Monday, May 31, 2010

Weekly Outlook 6/1

Going into this holiday shortened week I think the first few days are important and could lead the way for the next few weeks. Meaning that if we struggle to get back above 1110-1120 in the early part of this week then we could be headed lower to take out the 'obvious' double bottom lows near 1040. Friday ended on a weak note as the Spain downgrade stopped the market rally cold. However, I think it's impressive that the EUR didn't completely collapse off this news. That could tell us that the EUR might want to pop back to the 1.25 area this week. If the market does get back over 1100 I think resistance will be tough to break thru so upside is probably limited and I would be exiting longs anywhere between 1110-1130 and probably even reloading on some shorts as I think the market could roll over after testing the downtrending 21 and 50 day ema's. I just don't think we get back to the April highs for awhile.

Antother thing to remember is that June 1st is here and long only fund manager's could prop this market up as the first day of the month generally sees large mutual fund inflows of cash. If we see that then I would be taking an opportunity to lighten up on longs into it. There is some ISM and jobs data coming this week as the May unemployment report is released on Friday so that will be the focus this week.

Currencies- The EUR key level of support is 1.215 and that needs to hold or else we will see a quick move to 1.20 followed by 1.1820 based on fib targets of the last retracement. I think playing any bounce could be better done in the GBP as that currency can make it back to 1.48 on a nice bounce. AUD and CAD are still in trouble on the daily but could continue to rally off last week's lows. AUD can bounce back to 0.86 or 0.87 on strength this week. The USD/JPY is holding the 90 level so far and still has work to do until it gets back above resistance at 92. USD/CHF has been super strong as the markets sold off in May this pair climbed more than 1000 pips. It could now retrace back to the 21ema near 1.135.

Commodities- The bounce back in the AUD last week gave oil a nice oversold rally back to the 75 level. I think crude is ready to roll back over this week and we can potentially see a hard selloff if the Aussie dollar confirms the move lower in commodities first. Copper is in the same boat and unless it can break above the 3.25 level then I see it selling off further back to the May lows at least. Gold is looking more bullish and a move back to 1250 is possible but I tend to think gold is near the top side of a new trading range going into the summer months so I am not too interested in it here.



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