“Chaos Reigns around the World”, but it has little effect on Markets

“Chaos Reigns around the World”, but it has little effect on Markets

Over the past week we have experienced the fall of ‘The Iron Lady’, a bomb going off at a marathon, 30 Farmers being injured at a Greek Farm whilst asking for pay, and also now a factory exploding. The real questions traders are asking themselves is how is this chaos in the western world going to effect the markets and the answer in the long run is that it’s not.

We should rather look towards the huge Macro Economic problems still being faced by Europe which are having an ever more present effect on individuals and Micro Economic policies.

 How can one right a report on financial news without mentioning the massive move we have seen on Gold over the past few days. The largest drop in the past 30 years has seen the asset go into meltdown. We are seeing price-action deviations at the highest levels of all time which is giving huge opportunities for corrective trading. Stick to Gold if you want to make a fast buck!!

EUR/USD

The EURUSD took out yesterday’s breakout bar (negating the breakout of course) as well as the prior 5 days’ lows. Price may very well trade lower but strong support is seen at 1.2934/67, which is the close of the reversal day, 50% retracement of the rally from 1.2744, and 4/8 low. The sharp nature of the decline is worrisome but let the dust settle and see if price reacts at 1.2970 before abandoning a bigger constructive outlook. Consider that the EURUSD low was made early in the month and being bullish on dips isn’t so frightening.

GBP/USD

The GBPUSD hasn’t quite reached previously mentioned levels of interest, which include 1.5460 (2 equal legs from the low), 1.5500 (top of former congestion) and 1.5605 (50% retracement). Viewed in the context of the bearish break from a 4 year triangle in February, we should be looking to align with the downtrend after a month of gains. Friday’s inside day setup was resolved to the downside which offers a level (1.5411) to operate from the bearish side.  Left in 3 waves the GBPUSD remains vulnerable near term. Trend-line support comes in at about 1.5150 on Thursday. 1.5274 is resistance.

GOLD and OIL

Prices are staging a shallow recovery from support at 1341.88, the 114.6% Fibonacci expansion. Near-term resistance is at 1376.93, the 100% level, with a break above that exposing the 1400/oz figure and the 76.4% Fib at 1433.58. Alternatively, a reversal below support targets the 123.6% Fib at 1320.28. For Oil, prices declined as expected after putting in a Bearish Engulfing candlestick pattern below resistance at the underside of a previously broken rising trend line set from the March 4 low. Sellers have now cleared support at 87.38, the 76.4% Fibonacci retracement, exposing the 84.04-85.19 area marked by the November 7 and December 11 2012 swing lows. The 87.38 mark has been recast as near-term resistance, with a move back above that eyeing the 61.85% Fib at 89.45.

Written by Amar

or contact me on kasim@onetwotrade.com