By Forex District – ‘At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively,’ the Bank of England.

‘The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 8:30 EDT‘

Looking at the 4hour chart, EUR/USD topped out at 1.4445 and has remained in a confined range between the high and 1.4365. The bias is neutral at this level but buying on dips near the 1.4250 – 1.4300 area are possible. U.S. data can surprise and affect short term trading for the day; traders will continue to monitor stocks for direction. The next level of support is  the 1.4360, followed by 1.4305 and 1.4207.

Resistance is now seen at 1.4431, where a break of such will open subsequent levels at 1.4482 and 1.4540.

Trading levels in play:

Limit Buy @ 1.4245 Targets: T1 1.4265 – T2 1.4530 Risk: 1.4190
* Good Till NY Close After 15 pips profit move stop to entry, take profit at will. Trade is canceled if it rebounds near entry and moves higher by 20 pips. Comments will follow if outlook changes.

By Forex District -The pair is higher but still trades in a tight range as traders are unwilling to take decisive measures as earnings continue to be delivered. EuroZone economic releases were quite positve signaling stabilization is under way. The German Ifo business climate came in at 87.3, higher than the 86.6 expected and the 85.9 reading in June.

Meanwhile, the EuroZone’s flash manufacturing and services PMIs reported an increase to 46.0 and 45.6 in July, respectively. In Germany, the manufacturing PMI rose to 45.2, while in France the manufacturing PMI rose to 47.9. German services PMI increased to 48.4, while in France teh data reported below June’s reading to 45.5.

The news is somewhat encouraging as it suggests the worst of the recession may be over, however the data remains below the level of 50 which indicates contraction.

Looking at the 4hour chart, EUR/USD briefly surpassed the 1.4170 level (50.0% Fib.), on a news reaction, but was able to hold support as risk appetite remains fairly stable. Next key resistance 1.4245, which is testing at the moment, is fairly strong where the pair could pullback. A break above this level will open subsequent targets at 1.4290, followed by 1.4330 and 1.447. The bias is neutral in the near term following the strong economic releases and the markets mixed bias.

The next level of support is the 1.4170, followed by 1.4080 and 1.4012.

Trading levels in play:

There are no solid trade recommendations at the moment for intraday moves.

By Forex District -

The pair fell sharply as the IMF warned UK on public borrowing and was downbeat on the growth outlook. The IMF said, “the economic downturn heightening the risk of further large credit losses, banks have tightened the supply of credit. The high level of household indebtedness is also likely to constrain the pace of economic recovery.” They predict GDP to fall by 4.25% in 2009, with quarterly growth picking up gradually through 2010. “The speed and strength of the recovery, however, remain highly uncertain, given the unprecedented nature of the crisis and the importance of confidence effects.”

The continued stress over a CIT Group bankruptcy, fear over Indonesia’s bombings, and a cautious stance ahead of more U.S. bank earnings also put pressure on the Sterling.

Looking at the 4hour chart, GBP/USD found strong supply at 1.6470 (38.2% Fib Retracement Level connecting 2.1166 & 1.3547 Approx.) to reach an intraday low at 1.6284. A break below this area would suggest further downside with the next key target at 1.6200, followed by 1.6130 and 1.6032. The bias is neutral to bearish at these levels with preferred strategy to sell on rallies. However, positive results from Citi and Bank of America may weaken the USD on risk appetite flows, thus the Pound rallying against the Dollar.

Resistance is now seen at 1.6413, followed by 1.6470 and 1.6550.

Trading levels in play:

Limit Sell @ 1.6465 Targets: T1 1.6435 – T2 1.6300 Risk 1.6510.
* Good till NY close. After 15 pips profit move stop to entry, take profit at will. Comments will follow if outlook changes.

By Forex District – The pair is slightly higher but having a hard time above 1.4000. The Euro rose ahead of the German ZEW economic sentiment as risk appetite spurred demand for the currency and investors anticipated an advance in the index. However, the pair dropped around 30 pips as the data came in much weaker than anticipated. The index dropped 5.3 points to 39.5, against a 48.0 forecast and a 44.8 reading in the previous month.

Economic expectations for the Eurozone fell in July by 3.2 points to 39.5, while the current economic situation in the Eurozone remain unchanged at -90.7.

Meanwhile, Euro area industrial production rose for the first time in over 9 months to 0.5% from -1.4%. The data, however, came in below market expectations of 1.0%.

Looking at the 4hour chart, EUR/USD remains below the 1.4000 level with downside risks equaling those to the upside. Much of the pairs next move will be determined by Goldman Sachs earnings and U.S retail sales. Currency traders will monitor equity markets closely and guide the moves according to their reaction. Much of the Goldman Sachs move has been priced in (if positive) so markets will then focus to U.S. retail sales. The bias is neutral in the near term ahead the aforementioned key events. The next level of support is the 1.3958, followed by 1.3890, 1.3810 and 1.3725.

Resistance lies at 1.4016 followed by 1.4071, and 1.4134.

Trading levels in play:

Limit Sell @ 1.4170 Targets: T1 1.4150 – T2 1.4015 Risk: 1.4219
* Good Till NY Close After 15 pips profit move stop to entry, take profit at will. Trade is canceled if it rebounds near entry and moves higher by 20 pips. Comments will follow if outlook changes.

By Forex District -

On Friday Dollar/Yen continued descending. The currency couple made a peak at 93.18, than collapsed down to 92.02, closing the week higher at 92.52. The longer the pair stays under 92.50, each upward movement is considered as a normal correction, and our preferable short term scenario for now is descending. The nearest support is today’s bottom at 91.70. Break below this level may lead to further bearish movement towards next objective 90.60. The CCI indicator is in the overbought zone and downwards of the 1 hour chart, suggesting potential descending pressure.
Technical resistance levels: 92.90 94.00 95.35
Technical support levels: 91.70 90.60 89.45

Trading range: 92.15 – 91.55
Trend: Downward

By Forex District – The pair is falling on heightened risk aversion after the U.S. NFP report showed broad based job cuts and weaker wage growth. Worries about the pace of economic recovery has also weighed on sentiment ahead of company earnings. Stocks have been trending lower on Monday and the pair is expected to look at Wall Street’s performance for direction.

Looking at the 4hour chart, AUD/USD stayed below the 0.80 level suggesting further downside possible subject to equity market moves. The pair is currently testing a strong support at 0.7891 (50.0% Fib) which may see a slight pullback. However, if equities and gold continue to fall the pair is subject to further falls below 0.7900. The bias is bearish with preferred strategy to sell on rallies in the near term. The next level of support is the 0.7809, followed by 0.7749 and 0.7704.

Resistance is now seen at 0.7963, followed by 0.8010 and 0.8087.

Trading levels in play:

Limit Sell @ 0.7968 Targets: T1 0.7948 – T2 0.7809 Risk: 0.8012
* After 15 pips profit move stop to entry, take profit at will. GTNYC Trade is canceled if it rebounds near entry and moves higher by 20 pips. Comments will follow if outlook changes. Forex – technical analysis aud/usd trend forecast July 6, 2009

Technical Levels for certain currency pairs

EUR/USD: Presently trading at 1.4064 bid
Resistance levels at 1.4092 and 1.4150.
Support levels at 1.3975 and 1.3920
We favor short EUR/USD positions.

USD/JPY: Presently trading at 96.88 bid
Resistance levels: 97.15 and 97.60
Support Levels: 96.20 and 95.50
Pair is currently (96.88) right at an inflection point with a strong move expected to come out of the 96.70 – 96.95 range. We favor long positions.

EUR/GBP: Presently trading at .8558
Resistance Levels: .8595 (important) .8620
Support Levels: .8526 and .8472
This pair has been in a range of .8425 – .8600 for a few weeks now. Playing the range means fading the current and going short near .8565. A breakout strategy will go long once .8600 is clearly breached and held. Much more upside potential (could target .8800) than downside (target .8450) but less chance of trade opportunity arrising.
We favor long positions.

Gold (presently spot bid 930.8) did not hold above our 943.50 level yesterday (see previous posting) so we expect more room on the downside for gold. Though as noted moves lower in gold have had shorter runs than moves higher for the past few months. We would be short term sellers of gold on a move higher this morning towards 935.0 using a Stop Loss order at 945.0 and a target levels of 919.5

We believe that the US Government’s monthly Non Farm Payrolls data releases are becoming less important to global capital markets, but Thursday’s release has the potential for sharp moves in the market. It is a “quick-release” month with the number coming out on the 2nd business day of the month, AND dealers on the money center desks are going to cut our early in the day. There will be large, chunky money flows across the big desks just after the data release and then the senior dealers will cut out for the holiday weekend. Watch for a very volatile Thursday morning.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

We are nearing the end of a very volatile week in the currency markets. Trying to find a big figure or two has been nearly impossible except for this past Monday.

We are sticking with our theory of stronger USD for the coming weeks based on the US Fed’s statement this past Wednesday. (See our previous postings at www.backbayfx.com/blog.php) We are concerned that the price action of EUR/USD in the last 18 hours has not showed the follow through of the initial USD strength, but we keep in mind that our expectations of stronger USD is a longer term plan…..not an intraday trade.

The US Treasury’s 10 year note has continued it’s drop in yield and has hit the 3.50% level this morning; Down from 4.00% less than three weeks ago. The moves in the US 10 year note are some of the most volatile moves we have seen in the last 12 years since we started in the FX business. the move in the 10 year has been sharp, but we feel there is still some room for rates to drop.

Finally, our technical analysis of EUR/JPY shows a trend that is still moving higher and has bounced off the support line. See chart below. Our fundamental view differs from our technical view on this pair, so we will not aggressively trade the pair.

The chances of a direct conflict between the US and North Korea are escalating. The US Navy is reportedly following a North Korean ship through international waters. Under recent UN sanctions, the US could request to board and search the vessel. North Korea would certainly not allow this to happen. Also, North Korea has promised to test a ICBM this weekend and send it over Japan into the Pacific. Supposedly the missile has the capabilities to reach Hawaii.

Either of these two events would cause enormous uncertainty in the global markets. For those clients who believe that the likelihood of either of these events happening is high, we suggest a short EUR/CHF position. normally in times of global crisis, the USD is the best safe-haven currency, followed by CHF. A short EUR/CHF position combines these two ideas since one cannot be directly long USD and long CHF in one pair.

Short EUR/CHF combines a short EUR/USD position (which has long USD as it’s denominator) with a short USD/CHF position (which is long CHF as it’s denominator). So while a short EUR/CHF position has no direct USD involved, the position is a combination of the two high probability safe-haven positions.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

In the below image, we put a EUR/USD 30 minute chart overlaid with our standard Bollinger Bands (“BB”).

We see higher lows for the last 16 hours and a fairly tight channel moving higher. The risk/reward scenario seems to be pointing towards the 1.4000 level last seen yesterday.

We suggest a Buy Limit order just below market (current bid 1.3924) at 1.3915. Our Stop Loss level order is our first support level of 1.3875 and our Target Level with this trade is 1.4000.

We are willing to lose 40 pips to gain 85.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

thanks to FX Solutions for the below image.