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The financial markets are risk averse ahead of the US open, as Greece's default is priced in. As expected, the euro zone finance ministers reached an agreement for a new economic governance package, which includes five regulations and one directive, new criterion on debt and deficit definitions, sanctions for countries that don't fulfill the compliance requirements to be applied at an earlier stage, and improved transparency in the decision-making process in the EU economic governance. But Greece is highly unlikely to live up to its pledges. Adding to the crisis, Greek Prime Minister Papandreou cancelled his visit to the US to chair an emergency meeting and Germany's chancellor Angela Merkel suffered defeat at a regional election.
All of the foreign currency futures but the yen open lower in the US. The Asia/Pacific stock indexes sank, and the European bourses and the pre-open US stock indexes are sharply lower. Meanwhile, gold is up and oil down.
The short-term outlook for most of the major foreign currencies is bearish. Later this week, the Fed is expected to unveil some sort of stimulus plan, probably a scheme to reduce the yield of longer-dated Treasury bonds. The medium-term outlook is bearish for the European currencies and sideways for yen and the commodity currencies. The LGR short-term model is short on all of the major foreign currencies but the Canadian dollar.
Look for updates on my model's positions on Twitter: They are free, but with considerable delay. Once offered, you will have to pay subscription to get the model turns in advance.
Good luck!
Cornelius
www.lucafxta.com
Overnight:
- UK: Rightmove house prices rose 0.7% in September following a 2.1% plunge in August.
- Euro zone: Construction output increased 1.2% year-on-year in July, following a revised 11.5% decrease in June.
Today's economic calendar:
- US: NAHB Housing Market Index for September
EUR – December
Luca Model: Short since August 30
The oversold December euro opens further down in the US after falling on Friday. It had peaked at a four-day high on Thursday. Its reversal from a seven-month last Monday suggested that a medium-term bottom is in place, but we need to see the depth of the decline I expect through Tuesday. The short-term outlook is bearish. The medium-term outlook is bearish and my model is short.
Net non‐commercial positions: The short position EUR increased by 18,016 contracts to 54,459 contracts.
Immediate support is at 1.3610. A pivot low is at 1.3500.
Initial resistance is at 1.3700. The next ceilings are 1.3765, 1.3830 and 1.3925. The 21-day exponential moving average caps at 1.3984.
INDICATORS
Fast stochastics: Bearish
MACD: Bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Sideways
JPY – December
Luca Model: Short since September 16
The December Japanese yen found support from the 21-day exponential moving average and opens slightly higher in the US. It has been trading in a very tight range. The yen remains overbought in the medium term, and the short-term outlook is sideways. The medium-term outlook is sideways and my model is short.
Net non‐commercial positions: The long JPY position increased by 2,168 contracts to 34,955 contracts.
Initial resistance is 1.3095. The top of the uptrend is 1.3180.
The 21-day exponential moving average supports at 1.2999. The next floor is 1.2905. Friday's low is 1.2860.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Sideways
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Sideways
MEDIUM-TERM: Bullish
LONG-TERM: Bullish
GBP – December
Luca Model: Short since August 24
The oversold December pound opens off an eight-month low in the US. The currency remains in a declining channel. The short-term outlook is slightly bearish. The medium-term outlook is slightly bearish and my model is short.
Net non‐commercial positions: The short GBP position increased by 12,973 contracts to -26,193 contracts.
Initial support is at 1.5670. The next support is 1.5600. A distant floor is 1.5555.
Immediate resistance is at 1.5775. The next cap is 1.5850.
INDICATORS
Fast stochastics: Bearish
MACD: Bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Sideways
CHF – December
Luca Model: Short since September 6
The oversold December Swiss franc opens lower after falling in an inside range on Friday. The short-term outlook is bearish. The medium-term outlook is bearish and my model is short.
Net non‐commercial positions: The long CHF position decreased by 2,056 contracts to 5,493 contracts.
Monday's low is 1.1316 and last Monday's key low is 1.1234.
Immediate resistance is at 1.1395. The 200-day exponential moving average caps at 1.1484. The next caps are 1.1540 and 1.1595.
INDICATORS
Fast stochastics: Bearish
MACD: Bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Sideways
CAD – December
Luca Model: Long since September 15
The oversold December Canadian dollar opens off its overnight low after marking a two-week high on Friday. It found support from the 21-day exponential moving average. The currency has been consolidating since early August. The short-term outlook is sideways to slightly bearish. The medium-term outlook is sideways and my model is long.
Net non‐commercial positions: The CAD position turned negative 6,303 contracts after 8,384 contracts were sold.
The 21-day exponential moving average supports at 1.0134. Further support is at 1.0030. A pivot low is at .9951.
Immediate resistance is at 1.0210. A pivot high is at 1.0257.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Sideways to slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Sideways
AUD – December
Luca Model: Short since September 2
The December Australian dollar opens lower after advancing for two days. The short-term outlook is sideways to slightly bearish. The medium-term outlook is slightly bearish. My model is short.
Net non‐commercial positions: The long AUD position decreased by 11,107 contracts to 36,934 contracts.
Initial support is at 1.0105. Further support is at 1.0065 and .9962.
Immediate resistance is at 1.0200. The 21-day exponential moving average resists at 1.0317.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Sideways to slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Sideways
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
