The US stock market opened the trading week on the green territory and it looks like the indices are getting prepared to another strong break-up. However, they might correct before that break-up occurs, since they reached strong resisting areas and the directional indicators shows an overbuying situation.
The results season for the 4th quarter started yesterday with the reports of the aluminum producer Alcoa (AA). The earning seasons tend to be volatile especially in days where important firms report, and it will probably affect the forex market in the next few weeks.
USD/CHF
Last week we estimated that the support of 0.93 was strong enough and the USD would rise from this level. We brought-up the trade-idea of opening a long positing in case the price crosses above 0.945. This trade worked as we expected and the pair went up above the target we set at 0.955.
The most important thing here is to learn how to implement the idea of getting in the market before everybody does, and get out when everybody gets in. In this case, the idea was to enter the market before the amateurs would enter above the pick at 0.955. The pair made a false-break and started correcting right after the break-out of 0.955. Now, all of the traders that entered in this level are stressed and losing money, whereas those who opened the position in the reversal point at 0.945 are much relaxed and already took profits. This show how dangerous is to enter the market in extreme levels, and how important is to spot the reversing levels as we did in this trade idea.
EUR/CHF
The Euro finally made the expected correction against the USD and it might start an aggressive short-squeeze if it crosses above yesterday's high. The CHF is weakening against the USD but no doubt, the investors would prefer it against the EUR unless they were not afraid of the Swiss central bank.
However, there are some signals on the pair's daily chart that suggest that the CHF might try to break-down. The most significant signal is the fact that the 20 EMA crossed below the 50 EMA, which means that the prices are getting lower. The pair also broke the support of the 200 SMA around 1.214 and it reached the support of 1.21. A break-up of 1.21 might lead to another intervention by the SNB at 1.20, but if the central bank does not keep its promise to show-up at 1.20, the CHF might slide even under this support as well.
AUD/USD
The resistance of the 200 SMA on the daily chart was strong as we estimated last week. The Aussie slide down to 1.045 after hitting the 200 SMA and yesterday's long-tail candlestick might indicate that a bullish reversal might occur around the current levels. A break-up of yesterday's high will support this pattern, but pay attention to stochastic levels, which indicate that the Aussie is overbought and the correction might not been over yet.
Risk Disclosure
Trading and the execution of transactions in currencies, commodities,CFD indexes and other financial products with or without using high financial leverage, is speculative trading of high risk and may cause substantial gain or loss proportional to the size of the collateral, up to the total loss of the collateral sum in a very short period. The fluctuation of the prices and rates in the currency markets, commodities, CFD ,indexes and other financial derivatives are often volatile and there is no accurate forecasting as per the size of the change, its direction and the time frame in which it occurs.You must consider carefully and seriously if this type of financial activity fits your needs, your financial resources and personal circumstances. Since the risk of losing some of the invested funds or all the funds in a relative short period is high; it is recommended that you use for that purpose funds which you designated for speculative financial transactions of high risk.
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