Daily Form September 22, 2010

Inter-market Technical Analysis using algorithmic pattern detection

WEDNESDAY SEPTEMBER 22, 2010       10:31:00 GMT

From one perspective, the FOMC did not disappoint on signalling its preparedness for more asset purchases to be funded from the public balance sheet, but for those long the US dollar it has been a rough 24 hours and could get a lot rougher.

Just how much enthusiasm equity bulls can muster today when trading begins in North America remains to be seen but in Europe the market is seeing a case of having bought on the rumor throughout the earlier part of this month and selling on the news.

The FTSE 100 is again demonstrating difficulty in maintaining a foothold above the 5600 level and at the time of writing the Spanish IBEX 35 index is down about 2%. Also attention should be focused on Ireland where the news seems to get gloomier and where there are ongoing rumors of capital flight from that country’s private banking sector.

Here again are my comments from the September 13th commentary:

The stated objectives of the sector fund, CYB, are "to achieve total returns reflective of both money market rates in China available to foreign investors and changes in value of the Chinese Yuan relative to the U.S. dollar."

Recent stirrings in the Chinese currency, partly reflected in the chart below, suggest that this ETF is a vehicle to consider if there is follow through in daily range expansion.

EUR/GBP hit my target of 0.8530 in this morning’s trading and I exited my remaining long position established at 0.8380. With the euro steaming ahead for a possible test of the $1.35 level this pair still could has capacity for further gains on the long side but I would become more willing to re-enter after a pullback and consolidation of this morning’s gains.

The weekly chart for USD/CHF shows clearly the disdain from FX markets following the latest deliberations of the FOMC, and even though Chairman Bernanke may not disapprove of a weak dollar for US trade competitiveness, as custodian of the global reserve currency there would be some concern if there is no stabilization in the context of a potential triple bottom formation on this key cross rate.