What are we looking at?

• Posted by: kevinmhughes
• January 31st, 2010

Last week, the $USDX made an impressive rally!  We closed at 1.3861 on the $EURUSD where it opened the week at 1.4146.  It rallied (if that's what you want to call it) to 1.4191 before turning around and plummeting to Friday's close.  The equity markets closed negative for the week and oil was really fun to trade!  Our President got on national television for the 'State of the Union', the Feds and Bernanke kept rates at .25% and GDP came in at 5.7%.  It was a great week!  Tomorrow is the start of a new, short month.  There will probably be more suprises from the government and corporate America.  If we can keep the 3 Musketeers from appearing on the television at once (President Obama, Volcker, Geithner), we may be able to keep the hairs on our head (but we know that won't happen).

$EURUSD levels I'll be watching on the Daily Chart:

R1: 1.4422     S1: 1.3681

R2: 1.4768    S2: 1.3347

R3: 1.4422    S3: 1.2964

Point of no return to the upside (bad for the $USDX): 1.5139

Point of no return to the downside (good for the $USDX): 1.2593

Here are the levels I'll be watching on the HOURLY chart.  This is the chart I watch once the markets open on Sunday.  The market TYPICALLY has a nice gap at 5:00 pm EST Sundays.  I usually won't place a trade until 7:00pmish on Sundays, it allows me to get a feel for the Asian Sunday markets.

You will notice that there is no support levels that I'm looking at, they are on the daily chart.  In a nut shell, what that means is that my thoughts and plan is the $USDX will strengthen even more this week.  With that said, remember where plans go once the action starts, right out the window (so, keep an open mind).

R1: 1.3982

R2: 1.4042

R3: 1.4111

$USDX reversal point: 1.4192

The other currency pairs I trade actively are the $GBPUSD & $USDJPY.  If the $GBPUSD gets below 1.5965 we'll see sub 1.5900; if it breaks above the 1.6030 level, we'll get above 1.6100.  The $USDJPY below 90.14 it's into the 89.60's and above 90.47 we're breaking 91.00 and probably won't stop (which is what I'm thinking).

My thoughts for this week in regards to the equity markets is that they are going to have another down week.  I base that off the $EURJPY pair.  It's broken below 126.00 level and if it gets below and holds the 124.41 level, it really won't be good for the markets.  If it breaks above 1.27.47, we'll see a nice equity rally.  I know some of you may be saying that I believed the correlations between the markets would be thrown out the window...  You're right I did say that and I still believe (and witness everyday) that; but the $JPY currency (specifically $EURJPY) and equity markets seem to still work in unison...

Good luck this week and don't hesitate to contact me with any questions!

Kevin M. Hughes is the President/Head Trader at K.M. Hughes & Associates, Inc. which is a currency trading firm based in Charlotte, NC.  If you would like to find out more about Kevin and/or his firm, please visit www.hughesincorporated.com.

Tickers: $EURJPY, $EURUSD, GBPUSD, USDJPY

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