FOREX Daily Xnalytics 200411

Having rallied significantly on Monday, the Dollar traded lower against all of the major

currencies with the exception of the New Zealand dollar and Swiss Franc. Credit quality

is definitely a big deal for any country and the U.S. is no exception. Based upon the

persistent demand for gold, which was bid up to a record high, traders are indeed

worried about inflation and credit quality. The Swiss Franc and Gold are the only true

safe havens left which is why gold has seen such strong demand. Although a downgrade

of the U.S.’ credit rating is not an immediate risk, Standard & Poor’s announcement on

Monday served as a strong warning to the U.S. government that if they do not get their

act together and collaborate quickly to pass the 2012 Budget, the credit quality of the

U.S. will become a much more serious problem. Fiscal tightening is inevitable and if the

U.S. government wants to avoid a similar move by Fitch and Moody's, they need to make

some progress quickly. Unless the Federal Reserve shows willingness to normalize

monetary policy, traders have very little reason to buy the US Dollar which is why most

continue to expect the Dollar to underperform.

Stronger housing market numbers from the U.S. failed to lend much support to risk

appetite. Currencies gradually moved higher throughout the European trading session

and the moves initially extended on the heels of stronger US building permits and housing

starts but the gains were short-lived. Last month, permits rose 11.2 percent which was 10

times more than expected while starts rose 7.2 percent. Bad weather in February caused

housing market numbers to be unusually bad and now we are witnessing a rebound back

to more normal levels for March. Although these reports indicate that the housing market

in the U.S. improved, before getting too excited, traders should realize that the absolute

level of permits and starts are still low compared to last year's average, when the U.S.

economy was on softer footing. It will be difficult for the housing market to experience a

full-fledged recovery, until the U.S. economy gains momentum and jobs become plentiful -

unfortunately this is not very likely in the near term. Nonetheless permits are a forward

looking indicator for the housing market and the 11.2 percent rise brings hope for a

pickup in activity in the coming months. Existing home sales are due for release

Wednesday and like the housing reports later, a rebound is expected in the month of

March.

What’s Gold Gotta Do With It?

EUR-USD 4

GBP-USD 6

USD-CHF 8

USD-JPY 10

AUD-USD 12

SPOT GOLD 14

ABOUT THE AUTHOR 16

Inside this issue:

X N A L Y T I C S I N T E R N A T I O N A L

Wednesday, April 20, 2011

The rally in equities and improvement in risk appetite drove the Japanese Yen lower against all of the major currencies. The

only economic data that was released from Japan Tuesday was consumer confidence. It should surprise no one that

consumer confidence fell to its lowest level since July 2009. The earthquake last month halted business activity and there

was a great deal of uncertainty surrounding the radiation from the nuclear power plants. In fact, traders are surprised that

consumer confidence did not fall more significantly. The index only dropped from 41.2 to 38.6. Part of the reason for the

smaller decline could be the fact that the survey asks consumers how they think the economy will fare 6 months from now

and not how it is doing at the moment. The merchandise trade balance is due for release later and traders expect trade

activity to decline as well with exports likely to turn negative.

Japanese Consumer Confidence Took A Knocking

Wednesday, April 20, 2011

Economic Releases

ECB Officials Continues Talks Of Tightening

Wednesday , Apr i l 20 , 2011

After selling off aggressively on Monday, the Euro rebounded strongly as ECB officials continue to talk about the need for

tighter monetary policy. Monday it was Wellink that said the Euro is not overvalued and there is scope for further increases

in ECB rates. Tuesday, Stark said inflation pressures are rising and rate normalization means a gradual increase in interest

rates. What traders have learned about the ECB through the years is that they never like to send mixed signals to the

market. Since raising interest rates earlier this month, comments from central bank officials have been fairly consistent. They

are still looking to raise interest rates and none of the sovereign debt troubles in recent weeks has affected their bias. The

credit quality of both the Eurozone and the U.S. has come into question but the problems in the U.S. are far more severe

because in the Eurozone, only the peripheral countries have credit issues. Even though they share a common currency, the 17

members of the Eurozone have their own individual credit ratings. The latest PMI numbers also show that they enjoy a

different pace of growth. In the Eurozone as a whole and Germany in particular, manufacturing activity accelerated while

service sector activity slowed. In France, stronger economic activity was reported in both the service and manufacturing

sectors. Overall, the latest economic data shows the Eurozone economy performing very well despite a recent interest rate

hike, higher commodity prices and a strong currency. German producer prices are scheduled for release Wednesday and

given the drop in wholesale prices, PPI growth could ease which would be negative for the euro. However if ECB officials

continue to stress the need for tighter monetary policy, traders will quickly forget about any other disappointments.

BoE Minutes

Despite the lack of economic data, the British Pound traded higher against the U.S. Dollar. The minutes from the most recent

Bank of England meeting will be released Wednesday and how monetary policy officials voted earlier this month will

determine whether Sterling has enough momentum to break above 1.6400, which has become an almost insurmountable

barrier for GBP-USD. The Bank of England left interest rates unchanged earlier this month. Since this was expected, it was

not particularly market moving for the Pound. As a result, the minutes which provide us with a look into the central bank’s

discussions and bias have become much more important to the outlook for Sterling than the interest rate announcement. Back

in March, six out of the nine members of the monetary policy committee members voted to leave interest rates unchanged

and 3 voted to raise rates. Despite the central bank's belief that inflation could rise above 5 percent in the near term,

concerns about weak demand discouraged other MPC officials back from favoring tighter monetary policy. Since then,

retail sales have weakened, validating the MPC’s concerns but at the same time, commodity prices have also increased

significantly but the impact on consumer prices has been limited. If every one of the MPC members voted the same way in

April as they did in March, it would be perceived as bearish for the GBP. If Bean or Tucker voted to raise interest rates

however, it would renew expectations for a rate hike that would fuel further gains in the British Pound. Stay tuned.


EUR-USD WEEKLY

DOMINANT TREND

UPWARD BIAS

EUR-USD DAILY

DOMINANT TREND

UPWARD BIAS

In the bigger picture, the break of 1.4281 resistance firstly confirms that medium-term rebound from 1.1875 has resumed. Further rise should now be seen towards the 100% projection of 1.1875 to 1.4281 from 1.2873 at 1.5279. Also, note that current development also affirms the case that medium-term correction from 1.6039 was completed with three waves down to 1.1875 and the long-term uptrend might be resuming. A decisive break of the 100.0% projection of 1.1875 to 1.4281 from 1.2873 at 1.5277 would indicate that the rise from 1.1875 is developing into an impulsive wave

that should take out the 1.6039 high.


EUR-USD 4-HOURLY

DOMINANT TREND

DOWNWARD BIAS

Price action rebounded a little deeper than expected but is still within tolerance. The intra-day high was 1.4353; not far from the 50.0% retracement of 1.4521 to 1.4157 at 1.4339. The 38.2% retracement of 1.2873 to 1.4521 is at 1.3892; with a minor demand

zone at 1.3867-1.3927.

TRADE IDEAS

DATE OPEN HIGH LOW LAST CHANGE

19-04-11 1.4234 1.4353 1.4205 1.4334 +0.0099

S3 S2 S1 PP R1 R2 R3

1.4001 1.4149 1.4242 1.4297 1.4390 1.4445 1.4593

Action L1 L2 Stop-Loss

Sell 1.4296 1.4550

Take Profit 1.3927


GBP-USD WEEKLY

DOMINANT TREND

UPWARD BIAS

GBP-USD DAILY

DOMINANT TREND

UPWARD BIAS

In the bigger picture, price actions from the 2009 low of 1.3502 are treated as the consolidation to the long-term downtrend from the 2007 high of 2.1161. The rise from 1.4230 is treated as the third leg of such a consolidation and with the low at 1.5344 intact, this rally could continue for the 1.7043 high last seen in August 2009. Resistance is expected between 1.7043 and the 50% retracement of 2.1161 to 1.3502 at 1.7333 to limit this long-term corrective rally. On the downside, a sustained break of 1.4230 low will be the first signal of the resumption of the long-term downtrend and will shift focus to the

1.3502 low for confirmation.


GBP-USD 4-Hourly

DOMINANT TREND

UPWARD BIAS

The rebound from recent low of 1.6164 which hit the 100.0% projection of 1.6424 to 1.6226 from 1.6383 at 1.6185 which is incidentally near the 50.0% rise from 1.5935 to 1.6426 at 1.6181 is now poised to trade higher. The three waves down from 1.6426 is testament that the decline two Fridays ago has its full run. The first target could be the 161.8% projection of the initial rise from 1.6164 to 1.6326 from 1.6228 at 1.6490; bearing in mind the next

medium-term target is the 61.8% projection of 1.5344 to 1.6399 from 1.5935 at 1.6587.

TRADE IDEAS


19-04-11 1.6263 1.6335 1.6228 1.6312 +0.0047


1.6078 1.6185 1.6248 1.6292 1.6355 1.6399 1.6506

Buy 1.6185 Break-even

Target 1.6382 1.6490

Action L1 L2 Stop-Loss


USD-CHF WEEKLY

DOMINANT TREND

DOWNWARD BIAS

USD-CHF DAILY

DOMINANT TREND

DOWNWARD BIAS

In the bigger picture, the entire decline from 1.1730 is still in progress and is expected to develop into a five wave impulsive pattern, with the fall from 1.0065 as the third leg. Sustained fall below the 0.9000 psychological level will target the 61.8% projection of 1.1729 to 0.9466 from 1.0066 at 0.8668 first and then challenge the 100% projection at 0.7803. On the upside, a sustained break of 0.9782 high last seen on 11 January 2011 is needed to be the first definitive signal of a medium-term reversal. Otherwise,

outlook will remain bearish.


USD-CHF 4-HOURLY

DOMINANT

TREND

DOWNWARD BIAS

The rebound and subsequent failed attempts to take out 0.8895 have resulted in sellers temporarily yielding to profit-taking. The immediate focus of this tentative rebound is on the 38.2% and 50.0% retracement from 0.9339 to 0.8895 at 0.9065 and 0.9117 as the likely targets. A sustained rally above the 9 March 2011 high at 0.9369 would be the first definitive sign that the bearish scenario is deferred. That said, the long-term targets at the 61.8% and 100.0% projection of 1.1729 to 0.9466 from 1.0066 at 0.8668 and 0.7803

respectively is still very much in play.

TRADE IDEAS Action L1 L2 Stop-Loss


19-04-11 0.8963 0.9007 0.8944 0.8997 +0.0035


0.8857 0.8920 0.8958 0.8983 0.9021 0.9046 0.9109


USD-JPY WEEKLY

DOMINANT TREND

UPWARD BIAS

USD-JPY DAILY

DOMINANT TREND

UPWARD BIAS

In the bigger picture, the sustained rally from the 76.46 low traded on 13 March 2011 suggests that the long-term downtrend from 124.12 has completed at 76.46 on bullish convergence condition in the weekly MACD. Sustained trading above the 55 weeks EMA (now at 85.19) will confirm this case and targets the 94.61-94.67 cluster resistance (38.2% retracement of 124.12 to 76.46) and above. On the downside, sustained break of 80.64 on the 4-hourly chart is needed to invalidate this bullish scenario. In the mean-

time, a supply zone at 85.16-85.85 in the daily chart appears to cap this rally.


USD-JPY 4-HOURLY

DOMINANT TREND

UPWARD BIAS

The continued fall from the 85.51 high is now in doubt as momentum has practically died since NY midday. Should this fall continues, it has a likely short-term target at the 38.2% retracement level of 76.46 to 85.51 at 82.05. This is relatively close to Monday low of 82.17. Above this level is a minor demand zone at 82.65-82.83 in the 1-hourly chart beck-ons. In between the 38.2% and 50.0% retracement levels of 76.46 and 85.51 lies a supply-turned-demand zone at 81.44-81.71. On the upside, a sustained rally above the 50.0% retracement of this entire fall from 85.51 to 82.17 at 83.84 would seriously cast doubt on the bearish scenario. A rally above 85.51 will target 61.8% retracement of 94.98 to 76.46 at 87.91 next. Considering the Easter holiday, traders should just consider getting

out rather than establishing new positions into the long weekend holiday.

TRADE IDEAS


19-04-11 82.66 82.75 82.31 82.57 -0.08


81.66 82.10 82.34 82.54 82.78 82.98 83.42

Action L1 L2 Stop Loss

Sell 84.24 Break-even

Take Profit 82.05


AUD-USD WEEKLY

DOMINANT TREND

UPWARD BIAS

AUD-USD DAILY

DOMINANT TREND

UPWARD BIAS

In the bigger picture, the rally from the 2008 low of 0.6007 is still in progress and could extend further. Daily MACD's strong rise suggests that the uptrend has regained momentum. Sustained break of the upper channel resistance also points to acceleration. In the longer-term picture, the current rally could target the 100% projection of 0.4773 to 0.9847 from 0.6007 at 1.1081. On the daily chart, a sustained break of the 0.9701 low traded on 17 March 2011 is needed to signal a reversal.


AUD-USD 4-HOURLY

DOMINANT TREND

NEUTRAL BIAS

Alas the expected crossover to below the zero-line in the MACD did not materialize as price action continues without a clear direction. Should MACD moves below the signal line, this would be the first signal that the rally in AUD-USD is over - for the time being. The 1.0288 low remains the level to watch as a break below this level would suggest a short-term top is in place and may bring a deeper pullback. A 100.0% projection of 1.0583 to 1.0389 from 1.0578 is at 1.0384 which is near the 23.6% retracement of 0.9701 to 1.0583 at 1.0375. On the upside, should the rally continues beyond 1.0583, the next target is likely to be the 161.8% projection of 0.9537 to 1.0255 from 0.9701 at 1.0863. In the medium-term, the target is the 100.0% projection of 0.4773 to 0.9847 from 0.6007

at 1.1081.

TRADE IDEAS Action L1 L2 Stop-Loss

Sell 1.0558 1.0613

Take Profit 1.0438 1.0389


19-04-11 1.0512 1.0532 1.0443 1.0525 +0.0017


1.0322 1.0411 1.0468 1.0500 1.0552 1.0589 1.0678


SPOT GOLD WEEKLY

DOMINANT TREND

UPWARD BIAS

SPOT GOLD DAILY

DOMINANT TREND

UPWARD BIAS

The multi-year rally in gold powered through the longer-term target of the 100.0% projection of 251.90 to 1032.30 from 681.35 at 1461.75 with a high of 1499.25 so far. If this rally can be sustained, the next longer-term target is at the 161.8% projection at 1944.04. On the downside, only a sustained decline below the 15 March low of 1380.35 would suggest a reversal is in play. A demand zone of 1384.80-1394.83 lies just above

this level.


SPOT GOLD 1-Hourly

DOMINANT TREND

UPWARD BIAS

Price action continues to powers on to yet another new high at 1499.25 near the psychological $1500/oz level. On a close-to-close basis, last night’s gain is perhaps one of the smallest in recent memories; gaining just a minuscule $0.95c/oz. That said, the medium-term focus is still on the 100.0% projection of 1156.80 to 1430.85 from 1308.00 at 1582.05 next. Incidentally, yesterday’s pullback occurs at the 50.0% retracement of 1477.15 to 1497.50 at 1487.33 before rallying to 1499.25. Note the bearish divergence developing in the 1-hour chart. Considering the Easter holiday long weekend, profit-taking

is likely to set in within the next 24 hours.

TRADE IDEAS Action L1 L2 L3 Stop-Loss

Buy 1477.00 1440.30

Take Profit 1582.00 1944.00


19-04-11 1494.85 1499.25 1487.35 1495.85 +0.95


1470.35 1482.25 1489.05 1494.15 1500.95 1506.05 1517.95

Knowing How Money Works

X N A L Y T I C S I N T E R N A T I O N A L

Daniel Ang

Founder

Since 1985, I have been involved in the trading of derivatives contracts from commodities to gold to financial derivatives contracts like stock index futures to currencies. As a licensed representative (till 2006) and having held senior positions with various clearing members of the Singapore Exchange - Derivatives as well as foreign brokers based variously in Chicago, New Zealand and Dubai, I have gained an unique insight into the workings of the brokerage business. Setting up Xnalytics has been a dream come true my fellow colleagues and I as we now have a platform to embark on a new journey - that of educators. Looking back and reflecting on my quarter of a century in the business of financial derivatives trading, I come to realize adults these days lack one of the most essential life skills that formal education failed to impart. While graduates are armed with analytical skills and technical know-how, they sorely lack the one skill that everybody needs but was never equipped with - the know-how to make money. The fact is hard work and education alone is simply not enough in our increasingly materialistic world to secure our financial futures. My mission is to educate and impart the art of trading the markets to as many people as possible. My aim is not to turn everyone into millionaires but to give them a choice. After all, what education does is to give each and everyone of us a somewhat level playing field - expanding our choices and options in life.

Disclaimer: Information or opinions provided herein should not be used for investment advice and do not constitute an offer to sell or solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. When making a decision about your investments, you should seek the advice of a professional financial adviser.

FOREX Daily Xnalytics 200411

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