NY enters a market pushed around by comments overnight. EURUSD and USDCHF in focus.

Markets remember and the markets remembered March 12th when the Swiss National Bank entered the market and intervened directly in the market.  As a result when SNBs Roth spoke last night, the market remembered.  Of course the much weaker Swiss Retail Sales report for February (-3.8% vs -0.2% expectations – lowest level since November 2003) also helped contribute to Swiss Franc weakness (USDCHF strength). 

ECB Trichet was also on the wires once again with thoughts that were pessimistic for the Euro region.  “Risks of sudden economic, financial developments remain” was of particular concern to me.  As mentioned in past posts and somewhat forgotten from time to time by the market as focus goes elsewhere, the western Europe banking system is exposed to the Eastern European economies.  One concern, is there is pressure on Eastern home borrowers who secured mortgages from western European banks.  If the value of the Euro or CHF rises, this makes it more expensive for Polish homeowners (for instance) to pay their mortgage. It is Europe’s equivalent of the sub prime mortgage mess in the USA.

This idea re-enters the markets thoughts from time to time. The comments from Roth and Trichet are just a reminder of the fragility that still exists.  It is also no coincidence that Ireland was placed on review from Moody’s today. HMMM.  A comment from Moody’s included,  ”Action reflects the severe economic adjustment taking place in Ireland, which threatens to undermine the country’’s low tax, financial services-driven economic model.” .  Banks have enough trouble managing domestic banking issues.  When it is coupled with risk from outside a countries border (and when  currency exposure enters the picture), the layers of problems can accelerate.  This is what Trichet/Roth speak of and is why they are fighting for a lower currency. 

We have been speaking about the 100 day MA in the EURUSD for some time now.  Specifically, the EURUSD has been bumping against the 100 day MA.  In 5 of the last 6 days the price has move below the 100 day moving average but on each day the price could not break.   Yesterday afternoon, the price dipped below the key level yet again but a report that AIG was selling their Auto insurance arm, raised the stock market (see post) .  This has the preverse effect of raising the EURUSD as flight to quality bids into the dollar fade (1.3172 is the 100 day MA).  That is what happened and the EURUSD closed back above the 100 day MA once again. 

Today the EURUSD moved back below the 100 day MA in early Tokyo trading, and this time found the momentum and volume to the downside.  Along the way, there has been a couple attempts to test the 100 bar MA on the 5 minute chart(see above chart).  These would change the intraday momentum if the price could move back above the level.  Currently, the average comes in at the 1.3082.  It is Friday.  It has been a non-trend type week.  We have the break today.  Will the momentum continue?  A trend is supposed to trend.  If the price stays below the 100 bar MA, things will continue to move lower (by definition). 

Support comes in at 1.2991 high from Feb 23rd, and 1.2945 which is the 61.8% of the move higher from the March 4th low to the March 19th high (see chart above). 

In our video commentary, we have also been watching the daily chart on the USDCHF.  The pair has been no trending with the 100 and 200 day MA converging (indication of non-trend market trend).  At one point last week, the price broke above the 100 day MA and stalled quickly.  The move back in the comfort area between the goal posts (e.g. 100 day MA and 200 day MA) took the price down to test the 200 day MA one last time (grreen line in the chart above).  From there ,the rebound started (see chart above).  Last night the 100 day MA was at 1.1469.  The price closed just below at  1.1463.

Like the EURUSD, the market moved back above the 100 day MA iin the Tokyo session, after coming to a virtual standstill ( non-trending market).  The 100 and 200 bar MA on the 5 minute chart were both going sideways.  The price was on the line which was also the 100 day MA.  Talk about being in balance! 

The market tired of standing still (no one makes money when it stands still), and perhaps in anticipation of Roth and the Retail Sales, the USDCHF started to rise.  The momentum and volume started to increase, and the pair started the trend higher.  The price momemtum has been stronger than the EURO as the price has not seriously tested the 100 bar MA 9see chart).  This is indicative of the momentum of the pair and also the relative strength of the EURCHF which has move higher as well today.  The current 100 bar moving average on the 5 minute chart comes in at 1.1601 (and rising).  A correction cannot be ruled out toward the 1.1616 level. However, I would not expect a move below this level (or the 100 bar MA onthe 5 minute chart).  If it does, the momentum to the upside would be in question.

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