Category: UK & Europe

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Forex: Euro and Aussie rise as Dollar weakens

The Euro respected support, on a brief retracement to $1.34/$1.3450, before following through above the last two week’s high — signaling a test of the February high at $1.37. Breakout would offer a long-term target of $1.46*. The trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend. Respect of resistance is unlikely, but would warn of another correction.

Euro/USD

* Target calculation: 1.37 + ( 1.37 – 1.28 ) = 1.46

The greenback is heading for a test of primary support at ¥96 after breaking short-term support at ¥98 on the daily chart. Failure of support would offer a target of ¥92*. Reversal of 13-week Twiggs Momentum below zero would also warn of a primary down-trend. Recovery above the descending trendline is unlikely at present, but would indicate a rally to ¥100.50.

USD/JPY

* Target calculation: 96 – ( 100 – 96 ) = 92

The Aussie Dollar has so far respected support at $0.93 against the greenback. Follow-through above $0.94 would suggest an advance to $0.97; confirmed if resistance at $0.95 is broken. Reversal below $0.93, however, would warn of a correction to primary support at $0.89.

Aussie Dollar

* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97

The Aussie continues to test support at $1.12 against its Kiwi neighbour. Tall shadows (wicks) for the last two weeks indicate selling pressure. Failure of support would offer a target of $1.08*. Recovery above the descending trendline is less likely, but would suggest an advance to $1.20; breakout above $1.16 would confirm, completing a double-bottom reversal.

Kiwi Dollar

* Target calculations: 1.12 – ( 1.16 – 1.12 ) = 1.08

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European markets retrace, but FTSE bearish

European markets are consolidating after recent gains with the exception of Italy, which is suffering from political instability, while the FTSE 100 displays persistent selling pressure.

The FTSE 100 is heading for a test of primary support at 6400, having broken medium-term support at 6500. Declining 21-day Twiggs Money Flow after a lengthy period below zero indicates medium-term selling pressure; bearish divergence on the 13-week indicator also warns of strong selling pressure. Failure of support at 6400 would signal a primary down-trend; respect is unlikely, but would suggest another test of 6700.

FTSE 100

Germany’s DAX retraced to the new support level at 8500. Respect would offer a medium-term target of 9000* and a long-term target of 9400*. Reversal below 8000 is unlikely, but would warn of another test of primary support at 7600.

DAX

* Target calculation: 8500 + ( 8500 – 8000 ) = 9000 ; 8500 + ( 8500 – 7600 ) = 9400

France’s CAC-40 is similarly testing support at 4100. Recovery above its 2011 high of 4200 would offer an immediate target of 4300* and a long-term target of 4500*. Reversal below 3900 is unlikely but would warn of a test of primary support at 3600.

CAC-40

* Target calculation: 4100 + ( 4100 – 3900 ) = 4300 ; 4050 + ( 4050 – 3600 ) = 4500

Spain’s Madrid General Index displays healthy buying pressure on 13-week Twiggs Money Flow. Retracement that respects support at 900 would confirm a long-term advance to 1050*. Reversal below 900 is unlikely, but would warn of a correction.

Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050

Italy’s MIB Index is weaker, following a rift between Prime Minister Enrico Letta and his coalition partner, Silvio Berlusconi. Follow-through below the rising trendline would test support at 16500. Recovery above 18000, on the other hand, would signal a primary advance with a long-term target of 20000*.

MIB Index

* Target calculation: 17500 + ( 17500 – 15000 ) = 20000

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Forex: Aussie and Euro breakout

The Euro broke through resistance at $1.34/$1.3450, offering a medium-term target of $1.37* and long-term target of $1.40*. A trough above zero on 13-week Twiggs Momentum indicates a healthy up-trend.

Euro/USD

* Target calculation: 1.34 + ( 1.34 – 1.31 ) = 1.37; 1.34 + ( 1.34 – 1.28 ) = 1.40

The greenback is ranging aimlessly between ¥96 and ¥101 against the yen, indicating uncertainty. Breakout from the range will indicate future direction. Reversal of 13-week Twiggs Momentum below zero would suggest a primary down-trend.

USD/JPY

* Target calculation: 101 + ( 101 – 96 ) = 106

The Aussie Dollar retraced to test support at $0.93/$0.935 against the greenback after its recent breakout. Respect is likely and would suggest an advance to $0.97*. Follow-through above $0.95 would confirm.

Aussie Dollar

* Target calculations: 0.95 + ( 0.95 – 0.93 ) = 0.97

The Aussie found support at $1.12 against its Kiwi neighbour. Recovery above $1.16 and the descending trendline would complete a double-bottom reversal, offering a target of $1.20*.

Kiwi Dollar

* Target calculations: 1.16 + ( 1.16 – 1.12 ) = 1.20

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Europe: Bullish except for FTSE

European markets continue to display healthy primary up-trends with the exception of the FTSE 100 which warns of selling pressure.

Germany’s DAX broke through medium-term resistance at 8500, offering a medium-term target of 9000* and a long-term target of 9500*. Reversal below 8000 is unlikely, but would warn of another test of primary support at 7500.

DAX

* Target calculation: 8500 + ( 8500 – 8000 ) = 9000 ; 8500 + ( 8500 – 7500 ) = 9500

France’s CAC-40 is testing resistance at its 2011 high of 4200. Retracement to short-term support at 4100 is likely. Respect of support would be a bullish sign, while breakout above 4200 would offer an immediate target of 4300* and a long-term target of 4500*. Reversal below 3900 is unlikely but would warn of a bull trap.

CAC-40

* Target calculation: 4100 + ( 4100 – 3900 ) = 4300 ; 4050 + ( 4050 – 3600 ) = 4500

Spain’s Madrid General Index followed through above 900, but is now retracing to test the new support level. Respect would confirm a long-term advance to 1050* (960* in the medium-term). Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 840 is unlikely, but would warn of a bull trap.

Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050 ; 900 + ( 900 – 840 ) = 960

Italy’s MIB Index is testing resistance at 18000. Retracement to support at 17500 is likely, but respect would be bullish. Breakout above 18000 would offer an immediate target of 18500 and a long-term target of 20000*. Reversal below 16500 is most unlikely, but would warn of a bull trap.

MIB Index

* Target calculation: 17500 + ( 17500 – 15000 ) = 20000

Bearish divergence on the FTSE 100 (13-week Twiggs Money Flow) warns of strong selling pressure. Reversal below 6400 would warn of a primary down-trend, confirmed if the rising trendline is broken. Reversal of TMF below zero would strengthen the signal. Breakout above 6750 is unlikely, but would signal a medium-term advance to the 1999 high of 7000.

FTSE 100

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Forex: Euro, Sterling and Aussie Dollar strengthen

The Euro found support at $1.31, the short retracement suggesting a breakout above resistance at $1.34/$1.3450. Breakout would offer a target of $1.40*. Rising 13-week Twiggs Momentum indicates a healthy primary up-trend.

Euro/USD

* Target calculation: 1.34 + ( 1.34 – 1.28 ) = 1.40

Sterling is doing even better, breaking through resistance at €1.19 after piercing the descending trendline. Breakout completes a double bottom reversal with a target of €1.24*. Recovery of 13-week Twiggs Momentum above zero also suggests a primary up-trend. Reversal below €1.16 would warn of a bull trap, but is most unlikely.

Sterling/Euro

* Target calculation: 1.19 + ( 1.19 – 1.14 ) = 1.24

The greenback is stabilizing against the Yen after losing momentum over the last 3 months. The recent rally respected resistance at ¥100/101 and another test of ¥96 is likely. Breakout above ¥101 would offer a target of ¥106*, but failure of support at ¥96 remains as likely, and would warn of a primary down-trend.

USD/JPY

* Target calculation: 101 + ( 101 – 96 ) = 106

Canada’s Loonie is headed for a test of the descending trendline and resistance at $0.9750. Bullish divergence on 13-week Twiggs Momentum favors a breakout, while recovery above zero would suggest a primary up-trend. Breakout would also complete a double-bottom reversal, with a target of parity*. Reversal below $0.96 is unlikely, but would warn of another test of primary support at $0.9450.

Canadian Loonie

* Target calculation: 97.5 + ( 97.5 – 94.5 ) = 100.5

The Aussie Dollar also completed a double-bottom reversal against the greenback — this time on a daily chart — offering a target of $0.95*. Follow-through above $0.93 confirms the signal. Reversal below $0.92 is unlikely, but would warn of another test of primary support at $0.89.

Aussie Dollar

* Target calculations: 0.92 + ( 0.92 – 0.89 ) = 0.95

The Aussie continues to weaken against its Kiwi neighbour. Respect of primary support at $1.12 and recovery above the descending trendline, however, would warn that a bottom is forming. Breakout above $1.16 would confirm, offering a target of $1.20*.

Kiwi Dollar

* Target calculations: 1.16 + ( 1.16 – 1.12 ) = 1.20

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Europe: Unleash the bulls

Spain’s Madrid General Index broke resistance at 900, indicating a long-term advance to 1050* (960* in the medium-term). Rising 13-week Twiggs Money Flow indicates buying pressure. Reversal below 840 is unlikely, but would warn of a bull trap.
Madrid General Index

* Target calculation: 900 + ( 900 – 750 ) = 1050; 900 + ( 900 – 840 ) = 960

Germany’s DAX is similarly testing resistance at 8500. Breakout would offer a medium-term target of 9000* and a long-term target of 9500*. Recovery of 13-week Twiggs Momentum above 10% would also signal continuation of the primary up-trend.
DAX Index

* Target calculation: 8500 + ( 8500 – 8000 ) = 9000; 8500 + ( 8500 – 7500 ) = 9500

France’s CAC-40 is testing resistance at 4120. Breakout would offer a medium-term target of 4300*, but follow-through above its 2011 high at 4200 would also confirm a long-term advance to 4500*. Reversal below 3900 is unlikely but would warn of a bull trap.
CAC-40 Index

* Target calculation: 4100 + ( 4100 – 3900 ) = 4300; 4050 + ( 4050 – 3600 ) = 4500

Italy’s MIB Index is also testing resistance, at 17700. Money Flow indicates strong buying pressure and breakout above 18000 would signal a long-term advance to 20000*. Reversal below 16500 is most unlikely, but would again warn of a bull trap.
MIB Index

* Target calculation: 17500 + ( 17500 – 15000 ) = 20000

The FTSE 100 is far more subdued, encountering resistance at 6600 after an end to the recent correction. Follow-through above 6700 would signal a medium-term advance to the 1999 high of 7000*, but reversal below 6500 would warn of another test of medium-term support at 6400. Failure of 6400, while unlikely, would test primary support at 6000.
FTSE 100 Index

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FTSE & DAX face stubborn resistance

The FTSE 100 followed-through above initial resistance at 6500, indicating another test of 6700/6750. Breakout above 6750 would offer a target of 7500*, but bearish 13-week Twiggs Money Flow continues to warn of selling pressure. Reversal below 6400 would warn of a test of primary support at 6000.

FTSE 100 Index

* Target calculation: 6750 + ( 6750 – 6000 ) = 7500

Germany’s DAX respected support at 8000, indicating another test of stubborn resistance at 8500. Declining momentum suggests the primary up-trend is slowing. Reversal below support at 8000 would confirm, while breakout above 8500 would offer a long-term target of 9000*.

DAX Index

* Target calculation: 8400 + ( 8400 – 7800 ) = 9000

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Vickers calls for doubling of bank capital levels | FT.com

“It is not very sensible to run a market economy on the basis of a banking system that is 33 times leveraged, let alone 40 or 50 times leveraged,” Sir John [Sir John Vickers, Oxford academic who chaired the Independent Commission on Banking] told the Financial Times. He believes the right number is closer to 10 times, equivalent to a 10 per cent ratio.

That is a lot higher than the 3 per cent (33 times leverage) required by Basel III and the 4.1% (CBA) to 4.5% (WBC) of the big four Australian banks.

Read more at Vickers calls for doubling of bank capital levels – FT.com.

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Forex: Euro weakens but Aussie, Yen resilient

The Euro followed through below $1.3150, after breaking support at $1.32, confirming a correction to primary support at $1.2750/1.2800. Reversal of 63-day Twiggs Momentum below zero would strengthen the signal.

Euro/USD

Sterling penetrated the descending trendline (weekly chart) against the euro, suggesting the primary down-trend is over. Breakout above €1.19 would complete a double bottom with a target of €1.24*. Recovery of 13-week Twiggs Momentum above zero also indicates a primary up-trend. Reversal below €1.16 is unlikely, but would warn the down-trend may continue; failure of primary support at €1.14 would confirm.

Sterling/Euro

* Target calculation: 1.19 + ( 1.19 – 1.14 ) = 1.24

The greenback broke out of its triangular pattern (weekly chart) against the Yen, but too close to the apex to have much significance. Follow-through above ¥101.50 would offer a long-term target of ¥114*. Reversal below ¥96 is unlikely, but would test primary support at ¥94.

USD/JPY

* Target calculation: 104 + ( 104 – 94 ) = 114

Canada’s Loonie is testing primary support at $0.9450 against the greenback. Respect, indicated by recovery above $0.96, would test the descending trendline (weekly chart) and resistance at $0.9750. Failure of support is as likely, however, and would warn of another decline.

Canadian Loonie

The Aussie Dollar penetrated its descending trendline (daily chart) against the greenback, suggesting the primary down-trend is weakening. Breakout above $0.92 would complete a double-bottom reversal with an initial target of $0.95*. Respect of resistance remains likely, however, and would signal another test of primary support at $0.89*.

Aussie Dollar

* Target calculations: 0.92 + ( 0.92 – 0.89 ) = 0.95; 0.89 – ( 0.92 – 0.89 ) = 0.86

The Aussie penetrated its descending trendline (weekly chart) against the Kiwi, suggesting that the primary down-trend is over. Breakout above $1.16 would confirm, while reversal below $1.12 would signal another decline.

Canadian Loonie

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