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Inter-connected Market Roller Coaster

Recent trade has been all over the charts, literally, as the market revealed high volatility levels, on all fronts. All it took was an announcement that the Peoples Bank of China were raising interest rates, via an increase in Commercial bank deposits, to drop stock market valuations globally, drop oil and gold prices, and increase the value of the Usd.

The moves at 4:45-5:00 EST on Friday generated a global chart move that highlights two things. 1. The degree to which the 24 hour global markets are electronically hedge. 2. The increasing level of fear, as seen in the volatility of 15 minute charts, that the investment arena is shrouded in at the moment. This all sets up great potential for the upcoming week. Roll on Monday.

Euro:
The four hour trend is short. Weekly chart reads show support at 1.3550 that go back to Dec 2004, and the summer of 2007. The 1.3750 area is a massive swing point high that will now be resistance to get through after the fifth straight weekly closes in the red, with only two of eleven weeks that have a green close. The 2010 euro chart is a replica of the 2010 S&P futures chart. Favor a straddle.

Cable:
The four hour trend is short. Prices on cable are holding the lows of the daily chart channel. The pair really is flat-lining, and has done so since May 2009. The pair is struggling each day in trying to get past the neutral pivot point, and reflects the fact that fair value has been easily found on the pair. Daily Chart: ATR is 158 pips. RSI is moving towards oversold. Daily Chart: ATR is 160 pips. RSI is moving towards neutral. SMA is resistance. Favor a short break.

Swissy:
The four hour trend is long. The pair recently broke higher, and out of the 4 hour chart channel that has been in place since September 2009. The near-term bounce off the 200-day simple moving average at 1.0535 was in reaction to Usd buying that was linked to Treasury note purchases, and will be a main target area for any Usd selling next week. Daily Chart: ATR is 100 pips. RSI is hitting overbought. SMA is support. Favor a long play.

Yen:
The 4 hour trend is short. The Usd/Jpy pair has been running sideways recently, with daily chart moving averages locking the pair in a tight channel, and intra-day swings that test ranges without following through. The pair may move higher in reaction to threats from the Japanese Finance Ministry that an over-valued Jpy will be addressed if the market does not adjust Usd/Jpy weakness. Daily Chart: ATR is 92 pips. RSI is at the neutral line. SMA is resistance. Favor a long bounce.

Cad:
The four hour trend is long. The 1.0550 area has been important in recent trade, and now will act as resistance that may struggle to get broken if oil traders hold crude above 74.50. Targets are in the 1.0300 range and may be lower if equities also find buyers. The 50 and 100-day SMA areas are in play and will create volatility at 1.0575. Daily Chart: ATR is 110 pips. RSI is just below neutral. SMA is resistance. Favor a straddle.

Aussie:
The four hour trend is short. The pair is heading up towards the neutral zone on the daily momentum chart, and is back into the trading range set in Sep 2009. This is a pair that is backed by the strongest major Central Bank interest rate, and sets up a long-term, long-play off the 0.8800 area. Daily Chart: ATR is 125 pips. RSI is moving towards the neutral area. SMA is resistance. Buy the pull-backs.

Dollar Index
The 4 hour trend is long. All it took was an announcement that the Peoples Bank of China were raising interest rates, via an increase in Commercial bank deposits, to drop stock market valuations globally, drop oil and gold prices, and increase the value of the Usd. The unfolding story goes to show that there really is not a great deal of passion to get long the U.S. economic growth story, and also shows that unless equity futures (which are the easiest gauge of daily risk tolerance levels) really implode, the greenback will struggle to move too much higher. Favor a straddle.

S&P Futures
The 4 hour trend is short across the global equity market. Global stock markets are struggling to reverse the 2010 losses, and have spent the last week running sideways with little in the way of momentum. They have however put a support base in place. The 'Stocks Up/Usd Down' (and vice versa) correlation is in place, and holding at around 90% each day. That will be the norm until the global business cycle prints expansion and sustainable growth, and at that time, interest rates will value currencies ahead of risk aversion. Favor a straddle

Crude Oil
The 4 hour trend is short. Oil was recently trading at $75.50 per barrel after containing the selling in the previous sessions that held 73.50 support. The long speculative interest in crude oil is building again, and that will aid the short side of the dollar on the days that equities find buyers. Favor a straddle.

Gold Bullion
The 4 hour trend is short. Gold Bullion has tested $1,085 support and held, and now the precious metal has a road-block just above, at $1095. Over the last week of trade gold has been in an $100 range, following the equity markets up and down. To the downside, the next important support area is at $1050.00. Favor a straddle.