Submitted by Nic Lenoir of ICAP
Asian central banks have left unattended a bunch of pretty upset carry-traders... We had a well-established support line on EURUSD and on Friday when we tested it (for the 5th or 6th time) central banks came to the rescue. However, when we tried to break again this morning, the market awaited... in vain, and with no massive buyers it's a wave of stops that met the swing traders selling the break.
What now? Well it seems on the 180-minute chart that we stopped on the only decent support at 1.4846. As long a we don't break 1.4976 we are in a downtrend which would potentially take us all the way down to the 50-dma and the mediu-term channel support in the 1.4620/1.4660 area. That is the key medium term support.
Drawing a parallel with precious metals, it seems Gold has broken the recent low that was support at 1,043. In very short term trading we hit the support however of a potential sideways channel, and short term indicators are massively oversold, so we could well retrace to 1,052 in the near term. Bigger picture we have two supports at 1,025 and 986. The later is pretty much the key between retracing to 862 and making new highs past 1,100. Look at silver for guidance... Silver just rejected the top of a major channel, that's why medium term we think re-testing 986 seems the likely scenario. A hold there would be very bullish, but we would stay put until then. If we follow through a bit more here on the downside there will be some more stops being triggered.
Equities short-term look like they are supported as indicators are quite oversold on a 30-minute and 60-minute chart. We have good medium-term support in the 5,550/5,650 zone for the Dax, we would expect a bullish reaction near-term.
Good luck trading,