Thank you China!

• kevinmhughes
• February 12th, 2010

Chinese news makes for an interesting morning.  Evidentially China raises reserve requirements for their banks by 50 basis points.  When that was released, we saw the $EURUSD, $GBPUSD & $AUDUSD melt like snow in North Carolina.  Within an hour, we saw over 100 pips wiped away in each pair.  Which in turn, affected $CL_F & $GC_F.  If you were on the correct side of the trade, you should probably call it a day (I am for the most part); if you were on the wrong side of the trade, you should still call it a day and open up a bottle of scotch…  Moves like that should always bring up the question: “Why did the market move the way it did so quickly?”  My answer to that question was “it shouldn’t have”…  With that said, I believe there is going to be a reversal at for the interim…

Here’s a look at the $EURUSD 30 minute chart:

The price is CLEARLY below the 200 ema as well as the 21 ema.  It’s resting on the support level (just created) at 1.3530 & is creating a bear flag.  I drew the diagonal line to help me gauge a break out.  Below the 1.3530 is a confirm to sell it.  But there is also the risk of the pair retracing to the upside and a break above 1.3570 will warrant a run to the 1.3600 level.  Again, I expect a pullback on the $USDX; the move with China was not warranted and a correction will probably be made (I’ll be watching price action to confirm a pullback)…

For the commodity countries, all three played the game well after the Chinese reserve decision.  Here is the $AUDUSD:

As I am writing this, the price of the $AUDUSD is at .8812; a little different that the chart.  The .8812 is important because it is the 200 ema.  The support below that needs to be watched is .8771.  Below that level you can bet that there will be a nice drop.  If the price action HOLDS above the 200 ema, then we’ll be heading back to yesterday’s range (above .8840).

Again, when it comes to trading the commodity pairs ($AUDUSD, $NZDUSD, $USDCAD) make sure to watch the price action and your positions on $CL_F

Have a great day!

Tickers: $CL_F, $EURUSD, AUDUSD, China, GBPUSD

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