I believe there are many reasons to be long the USD and personally I have been riding the USD wild bull ride for the last couple months. Yesterday, I closed my remaining USD longs as we were trading at a new 2013 high. Many of you may wonder “why” I closed my longs, and frankly, positioning in the USD seems pretty stretched as the entire market is finally becoming USD bullish, which could bring on some near term weakness. I will state that I am still very bullish the USD, and I do think (and have thought for the last 2 years) that the USD is in the process of making a very large bottom (technically) and reversing this very bearish course of the last 20+ years. But I will also explain what I will want to see in the coming days/weeks to start building a core USD long position again.

First, let me share with you some arguing points for a stronger USD of many in the market which I share:

1. Energy Independence – One of the biggest swoons for the US economy (and the USD) would be us becoming energy independent. There is a lot of debate to whether or not this could happen, but just the mere thought of it has brought money back to US shores that have been overseas invested into BRIC countries.
2. Interest Rates – Keep in mind that the Federal Reserve was the first central bank to ease rates post financial crisis and other central banks have been or are currently lowering rates. There has been much talk of possible “tapering” of QE in the coming months. Regardless if you feel this is even possible, the fact of the matter is most other central banks are still lowering rates or firmly entrenched in their own “QE” programs. This “interest rate differential” as investors price higher rates here, but lower elsewhere should keep upside pressure on the USD. In addition, the upward trajectory of treasury yields is another sign of USD strength as the economy here improves.
3. Disinflationary Pressures – We are not seeing “deflation” at this point, but disinflation is real as inflationary pressures ease. Heaven forbid we actually see “deflation” because if you want to see how a G7 currency acts during deflation, just go see the JPY performance the last 30 years. I have long thought that the FOMC is more worried about deflationary pressures, and one of the main reasons for QE over the years was not only to promote liquidity and growth, but was also to ward of deflation. Don’t forget Ben Bernanke is a study of the Great Depression and the life-long effects of deflation and its impact on peoples lives.
4. PPP – Other major currencies are still overvalued on a “purchasing power parity” basis. Commodity currencies remain some of the most overvalued currencies to the USD on a PPP basis.
5. Commodity Super Cycle End – As austerity grips hold globally, we may be in for years of an “unwind” in commodity prices which will only continue to boost the USD.
6. The US Economy vs. the ROW (rest of the world) – In terms of the global economy, it sure does seem that the US economy is a beacon of hope and light. As long as the economy here in the states continues to show signs of resilience compared to Europe, China and other emerging markets it should keep money coming back into USD’s.

With all these arguing points, one must wonder why I took profits on long standing USD long positions. In recent days, I have said that in the near term for the USD to continue its recent breakout higher we will need some risk aversion to kick start a more sustained USD bull run. Looking at equities, it’s hard to imagine at this point that the market will even pullback. But, this chart I posted a couple of days ago via @StockTwits you can see we are pulling away about the maximum distance from the 200DMA that we have the entire time post financial crisis. This does not mean the bull market will end here, but the risk of a pullback from current levels are rising daily.

Also, with gold approaching its recent support near 1300, and the direct inverse relationship of gold vs. the USD, one would imagine a breakdown in Gold would prompt further USD strength.

So, to sum it up, I am looking for US equities to pullback, and gold to drop below 1300 to confirm a core USD holding for myself. And to be clear, I will be nibbling long USD positions moving forward, but what I stated above will help me feel me more confident about establishing those.

One last thing I wanted to mention. It’s obvious that the USD and US equities have been moving higher in tandem. When the equity markets start a pullback, the knee jerk reaction will be to sell the USD since it has been moving higher in recent weeks with stocks. However, I do expect this dynamic to be short lived as the once hailed JPY and CHF safe havens have been taken away from us by their respective central banks (SNB and BOJ intervention). Therefore, the USD may fall initially, but I would not expect that dynamic to last. The USD still is and now may be the only option for a “safe haven” play. More than likely, that will be the USD pullback I will be looking for to establish my long positions.

Blake Morrow

Chief Currency Strategist, Wizetrade

Disclaimer: I have no long USD positions, but that may change within the next 72 hours of trading.

Follow me on Twitter or StockTwits @pipczar

First of all, Happy Mother’s Day to all the mom’s out there. Without you, none of this would be possible.

I am going to make this quick since we have some Mother’s Day festivities around the Morrow house today. So here are a couple quick links and some USD charts in particular you have to watch since the USD is hitting key levels on many pairs.

G7 communiqué has been released, and it looks like Japanese officials have convinced the world they are applying the right monetary policy and not purposely weakening the JPY, so look for continued JPY weakness, or at least for it to be sold on short covering rallies.

The Telegraph also has an article over the weekend talking about the possibility of USD strength.

Australian Treasurer Swan also reiterates that the strong AUD will give an “unprecedented whack” to tax revenue and make it difficult to return to surplus.

Some of the key events this week will be Monday Retail Sales in the US and New Zealand. Tuesday we get German ZEW Economic Sentiment. Wednesday we will get the BOE Inflation report and also the PPI in the US. Thursday we will have CPI, Building Permits, Unemployment Claims and Philly Fed in the US. Friday Canada will have CPI and we will get Consumer Sentiment in the US. Next Saturday Fed Chairman Bernanke will have the opening remarks at Bard College.

Lastly, most of you know that my team and I broadcast daily from 7AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for nearly 10 years now) just click on this link. Also, for those of you who trade during the European hours, join @casaro3 from 2:30-4:30 AM daily for the “London Calling” webinar. Just use the same link!

Here are some charts and notes on what I am seeing currently (currency pair edition this week):

Remember the “Trap Door” trade from last week? The symmetrical trend line support comes in around .9920

EUR/USD major supports at 1.2950 and trend line support at 1.2850. The multiple rejections at 1.3230′s puts a possible triple top in play in the coming weeks.

GBP/USD is very self explanatory. We are on channel support and a break below puts sub 1.5000 back into view.

NZD/USD closed below trend line support but closed on the 200 day SMA at the .8280. It will be an interesting open for the Kiwi.

USD/CHF break out of the triangle has two possible targets. You can click the image above to take a closer look.

You can see we are trading at a 38.2% Fibonacci retracement level of the 1998 drop to 2011′s lows. The 101.50-103.00 levels should be some major resistance for bulls this week.

You can follow me on Twitter or Stocktwits @pipczar

The AUD/NZD has been in a severe downtrend since March of this year, but today it is showing signs of reversal. There are a few key components I look for in big reversals. Technically, I try to find at least three lined up. Today, I have them:

1. Fibonacci retracement or extension pivot
2. New trend lows or highs and then reversal
3. Channel Support or Resistance test

There are other “not so obvious” things I can look for, but looking at the daily chart below we have all three that I have listed above:

You can see the 127% extension was hit today at 1.2000. Also, we hit a new trend low and are setting up a nice reversal (hammer) candle. Also, the 6+ month channel support lower support has been tested.

What I am now looking for is a sustained break above the steep trend line seen on the 4 hour chart below. That price is about 1.2060.

Fundamentally, the RBA cut rates overnight to a historic low. This maybe bearish for the AUD moving forward. However, if you consider the overheated housing market in New Zealand, the already priced in rebuilding of Christchurch, and an economy that is heavily depended on Australia and Asia and an overly strong currency (which is not welcomed by the RBNZ) a rate cut for New Zealand may be around the corner as well.

Disclaimer: I do have a long in the AUD/NZD currency pair and I am looking to add to the position.

You can follow me on Twitter or StockTwits @pipczar

Over the weekend, there has been some interesting reading and developments worth noting. First off, Israeli officials have confirmed that they have conducted an airstrike in Syria. I doubt the markets will be too affected at the open, but if the situation heats up we must all take notice.

The Australian PM, Julia Gillard, said “There are plenty of pressures on because our currency has appreciated, grown in value by around 50 percent” and this is causing many concerns ranging from tax revenue to trade exposed business says Bloomberg.

Norway is to raise taxes on oil companies, says Reuters. Down below, I will take a look at the USD/NOK.

Deutsche Bank is bullish on the USD, and I must admit, I share their bullishness.

Last but not least…if you thought you have had enough of “bitcoins,” think again…the WSJ has a nice little article named “Bitcoin vs. Ben Bernanke.”

Some of the key events this week will be tonight with Australia retail sales. Monday Canada has building permits and IVEY PMI. Tuesday evening Australia will have their highly anticipated rate decision. Wednesday both Australia and New Zealand will have employment change. Thursday the BOE will announce any chances to monetary policy, and the RBA will have monetary policy minutes later that evening.  Friday we have G7 meetings and Canada will have their employment report.

Lastly, most of you know that my team and I broadcast daily from 7AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for nearly 10 years now) just click on this link. Also, for those of you who trade during the European hours, join @casaro3 from 2:30-4:30 AM daily for the “London Calling” webinar. Just use the same link!

Here are some charts and notes on what I am seeing currently:

Here is the e-mini 4 hour chart that displays 2 different channels. Keep in mind the RSI is nearing OB, but frankly as long as the market is above 1593 breakout point we should refrain from looking at the downside here.

Copper bounce was all the rave on Friday, but keep in mind when in a downtrend, short covering rallies are usually quite violent. As long as copper stays below the $3.40 (ish) level, a break of $3.00 does seem likely.

The EUR/USD is confined to a tight range from 1.3000-1.3200 roughly, and I suspect the move out of this range will dictate the trend in the coming weeks.

The AUD/USD has a nice trap door set below the weekly trend line at 1.0220, which if closed below on a daily basis points to sub parity at the lower yellow trend line of the symmetrical triangle.

The weekly chart of the USD/NOK shows two distinct inverted head and shoulder’s patterns. Norway’s move over the weekend could spell troubles for the NOK moving forward so this chart must be monitored carefully.

You can follow me on Twitter or Stocktwits @pipczar

If you were long the GBP/USD at 1.6300 you probably (vividly) remember this false breakout:

Yeah, that stunk. So, AUD/USD traders are probably looking at this chart:

The problem is, false breakouts (especially daily or weekly triangles) lead to this:

So with the precious metals complex breaking down, you have to ask yourself “could this really happen to the AUD/USD?”

I think the probabilities are high, and increasing daily.

Blake Morrow

follow me on Twitter and StockTwits @pipczar

Disclaimer: I am long the USD against the AUD and a basket of other currencies, and have been for the last couple weeks.

The biggest development at the end of last week was the slide in price of gold on Friday (charts below). The “knock on” effect with the markets when a large asset class like gold breaks a key level must be monitored carefully. For those of us that follow correlations in the market, we will have to see how the rest of the asset classes react tonight and early in the week regarding this big break (down in this case).

First off, huge gold bull, John Paulson, took quite a hit last week as reported by Bloomberg. Also, the WSJ is reporting that gold sinks into bear market territory.

One of my longer term arguments that gold is trading heavy, is that the Federal Reserve has been fighting “deflation” vs “inflation” as they have told us meeting after meeting that CPI remains “anchored” despite all the unprecedented QE that they apply month after month. However, Business Insider has an interesting article on “disinflation.” Keep in mind, disinflation is when there is a decline in inflation. Deflation is when prices are falling, and they keep falling which is not a good thing typically.

IMF trims global growth expectations, as the TIGER (Tracking Indices for the Global Economic Recovery) Index points to global growth at risk of stalling.

Some of the key events this week will be tonight with China GDP. Monday night AUD will release Monetary Policy Minutes, Tuesday GBP, US and NZD CPI will be released. Wednesday the Bank of Canada will have its rate decision. Thursday will be GBP retail sales and US Philly Fed Index. Friday Canada will also release its CPI.

Earning are in full swing, and I will list some of the companies reporting (obviously, there are a lot more, these are just some highlights). Monday is Citigroup (C). Tuesday INTC, KO and USB. Wednesday is AXP and BAC. Thursday AMD, COF and FITB. Friday MCD and SLB.

Lastly, most of you know that my team and I broadcast daily from 7AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for nearly 10 years now) just click on this link. Also, for those of you who trade during the European hours, join @casaro3 from 2:30-4:30 AM daily for the “London Calling” webinar. Just use the same link!

Here are some charts and notes on what I am seeing currently:

As you can see, we are sitting on a pretty good level of support near the 1480, but keeping in mind this is such a highly anticipated breakdown point, you can not rule out a move below 1400.

The obvious correlation is gold and the US Dollar. Unless the markets are falling from “event risk” (like Greek, Cyprus or North Korea fears as an example) these two asset classes tend to be very inverse. Heads up if you are a US Dollar bear.

The EUR/USD stalled at 38.2% retracement level near the 1.3110 level. Obviously, the downside here looks more attractive with gold falling.

Copper is also sitting on critical support for bulls at $3.30.

AUD/USD weekly chart failed at the 1.0525 weekly trend line resistance. Falling Copper and Gold prices won’t do any favors for AUD/USD bulls.

The USD/JPY stalled at the 50% retracement of the 2007 highs to last years lows. That shooting star candle probably has some late bulls (poorly positioned looking for a 100.00 breakout) a little concerned.

You can follow me on Twitter or Stocktwits @pipczar

It’s a fairly light news weekend, but there are a few stories that have grabbed my attention that I will bring to your attention.

First off, China rhetoric over North Korea has intensified somewhat with China’s President issuing a warning to North Korea.

Also in China, President Xi also talked about the global economic recovery and the “risks and protectionism” in the region.

Now, if you are like me and wash your hands more than you would like to admit throughout the day, and were horrified when you saw the movie “Contagion” or “Outbreak” you may not want to read this article.

China is discussing with Australia a direct exchange bypassing the USD, says the WSJ.

On Friday in Portugal, constitutional courts find some of the austerity measures in the bailout of the country as “seriously difficult.”

As Germany approaches an election in the coming months, these are the types of articles that may start to worry EUR bulls (I am long some EUR crosses too, btw).

Some of the key events this week will be Monday night China will release CPI. On Wednesday we will have the FOMC minutes, and also later that evening with have employment data out of Australia. And lastly, on Friday we will have retail sales here in the US.

Lastly, most of you know that my team and I broadcast daily from 7AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for nearly 10 years now) just click on this link. Also, for those of you who trade during the European hours, join @casaro3 from 2:30-4:30 AM daily for the “London Calling” webinar. Just use the same link!

Here are some charts and notes on what I am seeing currently:

Here is the EUR/USD, and as you can see, the 38% retracement comes into play near the 1.3100 level. I am a USD bull predominately, so I will be looking for shorts near there.

60 minute on the EUR/USD shows you the flag pattern pointed up to 1.3100 as discussed before the breakout on the Morning EDGE webinar on Friday.

If you watch correlations, you can see copper (JJC the ETF) and the AUD/USD and how the copper breakdown could cause the AUD/USD to challenge the lower trend line near parity.

Closer examination of the AUD/USD points to a range extension at the 61.8% retracement level below 1.0300.

The BOJ has sent the trajectory of the JPY lower, but looking at the 6J we are approaching the 61.8% “Golden Fibonacci” level which MUST be respected. Not to mention the divergent RSI as well.

The E-mini futures played out perfectly the “bear flag” hourly pattern to 1533 (as discussed on the Morning EDGE too) and held channel support (of 4 months). As you can see, the lows from Friday will be major support for bulls next week.

All charts provided by www.mbtrading.com

You can follow me on Twitter or Stocktwits @pipczar

The possible daily close in Copper below $3.40 could be very important for equities and commodity currencies. The charts speak for themselves:

Follow me on Stocktwits or Twitter @pipczar

Disclaimer: I am short the AUD/USD and have been for the last 2 weeks.

The Cyprus Bailout is dominating the wires over the weekend and for good reason too. I know Cyprus is a very small country and a small island in the Mediterranean, however the bailout (if passed) will undermine any type of banking union progress thought to be had in the EU. It’s still up in the air since the Cypriot government is set to meet on these issues on Monday.

Business Insider has a very simple re-cap of this weekend’s event in Cyprus, so if this is the first time you are reading up on Cyprus, just start here. Although I do not expect a huge impact during the Sunday open, if the market starts to get concerned about a contagion through the rest of the EU periphery, you could see some risk aversion ramp up resulting in USD (and possibly JPY) strength as the market searches for “safe havens” in the FX market.

Australian Treasurer, Wayne Swan, was speaking yesterday and had some things to say about revenues in Australia moving forward. Also, in New Zealand over the weekend, Finance Minister Bill English, warned of the drought that New Zealand is facing and what it could cost the country.

With all the news from Cyprus over the weekend, it is easy to forget that the FOMC has a very big week and Marketwatch has a good article that sums it up.

On the calendar this week Monday evening is the AUD Monetary Policy Meeting Minutes, Tuesday is GBP CPI, PPI, EUR German ZEW, USD Building Permits. Wednesday is GBP Meeting Minutes, Claimant Count Change, USD FOMC Meeting, Statement and Press Conference. Also NZD GDP. Thursday is EUR PMI’s, GBP and CAD Retail Sales, USD Existing Homes Sales and Philly Fed Manufacturing Index. Friday is German IFO.

Lastly, most of you know that my team and I broadcast daily from 7AM ET through the NY stock market close. To access our live webinars daily (which are free, and our live in the market analysis has been for nearly 10 years now) just click on this link. Also, for those of you who trade during the European hours, join @casaro3 from 2:30-4:30 AM daily for the “London Calling” webinar. Just use the same link!

Here are some charts and notes on what I am seeing currently:

The EUR/USD is very close to it’s 20 day SMA and 50% retracement level near the 1.2865 level that could get tested early this week.

The SPX and SPY (pictured above) are very close to closing highs. In the SPX it is about 1565. With the RSI divergence and possible triple top (longer term) and obvious ascending wedge you have to be cautious with longs up here.

The USD/CAD has back tested the broken daily trend line and RSI is back to neutral which could allow for another ramp higher. The 55/100/200 EMA’s on the daily a decisively moving higher as well.

The USD/JPY daily RSI is diverging (huge) and a re-test of the 94.50 support seems very likely, especially in light of weekend events. The bigger test will be at the daily trend line (blue) in the coming sessions.

You can follow me on Twitter or Stocktwits @pipczar

A we approach the semi annual testimony of the Federal Reserve Chairman, Ben Bernanke, we find the commodities are at a major inflection point. We are basically “make or break” levels. I wanted to point out these levels since what happens today, and the price action that follows, may leave us a few days of continued movement in either direction.

As you can see above, the AUD and NZD/USD and the USD/CAD are at major levels. But what is more important to me is the daily chart of gold (seen below). If Gold produces a bear flag formation today and breaks below 1585 we could see a continuation of USD strength, despite it being overbought. Don’t forget, the USD/JPY was very overbought on the daily chart from 88.00 to 94.00.

Follow me on Twitter or StockTwits @pipczar

Disclaimer: I am long the USD against the AUD, NZD and CAD and have been for weeks