AUDCHF - REACHING AT CRITICAL RESISTENCE...

The multi month AUDCHF rally (which is choppy and corrective in nature) is nearing the 61.8% retracement of the entire decline from 1.0080 at 0.8882. This is a potentially significant level that could see a reversal. Signs such as RSI divergence warn of a reversal as well.

USDCAD HEAD & SHOULDERS PATTERN

The USD/CAD has formed 3 part Head and Shoulders formation on 4 hours chart. The pair has almost completed the third leg of the Head and Shoulders formation, but needs to break the 1.0950. The support comes at 1.0784. Head n Shoulders target is 1.0610 (340 pips from the neckline) in the coming days.

GOLD - TRADING BETWEEN $943-951

On 60 min chart Gold struck in trading range between $943-951 after forming Double bottom at $943. Currently trading below $951 resistence level. A breakaway from $951 then we see a key resistence comes at $960 which has been previously a strong support on June 03 and June 04 and then at $964. On breakout of $951 one can buy for profit of $10-13.

USDCAD - BETWEEN TWO LINES

Last week, the Canadian dollar stopped its march. USD/CAD hit a major support line, around 1.08 and bounced off. The pair shot upwards and closed at 1.1191. This support line served as a stubborn resistance line in August and September 2008. After it was broken, USD/CAD leaped higher. Now it serves as a strong support line.

USD/CAD is blocked in the other direction at 1.1470. This worked as a support line in two occasions:. In November 2008, the pair was falling down, and bounced back at this line. And just one month ago, in May, the Canadian dollar stopped at this line. After it crossed it two weeks later, it plunged down to 1.08.

So, the loonie is now in the middle of these two major lines. Was last week just a momentary pause, or a change of trend?

INDIA SENSEX HOT

Tata Steel (463.90) Technically looks topped out at 496.40 and heading for slight retracement towards 425 which is 10 day SMA. On Daily Candlestick chart pattern you can see the Bearish Engulfig formation on top of the chart which signifies the trend reversal. In the last two trading session it has formed black candles with lower hihgs and lower lows. I reckon one can go short in it.

FOREX WEEK IN REVIEW

Until last Friday, the Dollar havent responded to economic data positively for few months. Dollar rised sharply against thier crosses as it seems that economic recession is over. NFP data came in much better than market expectation, but adding to the worst Unemployment Data surprisingly climbed to 9.4% which is 26 years high. Indeed, fed fund futures are pricing in full probability of Fed raising rates to 0.50% by December. Early 2010 Fed funds futures are even fully priced for Fed to have another 25bps high to 0.75% in Feb. UA Dollar technically bottomed out at 78.33 and showing lot of upside potential.

Central Banks like RBA, ECB, BoE, BoC have all left rates unchanged last week. RBA is somewhat adopting an easing bias as "the prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed". ECB lowered forecast for GDP and CPI along with the decision to keep rates unchanged. BoC reiterated to keep it at current level until the end of the second quarter of 2010 so as to achieve the inflation target.

From England we witnessed to see a lot repeated calls for Prime Minister Gordon Brown to stepped down after the expenses scandal, resignation of key members of the Cabinet and then the worst local election defeat in three decades. But Brown refused to quit and instead reshuffled to cabinet.

THE WEEK IN AHEAD

The main focus will be on USD, will USD strength sustain or not and political developments in UK. The key data from US is Retail Sales and Trade Balance. From UK we will have Manufacturing Production then from Canada we have Housing Starts and Trade Balance. Interest Rate to be decided by RBNZ.

GBPUSD - BEARISH TREND

The GBPUSD had significant bearish momentum yesterday. The pair bottomed at 1.5940 and closed at 1.5980. On weekly chart we can see that this week movement formed a “shooting star” candlestick pattern which technically a bearish formation. We also can see that the upper shadow of the “shooting star” ended at important (strong) resistance around 1.6670 area (low of October 05 week end and highs of October 26 week end) before slightly fell to the downside. At the same time, weekly CCI in overbought area and heading down suggesting a potential downside pressure. For the upcoming week, any consistent movement below 1.5910 area ( 23.6% Fibo retracement of 1.3502– 1.6662) should support the bearish scenario and trigger further bearish momentum towards 1.5454 area.

To support this bearish trend you can see GBPUSD daily chart where it formed Three Black Crows and at the same time this pair has reached Overbought zone on 60min and 240min chart, which clearly signifies the strong reveral trend in GBPUSD.

USDJPY 1HR CHART (update)

In the evening prior to US Non Farm Payroll data i'd posted USDJPY 60 min chart which had formed Ascending Triangle and i was looking for upside breakout. But data came in mixed version. But later it took the upside breakout and currently trading at 98.25

USDJPY 96.93 ASCENDING TRIANGLE

USDJPY has formed Ascending Triangle formation in 60min chart. A strong breakout is expected at 96.96 level. So at this point of time USDJPY is hust waiting for US NFP data which is expected to come out in the 15 min of time. If anything good comes then we see significant upside breakout and if anything bad comes then i see support coming at 96.55 and 96.15.

42000 Jobs Sheds in Canada

In May 2009, Canada economy sheds 42000 jobs and this put Canada Unemployment at 8.4% from 8% the previous month. But the market was expected to shed 36500. The employment report comes a day after the Bank of Canada announced it would keep its benchmark rate unchanged at a historic low of 0.25 per cent in an attempt to spur business and consumer spending. However, the central bank warned the strengthening Canadian dollar could offset recent positive developments in the economy. Still USDCAD is hovering between 1.004 to 1.041

Forex Trading Signals

Today we have a lot of news coming out from Canada, UK and USA. Therez a strong news coming in the market from UK and this gonna be a one big reason to GBP fall is UK Prime Minister Brown potentially resigning. These rumors have been refuted by his office.

0700 EST (1630IST) CAD Employment (-36.5 expected) Last month's huge positive deviation created a surprisingly small selloff in the USD/CAD. On the one hand it seems as though CAD levels after news events have been frequently manipulated; however, CAD Employment is usually a very reliable indicator and one bad month shouldn't completely force us to sit on our hands here. A comprimise of trading a wider trigger than usual seems appropriate. If it comes out at 0.0K or higher, USD/CAD should sell off 50 pips. If it comes out at -62K or lower, USD/CAD should rally 40+ pips.

0830 EST (1800IST) US Nonfarm Payrolls (-520K expected) - We have not seen very large deviations on this report since December 2008. Because of that, we've gotten a lot of strange price action on the smaller deviations primarily due to large order flows that tend to follow this release. I recommend trading a wide 100K trigger and if it comes out closer to expected than that, or if there's a conflict with Unemployment Rate, avoid taking long directional trades and simply look to scalp sell rallies and scalp buy sell offs into support. Because we've seen some clear decoupling of EUR/USD, USD/JPY and EUR/JPY, it's hard to say which pair will have the best reaction on the news. My best guess is USD/JPY will be best for a quick news spike pop, but EUR/JPY will have the deepest, most sustainable move. If it comes out at -420K or higher, EUR/JPY should rally 50+ pips. If it comes out at -620K or lower, EUR/JPY should sell off 50+ pips.

Forex Today Update and Wrapup

US ISM MANUFACTURING INDEX RISE TO 42.9

ISM Non-Manufacturing for January surprised analysts with a rise to 42.9 from a revised 40.1 in the previous month; analysts surveyed had expected the indicator to decline to 39.0. The higher figure reflects a similar move with the ISM's Manufacturing and Prices Paid indicators on Monday which also beat expectations of a decline and showed a rise. ISM Non-Manufacturing has been below 50 for the 4th month though improvements in ISM data this week signals that contraction may be less in the months ahead. ISM data is now well off its low of 37.4 in November and continued improvements may signal a bottoming in the first half of 2009.

US ADP DECREASED TO 522000

According to Automated Data Processing (ADP) nonfarm private employment decreased by 522,000 from December 2008 to January 2009 on a seasonally adjusted basis, an indication the worst recession in the post-war period is worsening. The Fed believes employment will weaken going into 2010. Today's report showed that sharply falling employment at small to medium size businesses clearly indicates that the recession continues to spread beyond manufacturing and housing-related activities.

UK PMI IMPROVED TO 42.5

U.K. services PMI improved more than expected in January, reaching 42.5 against our survey median for a pick-up to 40.5 from 40.2 in December, suggesting that sentiments now appear to be bottoming and the impact from recent aggressive rate cuts and fiscal stimulus measures starting to have an impact. The employment index fell further, however, to 40.2 from 40.5, the lowest since the series began in 1996.