Sunday, 30 October 2011

Next week's FOREX trading outlook

This week has been a hectic trading week, with most of the FOREX currency pairs behaving like in a bee hive. The global turmoil was enhanced by the two major news: first is the agreed haircut of 50% of the Greek debt and the subsequent leverage of the EFSF and the second one is the systematic dump of US Treasuries by the foreign investors (the latest to join the party is the Norwegian sovereign wealth fund which dumped all US Treasuries and all US mortgage backed securities). What is in store for us next week?


Trading the Euro-dollar forex currency pair was not an easy task (and it never was) considering this week's wild gyrations. Most probably next week the volatility will somewhat cool down with the focus will be shifting on the United States debt crisis.Currently it is sitting at a major resistance level of 1.4150 and if it fails to close higher than this during next week it may head back to 1.3910 support. 


Long term trend is still in place with the Yen appreciating against the USD. It has reached the long term bottom of 75.75 and chances are that the Bank of Japan will not let the Yen appreciate beneath this level. The intervention is imminent even if it may happen this week or next week. Go long the USD/JPY with a stop loss at 75.40.


The Hungarian Forint is forming a bearish triangle on the daily chart with the support level currently holding at 209. If the HUF breaks out of this support level, it will look out to retest the upper channel boundary at 196.15. Sell short some USD/HUF with a stop loss at 218.2.

The S&P500

The S&P just finished the largest weekly rally in three decades, a move that took by surprise a lot of traders (including myself), in what seems to be a massive short squeeze. Fading this rally is too dangerous at this level, but for more aggressive traders this move may pay off. My opinion is that the S&P topped out on the 2nd of May 2011 and it will retest this level only on the announcement of massive QE3 Fed stimmulus (no "Operation Twist", no "Repurchases of MBS's").

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