Currency comes the third (2011-02-02 US Dollar Index analysis)

Today the market will be opened half-day only.

The Eygpt matter brought oil to new high and the currencies changed greatly as well. USD kept on dropping, leading the other currencies to higher levels. Aussie rose above 1.0 and is heading to the high in December 2010. Though Reserve Bank of Australia remained the interest rate unchanged (at 4.75%), this appears to be an attractive rate to investors, especially when the atmosphere for stock markets isn't that good.

Let's see the daily chart of US Dollar Index.



The green line is basically the bottom line for the index. This is a very strong support and indeed if the price breaks it, I couldn't imagine how low DXY could fall to.

We can see that DXY formed three peaks from mid of Q4 2010 to Q1 2011. Though the levels were not too near, I would still treat it as triple tops.

The thick blue line represents the "neckline". Obviously the index broke it in early Q1. This accounts for the slump of DXY. The estimation given by the triple top suggests that the index would drop until 76, which aligns with the support level by the green line.

We could expect that US Dollar will keep on dropping while other currencies gain. 76 will be the next support, this is a critical support and is likely to successfully prevent the index from further retreat.

JPHK Update (2011-02-01)

Time for gold (2011-02-01 Gold analysis)

HSI bounced after dropping as low as around 23,285 yesterday, which still hasn't reached the level 23200 I mentioned in last post yet. The index probably would drop again until this support level.

Due to Egypt matter, the world's investing atmosphere is shrinking. Stock markets as well as commodity market have been sliding. Gold reached 1338 last week and rebounded a bit. This time I would like to share my analysis on Gold (XAU).

Daily chart of gold price:


I have identified three major trendlines which could affect the price of gold now. This first one is the green one, which has been a support for the price in longer term. Gold price stayed above this line since 2009 and it remains a major support. So basically we could assume a very strong at the level suggested, which is around 1290.

This second line is the red line, which is a middle-term trendline. It has been a resistant in early stage, turned into support in middle stage and became resistant again after gold price broke it in mid-January 2011. It acts as a resistant to the price now.

The third line is the purple one, which is a short-term trendline. We can see that the price has been falling along this line since late December 2010. This would be a resistant to the price now as well.

Good news is MACD is currently touching its EMA, a bullish cross is under formation. We need two more days to confirm it. Bad news is the price did try to test the resistant zone yesterday but wasn't able to break it. It seems like the gold price would undergo a bit consolidation.

Let's check the weekly chart as well.

Weekly chart:


Basically the red and green lines are the same as that in daily chart. I have only made tiny adjustments on the slopes of them.

Clearly MACD is falling with no signal of reversing. We could expect no sharp reversal in price movements. The fibonacci retracement suggests a support at around 1295, which aligns with that given in daily chart.

To conclude with both charts, I would expect a slight consolidation in gold price. In daily chart, MACD and EMA might show good signals but it is hard to tell due to that in weekly chart. Support level is at around 1290-1300, and resistant is at around 1350-1360.

JPHK Update (2011-01-31)

First in 2011 (2011-01-31 HSI analysis)

Finally here comes my first analysis in 2011. In December 2010, I mentioned about the head-and-shoulder pattern formation of HSI, which was not successful as the index bounced after slight breakdown of the neckline instead of keep dropping (due to support in weekly chart).

After one month, the index is currently on a falling track to 23617, after a surge above 24400. Too see how it would go, let's check the charts.

Daily chart:


The red line is a long-term up-trend line for HSI. It has been a pretty significant line for last 6 months. HSI broke it from above in mid-Jan, and we could see there were long upper shadows for last few candles, showing a great bearish push. Finally the index plunged further, reaching the level now.

It is now somehow supported by the 50-day SMA. But it is not a big support. The fibonacci retracement gives us more hints on the levels we are looking for. 50% and 61.8%, which are 23500 and 23200 respectively, are the next levels to be aware of.

MACD and its EMA are both moving downwards, showing shrinking momentum. In fact, we can see a clear bearish divergence at the period from the peak in October 2010 to the peak in January 2011. The index rose but MACD fell. This might be an indicator telling us about the slump after reaching 24400.

Weekly chart:

The weekly chart shows a clearer picture about HSI. The index has been moving along the green uptrend line for a long long time. Therefore, it remains the major support. There will be big support to HSI at 23200.

In fact, this level is also fibonacci retracement 38.2%. We could see the power of this level, so keep an eye on it!

MACD and EMA are touching each other. A bearish cross formation is in progress.

All in all, 23,200, which is the 61.8% fibs level in daily chart and major up-trend line together with 32.8% fibs level in weekly chart, will be the next important support level for HSI. For the upside, the red line in daily chart will provide resistance at around 24000, which is a psychological resistant as well.

Important Economic Data this week (2011-01-30)

31-Jan (Monday)
21:30 Canada GDP (MoM) {Forecast: An increase of 0.1%)

01-Feb (Tuesday)
09:00 China PMI Manufacturing (Jan) {Forecast: Decrease}
11:30 Reserve Bank of Australia Rate Decision {Forecast: Unchange}
16:55 German Unemployment Change {Forecast: Turn from positive to negative}
23:00 US ISM Manufacturing {Forecast: Increase}

03-Feb (Thursday) - Chinese New Year
20:45 European Central Bank Rate Decision {Forecast: Unchange}

04-Feb (Friday) - Chinese New Year
20:00 Canada Net Change in Employment {Forecast: Decrease by 0.8K}
21:30 US Change in Non-farm Payrolls {Forecast: Increase}
21:30 US Unemployment Rate

source: http://www.dailyfx.com

JPHK Update (2011-01-28)

Finally I am back at Hong Kong. Will keep up with recent news and update analysis on the market this weekend.