Kruger Insights Thursday – November 28, 2013 by FirstMacro

BinaryOptionsNow | Published on November 28, 2013 at 11:02 am

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Holiday Trade – Happy Thanksgiving to all those celebrating! As per my analysis in the previous piece, markets are expected to trade razor thin for the remainder of the week. However, this does not mean we won’t see activity. Still, trading holidays is never recommended and I always favor looking to fade any extreme moves that happen during holiday trade when fuller trade resumes post holiday. Though the Euro managed to put in another bullish close on Wednesday, we did see a good deal of resistance above 1.3600 and ahead of the cited medium-term internal resistance at 1.3650. Moreover, the market still failed to put in a daily close above 1.3580. I still like the idea of looking to fade Euro strength and would recommend against looking to buy at current levels. At the same time, we will need to see a break and close back under 1.3490 to put the pressure back on the downside. Elsewhere, the Pound has been the standout outperformer in recent trade on the back of some very well received UK growth data. The latest break above stops at 1.6260 now opens the door for fresh upside towards 1.6500 over the coming sessions.

 

kruger insights november 28, 2013

Isolated Activity – Yet, even with the noted strength in the Euro and Pound in recent trade, broadly speaking, the US Dollar is still the favored currency. The commodity bloc and emerging market currencies remain on a downward trajectory against the buck, and currencies like the Canadian Dollar are contemplating a move to fresh yearly lows (USD/CAD yearly high). It is actually not all that surprising to see the Euro and Pound outperforming, with the Eurozone and UK economies having already endured the brunt of the global downturn and starting to move back in the right direction. The ripple effects from the crisis are now a lot closer to the commodity bloc and EMs, and this is why we are seeing these markets still pressured. Looking ahead, I continue to forecast medium and longer-term Yen weakness and project gains in USD/JPY to 110.00 in 2014. At the same time, I would not rule out the possibility for a short-term retreat to some previous resistance turned support at the former triangle top in the 99.00-100.00 area, to allow for a healthy correction.

Commodity Slide – The one catalyst that could potentially inspire this move would be a long overdue capitulation in US equity markets, with the Yen expected to find bids on traditional correlations, at least for a short time. I do not believe the Yen will rally significantly if equities pull back as the traditional flight to Yen correlation in risk off markets no longer applies. The Yen is by no means a safe haven currency, and any strength on these merits will not be sustainable. But again, I still expect the market to respond to this familiar correlation for a short while. Right now, everyone is looking for the liquidation in equity markets, but as of yet, still no signs. Elsewhere, the OIL market is making noise, with the black gold dropping to fresh multi-week lows. There is some solid rising trend-line support off of the 2012 lows which comes in around $92.00, but given the latest breakdown on the daily chart, I would be looking for an overshoot of this trendline support and potential drop to psychological barriers at $90. I then like the idea of looking to buy OIL. Finally, GOLD remains well offered on any rallies, and with the market breaking back below $1250, the door is open for a full retracement to retest the late June multi-month lows at $1180. I also like the idea of buying GOLD further down, but will be waiting to see how the market responds if and once $1180 is retested. That’s all for today. Have a good one.

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