EUR/USD expected to go lower

Euro Dollar against US Dollar (EUR/USD)

Last week I suggested in this column that there were two outstanding possible scenarios that may help us interpret current price action on the charts, and how that helps us to forecast major directional change over the next few days and weeks.

Scenario #1 in brief – that the down move will continue, but that downward and sideways action over the next several days was probable.

Scenario #2 – The correction is complete and the market will continue to rally to test the July 8th high.

I continue to favor Scenario #1, and that is primarily because of the price pattern on the chart rather than any particular technical or fundamental indicator. The market has indeed moved down and sideways during the past several days. Neither the low of Oct. 28th nor the high of November 2nd has been surpassed.

There is even the possibility that a triangle pattern is forming in this consolidation which, if it occurs would imply several more days of tight range movement.

Whatever pattern eventually emerges from the consolidation, it is most likely a wave four in Elliott Wave terms, and the outcome of a wave four pattern, in this case, should be an eventual break of the low at 1.2326 with a near-term price target between 1.2000 – 1.1700.

A rise in price above 1.3881 before 1.2326 is exceeded to the downside would cause a change to this outlook.


EUR/USD chart as at 6 November 2008 using NextVIEW Advisor

TECHNICALS

R1 – Nearby resistance at 1.3298.
R1- 1.3881
S1 – Nearby support at 1.2317
S2 – downside targets from 1.2000-1.1700

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.

Can we depend on our Leaders to handle our economy?

Malaysia is not going into recession next year... economy fundamentals are strong, says our up and coming PM. But what is happening now, Mr. PM to be cum Finance Minister, does not seem to look like it...

RM$5b "bailout" loan to State investment company, ValueCap Sdn Bhd from EPF to invest in the stock market. ValueCap owes its three shareholders RM$5.1b. The move was highly questionable. Deputy PM, now Finance Minister defended the move by saying that ValueCap has good performance record. Then why the hell do they need the RM5b loan if the they performed well.

Goverment spending RM$42b in September to defend the Ringgit... Wow. Again Mr. PM to be, why do we need to spend so much to defend our Ringgit if the economy is fundamentally strong? Haven't we learned something from the Asian Financial crisis? Oh.. I forgot, your right hand man (Finance Minister II) is a gambler and he once lost big during the Asian financial crisis. Like all gamblers, revenge would be sweet... our sour. I just hope we would need to get assistance from World's loan shark, the IMF in the near future.

And recently RM7b stimulus package to strengthen the economy and boost confidence within the private sector. I am OK with this, but I always fear the implemention part and our government has very good track records for this.. remember all the development corridors? from south, north, east, west , heaven and earth... what happened to them? I am sure money will be syphoned out of the package. YAB PM to be.... tak cukup lah (not enough).

Our current PM says price of goods MUST fall, now that price of oil has declined... but who is listening Mr. PM? Last time I checked, prices still the same. In fact, some vendors still has the gut to raise prices even now...Inflation to come down? Domestic Trade and Affairs minister said that there is no guarantee that price of goods must come down.

Bahhhh... But I must salute him for changing his finance minister portfolio with his deputy because he knows that he do not know anything about finance and economy. I am not sure whether the deputy knows about the economy or not but I only know his brother is a great banker.

Can Malaysia depend on Finance Minister II?.... He's a gambler. What if Malaysian currency continues to depreciate? Gamble more? His hands must be itchy after 11 years.

No wonder the opposition walked out of parliament in protest.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Buy Commodities....

and the US Fed should shut down... "Legendary Investor" Jim Rogers interview on Bloomberg. Jim Rogers also mentioned previously that government bailouts will cause hyperinflation. He's right many times...



Price of major commodities from early 2008 to current time (17:20pm +8:00 GMT):


Charts created from NextVIEW Advisor Professional

N.I.N.E.

Kuala Lumpur Composite Index (KLCI): Strong down trend

Once again, the KLCI easily broke the immediate support of 950 points and plunged to its lowest low since June 2004 at 801 points before rebounding immediately. Despite this, the Malaysian market was less volatile than other equity markets. The government has repeatedly given assurance that the Malaysian financial market exposure to the current financial crisis is minimal but investors are still concerned. Inflation has not really declined despite lower commodity prices and weaker currency adds more weight to the concern.

The down trend remains resilient and the currently the KLCI level is way below the average at 863.61 points while the short term 30-day average is at 950 points. Momentum indicators are indicating that the down trend momentum is strong and therefore the KLCI may decline further. If the KLCI goes lower than the 801 points low, it may find the next major support level at 600 points. The current immediate resistance is 950 points and is the KLCI is able to break and stay above this resistance level, a sideway correction is expected.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Singapore FTSE Straits Times Index (FTSTI): Expected to gain short rally from rebound

The Singapore market was in a very volatile mode. Banking and finance stocks faced heavy selling pressure. Singapore is technically in a recession. Despite technically being heavily oversold, the FTSTI was sent to an unexpected low of 1,473.77 points recently, lowest since August 2003 after easily breaking the support level of 2,100 points. It also rebounded sharply to close at 1,794.20 points in the same week. It was a roller-coaster month for Singapore investors.

The STI is still highly oversold because the short term 30-day average is at 2,100 points. The weekly chart on the STI has formed a bullish candlestick reversal pattern called piercing lines and therefore a short rally is expected from this rebound. Furthermore the RSI indicator shows a bullish divergence which means that the down trend is rather weak on the daily chart. With the trend is still strong downwards in the longer term, the rally is expected to be short with a resistance at 2,100 points. While the 1,473 low becomes the immediate support level, stronger support level only exists at 1,200 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Hong Kong Hang Seng Index (HSI): may form short rally upwards

It was a very volatile month for the Hong Kong equity market. On the 27th of October, the HSI was three times lower than its peak of 32,000 points just one year ago. The HSI was at 11,015.84. However, a strong rebound followed and the HSI is currently at 13,968.67 points. The Hong Kong market was highly affected by the performance in the US and China markets. The Shanghai Stock Exchange Composite is currently three and a half times lower than its peak last year.

The HSI short term average is currently at 15,950 points. Therefore the HSI is still oversold. A bullish divergence is formed on the daily chart by the RSI indicator and this indicates that the short term down trend momentum is weak. The rebound formed this week may form short rally upwards. However, it may face heavy resistance and the first one is the above short term average. Support level is at 11,000 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.