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Dollar Gains As The Markets Become Cautious

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Dec 9, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    With little in the way of economic data from the U.S. on Tuesday, the USD continued to get stronger against both the EUR and GBP. The greenback continued to get stronger as Wall Street turned in another rather poor performance as the major indexes lost ground. Equities have struggled for several sessions and their ‘underperformance’ has not gone unnoticed. Investors could be in the midst of taking profits by closing out their equity positions in order to show a profit for their end of year accounting. Caution also may be emerging within the markets regarding the future growth outlook for companies compared to the gains made in share prices since the beginning of the March. Today Wholesale Inventories and Crude Oil Inventories numbers will be released. The market will not be affected too much by the outcome of Wholesale Inventories but the Crude Oil outcome could spur on some curious glances.
    Tomorrow data will start to pick up from the U.S. when the weekly Unemployment Claims totals are published. Trade Balance statistics will also come forth from the States on Thursday. This will be followed up by Friday’s important Retail Sales figures of which investors will have more than a passing interest in considering the vital part that consumers play in the American economy. The USD has had a good run the past few trading sessions and this has come under the guise of better jobless information and perhaps the perception that the outlook for growth is improving in the U.S and may start to push the Federal Reserve into the position to consider raising interest rates at some future time. However, traders too must consider the implications of the results from Wall Street the past few sessions, which seems to have taken on a rather cautious tone as we shift into the heart of the holiday season and year end accounting. The USD finds itself in a positive short term trend and traders may try to test its waters.

    The EUR traded lower against the USD again on Tuesday taking it to a one month low versus the greenback. The German Industrial Production figures were released yesterday and proved negative with a minus -1.8% compared to the estimated gain of 1.1%. Making quite a bit of news was the downgrading of Greek government bonds by the Fitch Rating agency. The Greek problem underscores concerns, which have been highlighted in Portugal, Spain, and even Ireland regarding their budgets and current deficits. Today the German and French Trade Balance figures are on the schedule, but these outcomes will have limited impetus in the currency markets. Tomorrow the ECB will release their Monthly Bulletin which could contain some interesting tidbits. The factory and industrial data from Germany respectively already this week has shown that Europe continues to face a tough economic road. Added to this mix now is the possibility of cynicism seeping into investor sentiment regarding the capabilities of individual countries making up the European Union which are mired in difficult financial circumstances. The EUR is still at the higher end of a long upward trend against the USD, but traders will be looking to see if the European currency will continue to be pushed around today.

    The Sterling continued to slump against the USD on Tuesday and is now starting to reach the lower end of its range against the greenback. The Halifax HPI was released yesterday and produced a gain of 1.4% compared to the estimated climb of 0.8%. However, the Manufacturing Production figures produced an unchanged figure, which was worse than the projected gain of 0.5%, also the previous month’s outcome was revised downward. The U.K. economy thus continues to show that it is finding a rough task as it battles recessionary pressures. Today the Annual Pre-Budget Release will be published with Alistair Darling presenting its details supposedly. Investors will note that the proposed budget is coming from a government led by a political party which faces a major election most likely early this spring - and one that is probably destined to lose. This doesn’t mean that the budget numbers do not hold merit, but that they will go under a tough reassessment from the likely new powers that will take office after the vote. The GBP has traded within a well worn range for a few months. The Sterling’s weakness the past few days has the attention of all traders who will be keen to see if the GBP can find its footing once again or descends to a lower value.

    The JPY found some solid ground on Tuesday after trading a bit weaker the past few sessions. The Japanese government revised their GDP figures downward yesterday and what this did is increase risk adverse trading. Asian bourses also followed other international markets and traded lower on Tuesday. Thus it appears that the JPY found some strength as investors sought some safer traction. Also Gold sank in value yesterday and now finds itself around 1130.00 USD an ounce in fast and rapid markets proving that its speculative flair continues unhindered.

    Can the Dollar Make a Comeback? Where is Gold Heading Next?

    For today, Gold yet again promises to be a very exciting commodity for fx traders to both follow, trade in and take profit from. The highly traded commodity has indeed reached new highs in recent weeks and months. However, this trend may have run out of steam for the moment. Despite some bullish momentum taking affect on the 7th of December, as you can see on the Gold 8 Hour Chart, the bears seem to have the upper hand. For day traders, the support levels are $1,133.88 and $1100.28, and the resistance levels are $1,165.46 and $1,226.60. If Gold hits the support level $1,133.88 anytime soon, it could be a profitable bet by going long.

    The pair happens to be trading bearishly for the past five trading days. At the moment, it seems as if there is no ending to this downtrend. For medium-term traders, the resistance levels stand at 1.5145 and 1.5046. The most significant support levels lay at 1.4483 and 1.4626. As the pair currently stands at about 1.4760, and considering that daily volatility could drive the pay 100-150 pips lower at least once or even twice during an average trading week, then the cross diving to the 1.4626 support level soon isn’t unreasonable at all. Buying into the EUR/USD pair when this downward breach occurs may be a big profit-making event for fx traders.

    This pair seems to be offering the most exciting trading opportunity for fx traders who are looking to make some money in a short period of time. This is another one of those currency pairs that can move by over a 100 pips range from their daily and even 4 hour opening prices, as the USD/CAD 4 Hour Chart indicates. Overall, the last several candles offer the view that the bulls are getting stronger and stronger. A wise profit-making opportunity may be waiting for you!

    For forex traders that want to make some good money in the short-medium term, now may be the opportunity you’ve been waiting for! The last 10 candles on the USD/JPY 4 Hour Chart clearly shows that the pair is exepriencing much bearishness during its current downtrend. Despite much bullishness prior to the past 2 trading days, the current trend looks extremely bearish. The support levels lie at 88.034 Yen and 86.561 Yen, and the most significant resistance levels are 90.780 Yen and 90.143 Yen. The pair currently stands at 88.410 Yen, and if it slides to below the support level of 88.034 Yen, then going short at this level maybe a wise proposition for fx traders.

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