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19 December, 2011
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MA RK ET
EUR/USD GBP/USD USD/JPY USD/CHF
Ron William, CMT, MSTA
S-TERM
MULTI-DAY
L-TERM
MULTI-WEEK
OBJECTIVES/COMMENTS
STOP
1.2870 (Entered 12/12/2011) Await fresh signal. Await New Buy Trade Setup Above 80.00. Possible sell higher. Awaiting New Buy Trade Setup.
1.3140
SHORT 2
1.0050
0.9950/0.9660/0.9380 (Entered 13/12/2011) Await fresh signal. Missed Buy. Await New Setup.
1.0210
Notes: Entries are in 3 units and objectives are at 3 separate levels where 1 unit will be exited. When the first objective (PT 1) has been hit the stop will be moved to the entry point for a near risk-free trade. When the second objective (PT 2) has been hit the stop will be moved to PT 1 locking in more profit. All orders are valid until the next report is published, or a trading strategy alert is sent between reports. CH-2008 Neuchtel info@migbank.com Switzerland www.migbank.com
EUR/USD EUR/USD
EUR/USD (Daily)
BERMUDA TRIANGLE
EUR/USD is unwinding mildly from oversold conditions, driven by shortcovering as the market adjusts to a new bearish paradigm, following the break beneath that all-important psychological level at 1.3000.
BREAKOUT ZONE
(1.4000)
Our cycle analysis successfully signalled increased volatility within the first two weeks of December across risk proxies, including the equity and commodity markets. Expect some respite ahead of the holiday period.
200-DMA (1.4060)
Watch for a sustained close beneath 1.3000 (psychological level) to resume EUR/USDs multi-month downtrend into 1.2870 (2011 major low).
UPTREND (2 YEARS)
Near-term resistance can be found at 1.3215 and potentially even 1.3550 (02 Dec high). Any rebound into these levels is likely to be short-lived.
Inversely, the USD Index has extended its recovery higher to new 11-month highs, (a move worth over 10% from the summer 2010 lows).
11 MONTH HIGH
Speculative (net long) liquidity flows is strengthening once again and will continue to help resume the USDs major bull-run from its historic oversold extremes (momentum, sentiment and liquidity).
Special Report: EUR/USD A Fall From Grace ? Decline Targets 1.3770/1.3410.
VIDEO
MIG Bank Webinar: Why the US dollar is likely to gain up to 30% in 6-12 months.
BREAKOUT ZONE 200-DMA (75.92)
13
S-T TREND
L-T TREND
STRATEGY
SHORT 1: 1.3280, Objs: 1.2870, Stop: 1.3140
Ron William, Technical Strategist, E-mail: r.william@migbank.com, Phone: +41 32 7228 454 2
GBP/USD
Hourly price channel broken.
GBP/USD has recently broken above the top of the hourly price channel. This may have marked the final phase of short-term weakness from the 1.5780 lower high. However, we watch for a sustained move above this
200-day Average
area before initiating a potential buy trade setup. Demand for sterling is likely to be affected by the movement in selected core Euro-Zone sovereign markets. In particular we note that Italian 10 year yields are shying away from 7.000%. Daily structure is also suggestive of a return to test 7.000% and higher. A continuation of higher yields may see Sterling being adopted as a safe haven again. This reasoning would likely help to keep cable within its year long range.
Failure to remain above 1.5423 will see an immediate target at 1.5272 and then potentially trend-line support at 1.5110.
S-T TREND
L-T TREND
STRATEGY
Await fresh signal.
www.migbank.com
Bijoy Kar, Technical Strategist, E-mail: b.kar@migbank.com, Phone: +41 32 7228 424 3
USD/JPY
POST INTERVENTION RETRACEMENT (PIR I) MULTI-YEAR PATTERN ANTICIPATES BREAKOUT (85-80)
QUAKE SHOCK!
G7 MOVE HIGH
POST BOJ MOVE (II) HIGH POST BOJ MOVE (III) HIGH
Confirmation beneath 77.25 (pivot level) would help trigger a third price retracement back to pre-intervention levels (PIR III) and potentially even a new post world war record low beneath 75.35 (PINL).
PIR II
PIR III
Sentiment in the option markets continues to suggest that USD/JPY buying pressure remains overcrowded as everyone continues to try and be the first to call the market bottom, within the end of this multi-year contracting pattern (see top chart insert).
This may first inspire a temporary, but dramatic, price spike through psychological levels at 75.00 and perhaps even sub-74.00. Such a move would help flush out a number of downside barriers and stop-loss orders, which would create healthy price vacuum for a potential major reversal. The medium/long-term view remains bullish, as USD/JPY verges toward a major long-term 40-year cycle upside reversal. Expect key cycle inflection points to trigger over the next few weeks, offering a sustained move above our upside trigger level at 80.00/60, then 82.00 and 83.30.
Please select the link below to review our special coverage on USD/JPY. Special Report: USDJPY Verging on a major 40 year cycle reversal VIDEO Webinar: USD/JPYs Long-Term Structural Change Media Reports: CNBC / Squawk Box & Bloomberg
S-T TREND
L-T TREND
STRATEGY
Awaiting Renewed Buy Trade Setup above 80.00.
Ron William, Technical Strategist, E-mail: r.william@migbank.com, Phone: +41 32 7228 426 4
USD/CHF
USD/CHF has met resistance close to our initial target in our previous long strategy into the rise from 0.9176. We view the push under 0.9430 as
potentially breaking down the short-term bullish structure. However, while above 0.9342, there remains scope for a further rise back towards 0.9548 initially. Given that the region of the initial target has been tested and with yields continuing to rise in some core Euro-Zone sovereign markets, the trade location is deemed as poor. It is anticipated that a return to 7.000% in Italian 10 year yields is imminent. This may once again pressure USD/CHF to the USD/CHF daily chart, Bloomberg Finance LP downside. There is thus potentially a greater opportunity to sell at higher levels. Referencing Spanish and Italian government bonds back to their respective levels prior to the six party central bank agreement, we note that most of the positive after effects have worn off, with yields trading at 5.698% and 6.824% versus 6.374% and 7.355%, before the agreement. (These yields were trading at 5.699% and 6.685% respectively at the same time yesterday.)
S-T TREND
L-T TREND
STRATEGY
Possibly looking to sell higher.
Bijoy Kar, Technical Strategist, E-mail: b.kar@migbank.com, Phone: +41 32 7228 424 5
USD/CAD
USD/CAD (Daily)
Only a sustained close beneath 1.0200 and 1.0080, then parity unlocks
DEMARK SIGNAL KEY RESISTANCE (1.0425)
bearish setbacks into the long-term 200-day MA at 0.9879 and 0.9726 (31 Aug low).
st
month distribution pattern. A break beneath 1.3393-79 (19 Sept low/61.8% Fib), signals an important breakdown into 1.3140 and would provide substantial correlation pressure onto EUR/USD.
th
S-T TREND
L-T TREND
STRATEGY
Awaiting New Buy Trade Setup above 1.0425.
Ron William, Technical Strategist, E-mail: r.william@migbank.com, Phone: +41 32 7228 454 6
AUD/USD
AUD/USD
(1 YEAR)
AUD/USD is unwinding strongly from oversold conditions, which also coincided with an intraday DeMark buy signal (see lower chart). Even so, we expect this recovery to be short-lived and continue to hold our stop level at 1.0050 for the active model portfolio short position, which is still maintaining a risk-free bias. The bears must sustain below 1.0000 to further compound downside pressure on the rates multi-year uptrend and push back towards 0.9611.
Elsewhere, the Aussie continues to weaken sharply, against the New Zealand dollar. Near-term price activity is mean reverting back into the 200day MA and we watch for further setbacks over the multi-day/week horizon. The Aussie dollar is also pairing back its mild recovery against the Japanese yen, while holding above the neck-line of its two-year distribution pattern.
Watch for further downside scope into support at 72.00 which would signal further unwinding of global risk appetite.
RANGE BREAKOUT
S-T TREND
L-T TREND
STRATEGY
SHORT 2: 1.0050, Obj: 0.9660/0.9380, Stop: 1.0050.
Ron William, Technical Strategist, E-mail: r.william@migbank.com, Phone: +41 32 7228 454 7
GBP/JPY
phase with an eventual return to strength anticipated, potentially close to the 120.00 region. However, the recovery seen from the 116.84 low appears corrective in nature, suggesting scope for a return to 119.38 and then potentially 116.84. A minor break has taken place under the support of the hourly channel, reaching 120.30. This may now mark a short-term higher low for a fresh swing to the upside targeting both 122.64 and 122.23, before a potential lower high in the medium-term timeframe may develop. This would then
return focus back to the structure mentioned in the second bullet point.
S-T TREND
L-T TREND
STRATEGY
Await fresh signal.
www.migbank.com
Bijoy Kar, Technical Strategist, E-mail: b.kar@migbank.com, Phone: +41 32 7228 424 8
EUR/JPY
We now anticipate a degree of support close to the 100.76 level, from where a recovery may take place As mentioned in prior reports, the medium-term recovery that we have already witnessed from 100.76 to 111.60 is viewed as the initial leg higher in a larger recovery structure. Even if a lower low were to be printed in the medium-term timeframe, an initial recovery from the 100.76 region is anticipated. With this in mind we
look to attempt longs just ahead of the key 100.76 level. Sustained price activity under this level will warn of a much larger continuation to the downside.
S-T TREND
L-T TREND
STRATEGY
Missed buy. Await New Setup.
Bijoy Kar, Technical Strategist, E-mail: b.kar@migbank.com, Phone: +41 32 7228 424 9
EUR/GBP
Also noted is that 1.3146 has now been broken in EUR/USD, weakening the longer-term outlook there. This may assist a short EUR/GBP bias going forward. An initial target for the current downswing in the daily timeframe is on the support of the previously mentioned falling channel, currently at 0.8330. As mentioned in prior reports, the recent six party central bank coordination
is in fact a warning sign and a clear weakness, suggesting scope for a credit contractionary phase. We continue to expect a continuation of rising yields in the Euro-Zone and it is within this environment that we see the potential for Sterling to be perceived as a safe haven.
S-T TREND
L-T TREND
STRATEGY
Sell limit 3 at 0.8510, Objs: 0.8395/0.8300/0.8142, Stop: 0.8615
Bijoy Kar, Technical Strategist, E-mail: b.kar@migbank.com, Phone: +41 32 7228 424 10
EUR/CHF
Messy sideways trade continues.
200-day Average
EUR/CHF is currently witnessing a flurry of price activity which has now triggered our filter level at 1.2226 (see below). It thus appears that the possibility of a break over the recent high at 1.2474 is receding. We reference the Italian 10 year sovereign yield on a daily basis in our USD/CHF commentary. A return to 7.000% and higher is building a recipe for disaster and, should it take place, may well instigate a period in which the Swiss Franc is sought as a safe haven irrespective of little to no yield pick-up. A parallel can be made with the negative yield that was available on short dated US paper during the last crisis. Sometimes return of capital is more important then return on capital.
The 1.2000 level is the only level that the SNB has suggested they will defend. There is thus likely to be a large cluster of stops under this level, which if tiggered, could herald a return towards the 1.0075 level.
S-T TREND
L-T TREND
Bijoy Kar, Technical Strategist, E-mail: b.kar@migbank.com, Phone: +41 32 7228 424 11
GOLD
CYCLE FAVOURS DECLINE INTO $1300 & $1040-00
DEMARK SIGNAL WARNED OF GOLDS OVERBOUGHT CONDITIONS
DOUBLE TOP
$1800 $1760
broken for the first time in 3 years. The move was triggered by a multi-month triangle pattern breakout (see both daily and intraday charts). Downside pressure remains heavy from inter-market weakness across related risk proxies such as EUR/USD and equity markets. Moreover, there
TREND CHANNEL
(12 YEARS)
$1600
$1532
200-DMA BROKEN FIRST TIME IN 3 YEARS! CONFIRMATION BENEATH $1532 TARGETS $1300
is still heightened risk for a much larger decline if we confirm a weekly close beneath $1600 and $1530 (swing low). A number of bargain hunting trend-followers will be watching this benchmark line in the sand for repeat support or a potential big squeeze lower into $1300 and perhaps even $1040-1000 (12-year channelfloor/see
top chart insert). Speculative (net long) flows also support this view having recently breached a key downside level which may threaten over 2 years of sizeable long gold positions. This will trigger a temporary, but dramatic setback that would ultimately offer a unique buying opportunity into summer 2012.
PATTERN BREAKOUT
Please select links for in-depth Gold coverage: Special Report Golds mountainous peak at riskbeneath $1600
COT NET LONG SPECULATOR POSITIONS SHARP DECLINE
VIDEO
Bloomberg Countdown
WEAK RECOVERY
OVER 2 YEARS OF SIZEABLE LONG GOLD POSITIONS UNDER THREAT IF KEY LEVEL BREAKS
S-T TREND
L-T TREND
STRATEGY
SHORT 2: 1705, Obj: 1530, 1300, Stop: 1705
Ron William, Technical Strategist, E-mail: r.william@migbank.com, Phone: +41 32 7228 454 12
SILVER
Gold/Silver "Mint" Ratio Silver (Daily)
DEMARK SELL SIGNALS
test of the previous swing low at $26.0700. Macro price structure continues to focus on the downside risks, following the major sell-off in September. Such a dramatic move traditionally produces volatile trading ranges. This allows the market to have enough time to recover and accumulate renewed buying interest.
KEY SUPPORT (26.0700)
Expect a large trading range to hold between $37.0000-26.0700 over the multi-week/month horizon, with downside macro risk into $21.5165 (61.8% Fib-1999 bull market) and $20.0000. This would still maintain silvers longterm uptrend and help offer a potential buying opportunity for the eventual
resumption higher. Continue to watch the gold-silver mint ratio (see top chart insert) which has now accelerated higher by 70%, suggesting further risk aversion over the next few weeks. This also helps explain recent divergences between gold and silver.
RANGE BREAKOUT
PSYCHOLOGICAL (30.0000)
WEAK RECOVERY
S-T TREND
L-T TREND
STRATEGY
SHORT 2: 34.1300, Obj: 26.0700/23.3400, Stop: 34.1300
Ron William, Technical Strategist, E-mail: r.william@migbank.com, Phone: +41 32 7228 454 13
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Notes: Entries are in 3 units and objectives are at 3 separate levels where 1 unit will be exited. When the first objective (PT 1) has been hit the stop will be moved to the entry point for a near risk-free trade. When the second objective (PT 2) has been hit the stop will be moved to PT 1 locking in more profit. All orders are valid until the next report is published, or a trading strategy alert is sent between reports.
www.migbank.com
14
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