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Daily Observations: October 5, 2012

Daily Observations: October 5, 2012

Christopher Vecchio, CFA, Senior Strategist

Current Positions:

- Long NZDUSD from 0.8195, Stop at 0.8170, Target 1 at 0.8300 (will trail)

- Long EURCHF from 1.2018, Stop at 1.1990, Target 1 at 1.2500, Target 2 at 1.2750

- Short USDJPY from 78.56, Stop at 79.05, Target 1 at 78.10, Target 2 at 77.90

Pending Positions:

- Pending Long USDJPY daily close >80.65

- AUDUSD: A bullish Outside Day yesterday after holding key support gives us a bias higher. However, the pair has run into resistance once support, at 1.0270 and 1.0255 today, the descending trendline off of the September 12, September 20, and September 26 lows. Resistance comes in at 1.0255/75, 1.0330, 1.0405/25 (mid-August swing lows), and 1.0470/85 (former intraday swing levels). Support comes in at 1.0160/75 (mid-July and early-September swing levels), 1.0100/10, and 1.0000. Bias: bullish above 1.0160/75.

- EURUSD: The strong performance yesterday cleared a number of important resistance levels, including the psychologically significant 1.3000. But considering that we’re still within prices we’ve seen over the past two-weeks, our key levels remain the same. Resistance comes in at 1.3030/35 (October high), 1.3145, and 1.3165/75 (September high). Support comes in at 1.3000, 1.2960/65 (5-EMA), 1.2890/95 (20-EMA), and 1.2820/30 (200-DMA, late-April swing high). Bias: bullish above 1.2830.

- GBPUSD: The lack of follow through on the break from Wednesday led to a sharp rebound yesterday, with the GBPUSD closing back above major support at 1.6100/25 (20-EMA, descending trendline off of April 2011 and August 2011 highs, ascending trendline off of August 2 and August 31 lows). However, there’s been little progress today, so we think it is possible that there’s a healthy retest of the key support. A break below suggests a move to 1.5970/75 (former channel resistance off of June 20 and August 23 highs), and 1.5770/85 (late-August swing lows. Resistance comes in at 1.6260 (the former April swing highs by close) and 1.6300 /10 (September high). Bias: bullish above 1.6100/20.

- USDJPY: Yesterday I said “Today the USDJPY has held in the 78.40/60 zone, a level that was pivotal in August. With descending TL resistance overhead, further upside price action is likely capped.” Indeed, price is stuck in the same zone, which means our outlook is little changed. A daily close above 78.40/60 (50-EMA) suggests a move to 78.80/90 (100-DMA, descending trendline off of the April 20 and June 25 highs), and 79.20/30 (200-DMA, September high). Should price close at or below 78.40/60, support comes in at 78.10/20, 77.90, 77.65/70 (June 1 low),77.40/45 (September 28 low), and 77.10/15 (September low). Bias: bearish.

- SPX500: A push to the highs remains around the corners. “Since early-August, the 20-EMA has been strong support, with no two consecutive closes below occurring. We also note that over this time frame the daily RSI has not moved below 50.” Resistance comes in at 1475, and 1498/1504. Support comes in at 1458/60, 1445/47(20-EMA), 1425 (the 61.8% Fibo retracement on June 2012 low to September 2012 high), and 1423/25 (50-EMA). Bias: bullish above 1445/47.

- GOLD: Gold is hovering in the crucial 1785/1805 resistance zone, and today’s NFPs could result in the break or the pullback to support. It is important to consider that the sharp ascending trendline off of the August 15 and August 31 lows has held, now reinforced by the 20-EMA at 1755/60, also former intraday swing lows throughout mid-September. If this resistance breaks, a move to 1840 shouldn’t be ruled out. Another failure at 1785/1805 would likely result in a pullback to 1750/55. Bias: bullish above 1750/55.

Any other trade ideas and general macroeconomic musings can be found in the Real Time Newsfeed, or by following me on twitter @CVecchioFX.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail

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