Tuesday, 8 November 2011

Weekly FOREX outlook: USD/HUF, USD/JPY and GLD

Provided that Berlusconi does not surprise us in a negative way, this week's investor sentiment should switch from from the European debt crisis to the US structural problems. The day of 23rd of November is closer and closer and by that date the leading American parties will have to decide on $1.2 trillion in spending cuts over the next decade. If the budgetary supercommittee fails to reach an agreement, the US budget crisis circus may repeat itself. So the limelight switches to US.

Hungarian Forint cooling off

The Hungarian Forint has been steadily depreciating against the USD as a result of the European concerns, and as investors pulled out their capital from Emerging markets like Hungary, the USD/HUF reached the high level of 227.75. After testing the long term resistance level for two times, backed by positive news coming from the European Union, it looks like the USD/HUF' path of least resistance is towards 208.00 support. I scaled in shorts at 222.00 and 218.00 with a stop-loss at 227.20. The swap rates for holding USD/HUF are appealing for some of the online brokerages, and holding over-night positions from Tuesday to Wednesday could prove profitable. Take care though as the Hungarian Forint market is not an extremely liquid one.

Japanese Yen: Game Over

It seems like Bank of Japan is losing grip over the USD/JPY exchange rate and if no further intervention takes place the intervention spike will certainly have a 100% retracement. Looks like BOJ, which intervened on the market, flooding it with 5 trillion Yen of new Bond purchases made little difference, as the JPY is still appreciating. I exited all my positions in Japanese Yen, even though I contemplated opening a long position. The best thing is to wait for a complete retracement to 75.64 and then expect a currency intervention, or better on a currency peg (which is also probable as the USD/JPY rate should be close to 100 if Japan wants an early economic recovery). Don't try to fade the spike as it carries too much risk.

Mirror mirror on the wall, is gold going to fall ?

The noble precious metal has had (yet another) spectacular run in the recent weeks, retracing more than 60% of its margin-hike sell-off. It is entering a resistance area, and consolidation is to be expected in the next period. I`m looking for a lower entry point to get back into gold and the first 30% of my entire position will be bought at $1764 (if it will reach that level). I`m expecting gold to reach $2200 by spring next year, provided that my views regarding the US and European economies hold water. 

Have a profitable trading week and don't hang on to your losers!

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