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At the Close. What will prevail tomorrow?

Very slow market in the last hour of trading, as traders seem to be taking it easy after the earlier roller-coaster.

However, the price action seen earlier in the day (using funnymentals as the perfect excuse once more), brings up the key question in the benchmark EUR/USD now: What will prevail tomorrow? Because, if you have noticed, we have 2 scenarios who are driving many of the positions at the moment:

(A) Uptrend line from last August's low holds (yesterday's touch @ 1.5520 caused a 180-pip rally, which gives you an idea of how important that line is), and the unit breaks 1.5720 and rallies past 1.58 again.

(B) Uptrend line @ 1.5525-35 gives way and we see the second dynamic key support line @ 1.5440 being tested, prior to going for the double top (daily) neckline @ 1.5280 and an eventual break of it,

I guess by now you know which of the 2 scenarios is my preferred, so will not waste your time repeating it. The thing is that followers of both scenarios are pushing hard to make their preferred case prevail, and that's one of the reasons why we saw a knee-jerk price action so clearly in the Euro today. And I feel that the big hands have already positioned themselves for tomorrow's price action, so am expecting a volatile day indeed.

In other pairs, I will keep my shorts in JPY crosses (GBP/JPY test of dynamic level was a very good short trigger and I believe it can give some very nice pips, along with EUR/JPY, of course, and this time I don't mind doubling up the risk as probabilities were in my favor (and, by the way, I have already protected that position with some pips in case of a spike, so no worries at all, potential is big) and that EUR/AUD battle, which looks a bit threatening at the moment, but I'll stick to it as I have a system still short and so I'll follow it. USD/CHF looks good for a 1.0510-20 test from here although that will also depend on the 1.5580 level break in EUR/USD (which I think very likely at the moment).

Calling it a day, I'll be back tomorrow with more, looking for confirmation of this interesting technical picture we have, hopefully the NFP release will help clear the technical picture. Bye 4 now.

Gold View, by 'Zeb'

'Zeb', a good friend of this Weblog, posts his views on Gold:

SAY GOODBYE TO LOWER LEVELS IN GOLD
Hi Tony Gold started looking bullish again after a dip below $900 level. Gold up 13% in first half of 2008. Last year Gold posted gain of 31%. 2008 likely to be very bullish as oil is above $100, inflationary pressure still there. Yesterday gold breaks below $915 important support level and today breaks above $915 easily. Now Gold should find immediate support around $914 and $932 followed by $945 should be in focus. A break above $957 will indicate time for test of $1000 once again and later huge rally towards $1250 by year end. In 2009 $1650 target...

Reversal complete

EUR/USD is currently trading around 1.56, having broken the support line mentioned earlier (the new one), and approaching the magnet line 1.5580. USD/CHF is back above intraday resistance @ 1.0470 and it points to 1.05.

All in all, a good bear trap set up after (bad???) the US data, with the market going to where it was before it.

EUR/AUD hit 1.66 but has quickly moved below it, open trade still working.

EUR/USD re-techs

Intraday wise (30m chart) we have to add a new line after the tst of 1.57 today, and that line comes from yesterday's low @ 1.5530 thru second low of 1.5560. That line is coming in @ 1.5615-20 now and precedes the magnet @ 1.5580.

Very important to note that the channel line off it was coming in @ 1.5680 when the unit spiked, so we should take it into account (now 1.57).A projected line completing the 3-line range is seen @ 1.5750 now, but I don't see even coming close to prices. I feel we'll first see the magnet line, which is still there, waiting for prices to come back to it. A break of the 1.5615 line should be used for a fast scalp towards the magnet line, I'd even say that you could be very aggressive with that trade if the moment comes for fast pips.

Watch EUR/JPY

The unit is breaking upper line of original intraday tiny uptrend channel @ 168.75 and is right now testing 168.60 tough support. If this support is penetrated, we should see the test of the base of the channel (original uptrend line) @ 168.15.

Intraday reversal

We go from one extreme to another, with a solid correction of market values as Chicago Business Barometer shows 50.8 reading, better than expected, and is used as a means to send the USD back up in a complete turnaround.

1.0470 trendline the level to watch in the Swissy (if prices go back above it we could see a big jump above 1.05, with extreme levels only coming into play around mid 1.05s.

EUR/AUD remains a good choice for intraday trading or even for holding it 1-2 more days as long as 1.66 is not broken.

EUR/AUD techs

Watch the 30m bearish MACD divergence forming, might kick in soon (still not completed).

Trade Idea: EUR/USD (close)

Grabbing the little pips @ 1.5680 on my very light position.

Leaving one order to re-sell @ 1.5700 if seen.

Trade Idea: EUR/USD (Open)

I'm taking 1/3 usual volume shorting the pair @ 1.5690, will add a second and last 1/3 @ 1.5710, stop on all 1.5730, target 1.5640 for now.

The unit is way OB and out of bounds, but am just remembering what happened on Tuesday and...

EUR/USD comment

Apart from being out of bounds above 1.5670, there is one more technical evidence to look at the moment: If we take yesterday's broken support line and draw the 3-line range, we'll see that this morning's highs were exactly the top of the original channel, while the projected line of that channel is found now around 1.5700.

If that level is seen without a retracement, going for a fast scalp should work fine.