Daily Form December 17, 2009

Inter-market Technical Analysis using algorithmic pattern detection

THURSDAY DECEMBER 17, 2009       06:55 ET

I made the comment recently that if the Euro failed to find support at the $1.45 level there was a rather disturbing prospect that some large FX players may know more about the internal European Monetary Union dynamics than the bulk of the market. We shall have to wait and see just how much further there is to be known about the tightrope being walked by the ECB at present as S&P have joined the fray with a BBB+ downgrade of Greek sovereign credits.
The weekly chart below for EUR/USD suggests that major support for the euro may have to wait to $1.4180 before it kicks in.

USD/GBP has also fallen out of bed this morning on weaker than expected retail sales data in the UK.
The Bank of England may be keen on a weak pound but the Treasury still has £200 billion of gilts to sell this year and next year and may have to take another look at its QE stance.
At least the Christmas lights look nice in London at this time of the year - it even snowed here yesterday to provide some additional seasonal cheer.

To complete the trio of headaches for the big FX carry trade advocates the Australian dollar is breaking down as well as the bullish dollar bandwagon gathers pace.

The chart below for the Hang Seng is reminiscent of the one for the Nikkei 225 a few weeks back. The BOJ managed to find a rabbit or two still in its hat and conjured the Nikkei back to life so we shall have to see whether the Chinese authorities also can deliver the necessary placebo to "stabilize" matters.


The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions.
None of these setups should be seen as specifically opportune for the current trading session.
For a more comprehensive listing of price formations detected by our pattern recognition algorithms please visit TradeWithForm

GS  The Goldman Sachs Group Inc.  

Notice the huge green volume spike on the open yesterday in trading for Goldman Sachs (GS) which more or less coincided with a comment from the company that it was recommending long EUR/USD positions with a $1.55 target in three months to its clients. Initially the euro found a bid on the comments and the GS prop trading desk, which has most likely been busy selling US dollars to support its book, must have felt that the market was willing to listen, as ever, to the smart strategists at the firm.
As the day wore on and with the less than super-accommodating remarks from the Fed, the new found affection for the greenback gathered more momentum and this has really kicked in during the overnight session in Asian trading and in Europe this morning.
GS may, like many firms with large proprietary trading interests have to re-assess some of its current positioning or may be it should simply keep repeating its message about the attractiveness of the euro at current levels.
It promises to be an interesting session when North American trading opens and GS and JPM will be well worth monitoring today.