quiet start to the new week with neither data nor events on the UK calendar, and only a couple items from Europe.

There were almost "nothing new" at the G20, and I will look to more USD downside to resume, at least until 2-3 November.

 

Finally, let me tell you all a little story.

A man prays to God: " God the Almighty, please let me one time getting the first prize in Lotto as I never get it, and it will change my life? Please!"

This man prays everyday, every night, every week, every month, every year.

God is tired, and finally reply to him:

 " Hey man, let me pray back to you and beg you to "buy" a lotto ticket, please!"

 

Folks, I have been "RIGHT" all through the month on my recommendations. Please don't just "read", but do something----"open a position".

TECHNICALS

TECHNICAL RECOMMENDATIONS

 

GBP/AUD: SELL anything around 1.6200

I have a bias in shorting this pair. For 3 days, we have a chance shorting this around 1.6175-1.6200 and can make a profit. In longer run, target 1.5850 at least.

 

EUR/USD: Range 1.3650 - 1.3925

today's bounce from low put the down trend less dangerous. But only 1.4000 breach, then up trend can resume. At present, range trading.

 

GBP/USD: Range 1.56285 - 1.5825

A significant move lower overnight broke recent daily range support around 1.5750 and shorts were suggested, target first 1.5650. The daily studies support shorts, heading lower with room to extend, so my bias remains down and I look to reset short at around 1.5800

 

USD/JPY: Range: 80.60 - 82.05

 Daily studies are mixed and this reflects the tighter more congested nature to price action over the last four sessions. On balance a sell again but our triggers are just away from market at present. I do not recommend trading in this pair at the present moment.

 

AUD/USD: Range 0.9650 - 0.9825

Come to a consolidating stage and strategy is range-trading with above range.

 

AUD/NZD: Range 1.2980 - 1.3150

The daily studies are bearish, edging lower from overbought levels, but the tightening Bollinger bands favour range trading. I suggest stay with the strategy of trading the 1.2980/1.3150 range.

 

Victor Ho

CONSOLIDATION

CONSOLIDATION

Market will probably "consolidate" as analyse by technical. May be a day or two for the week. GBP continues to look vulnerable to more downside today.

Sterling was hit by weak CBI industrial orders (-28, -19 expected) early. The report's impact could be seen clearly in EUR/GBP with the cross jumping through 0.8800 to day highs of 0.8825. The rate hike by the PBOC, however, flipped the asset markets to negative and that started EUR/GBP on the path to eventually reach 0.8740. It also saw cable carry on the down trend started from 1.5950 on to 1.57. GBP/USD broke that level when news that BofA was being sued to buy back mortgages, but didn't extend that loss much. Mervyn King's comments were 2-sided and of little impact given other market factors.
     On today's drop we've seen a break of the 20-day moving average, which was acting as something of a trend line for the move, as well as the last retracement low. That, combined with narrowing Bollinger Bands and a Trend Intensity downtick suggest we're moving into a consolidation period.
     The primary event focus for Wednesday will be the release of the minutes from the last MPC meeting. There's also money supply and credit/lending figures due to be reported.

And it is really funny, China's move was a move in the direction of a higher Yuan in a floating market as investments will definitely flows into China and will need to buy more Yuan thus pushing Yuan higher. The general market should harrah rather than reacting with a risk-on. I cannot understand this.

Victor Ho

SEVEN

SEVEN

 

Many of you must have seen this famous Pitt/Freeman movie called "Seven", a weild, suspense, scary criminal film about the "seven sins" of human being.

 

The FX market closed with most major currencies stuck at the "big-figure 7"----the EUR/USD closed at above 1.3700; GBP/USD at 1.5700; USD/CHF at 0.9700 and AUD/USD at 0.9700.

What's next? Will they all stuck at this low after their recent high or will it drop below the "line-7" and go towards "line-5" as some technical analyses show?

 

I continue to hold the idea that the USD will drop more eventually if one looks at the market till year-end. The period at present is a "consolidation" of prices reaching their first level peak as prices reached psychological peaks AUD/USD 1.0000; GBP/USD 1.6000; EUR/USD 1.4000 etc. The US authority also appears to be wanting a "slower pace" for the USD drop as seen by Tim Geithner's vague speech yesterday.

The crucial date is 3 November when the Fed will decide interest rates and whether and how the QE2 may come. It is also coincidentally clashes at the same time of the by-election. It does not need me to say what will happen then.

 

Strategically, this is "golden opportunity" for "position accumulation" on my beloved currency AUD. As I said above, I am not sure whether the "line-7" could break, really don't know. If you are not sure about the USD short-term run, go for GBP/AUD----i.e. short GBP against AUD. It also plays save by accumulation AUD in 2-3 lots, if it goes down at all. I really do not have a crystal ball.

 

As the Chinese saying, this is the time of "vulnerability", and it is also time to show who is the hero. I love it.

 

Victor Ho

WAR

WAR

War, children, it's just a shot away
It's just a shot away (hey)...Song by:  Rolling Stones, "Gimme Shelter"

 

It all happens in a day.

China raised interest rate, finally, as I continued mentioning, that either they up the Yuan, or they raise interest rates. I am always right.

Tim Geithner of U.S. tried to slow the USD drop, please note just "slow" and not stop. It is a "managed drop" folks, by repeating that vague statement that strong USD is still in the US's interest. How sarcastic!

Europe of course will not be silent after the above two was in the lime-light. They tried to steal the show by implying a gloomy outlook for Europe. Yup, the Euro has been too high for their liking and they purely wish to do something about it by talking it down a shade.

Australia had a "hawkish" RBA minute and AUD/USD bournced to as high as 0.9945 and unfortunately could not resist the broad USD rise and long position unwinding caused it drop to the low 0.9700's where it appeared meeting strong support, at least at this time.

Then of course, we also has a risk-on day as share results are not looking flashy with Bank of America and Apple. This also tends to push USD higher.

 

I did warn after Friday close that this week will be a reversal week. I am right again, and I did 3 times warning of a GBP drop-----sometimes, really feeling a bit lonely up there........Good night!

 

Victor Ho