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Dollars Takes Another Tumble

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Nov 26, 2009.

  1. mercaforex

    mercaforex New Member

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    By Mercaforex


    USD:
    It may be a holiday in the U.S. today but backers of the USD may not find much comfort. The greenback continued to get hammered on Wednesday against all the currencies and it is in a precarious position. Data was rapid yesterday and came in with mixed results. The Core Durable Goods Orders figures turned in a surprising negative result, while weekly Unemployment Claims and New Home Sales results were better than anticipated. Today is the Thanksgiving holiday in the U.S. and all the markets in the States will be shuttered until tomorrow when they will open for a half day of trading. Essentially the USD finds itself on life support and traders participating in today’s market may find a rather tumultuous affair if investors are abundant enough within Europe and other locales to try and take advantage of light volume.

    EUR:
    The EUR continued to be buttressed by poor sentiment in the USD. The EUR is clearly bouncing around its highs against the greenback and because of the holiday across the Atlantic today may not find as much resistance as it typically would encounter. The GfK German Consumer Climate reading actually came in below the estimate yesterday with an outcome of 3.7 compared to the forecast of 4.2. Italian Retail Sales figure met expectations. Today the German Prelim CPI statistics will be released and no change is expected. Inflation continues to be an odd word within economic discussions presently. Many analysts are sounding alarm bells that it could be a danger, but the crux – read reality – is that deflationary numbers are still being seen in many respects. The strength of the EUR will not be a welcomed sight by the ECB and certainly will not be greeted warmly by Germany.

    GBP:
    The Sterling like its counterparts trading against the USD, made strides on Wednesday. The GBP is now touching the high end of its range against the greenback. The Revised GDP numbers from the U.K. met expectations with a decline of minus -0.3%, highlighting that the British economy remains in a recession. Today the CBI Realized Sales figures will be published and the estimate is calling for a reading of 12, which would be an improvement on the previous outcome of 8. The U.K. still is squarely within a recession and although the Bank of England spoke earlier this week about their belief that the economy is showing signs of growth, the question some investors will ask is what will happen when stimulus from the government is eliminated? There will be no major economic data from the U.K. tomorrow, which means the Sterling may trade in a dollar centric fashion today and going into the weekend.

    JPY:
    The JPY broke into new ground yesterday and is now at 14 year high against the USD. Coupled with USD weakness and anxious investors on Asian bourses, the JPY is exhibiting a strong trend. Gold also continued to break into new territory yesterday and now finds itself within the 1190.00 USD an ounce mark. With the advent of the American holiday today both the JPY and Gold could find a very opportunistic market for traders.

    Thanksgiving Leads Way To Dollar Weakness, But Is This A Sustainable Move?

    SPX/USD:
    With today being the thanksgiving holiday, nothing will happen in the American market. Tomorrow most of the key players will be taking advantage of the half day to make the bridge and have a nice long weekend. I continue to stand aside even after yesterday’s show of strength. At this point in time I do not trust the market. I would rather watch from the sidelines, than stand in the middle and get hit from all sides. I mentioned that it is important to keep an eye on the dollar as any weakness could send the American equity market much higher. Yesterday the Greenback hit a 14 year low against the yen! So play this cautiously and I recommend waiting until next week to put on a new trade. Support 1101.3, 1094.9, 1091.7, 1085.3, 1077, 1068.9 Resistance 1113.45, 1132.2, 1153.8

    XAU/USD:
    Hitting a high of 1195.15 early this morning we are now trading $9 lower. The dollar had a big red day yesterday, and I expect some retracement early on before we follow through with a further down move. Of course, since it is an American holiday, this market will be as volatile as ever, and may actually break the $1200 level just because some big shot trader wants to be the first person to trade gold at $1200. Yesterday’s recommendation continues to hold true and you should keep in the back of your minds for weeks to come. “Today we will return to the Weekly head and shoulders formation we discussed a couple of months ago, and see how that is developing. Obviously it has developed very well and it is obvious that gold is flying. The original recommendation was that we would see gold trade over $1100 with a strong probability of it hitting $1200 before year end. Today I want to point out two key elements of this trade. I would be cautious about getting long at these levels on a long term basis. In terms of the head and shoulders formation, the trade is basically the length of the neckline. The neckline takes us to about $1220. We are only about $40 from that target. Considering the sharp angle we have been trading over the last few weeks, I do not believe that this particular move can sustain itself much longer. Gold will have to slow down and people will begin to take profits on this trade. Furthermore we have traded most of the move, even if we do trade another $40 higher, my recommendation is to hold onto the long position, not to enter the trade at these levels. It’s just too risky. Support 1179.95, 1173.75, 1155.7, 1151, 1121.9, 1100.3, 1070.6, 1024. Resistance … 1195.15

    GBP/USD:
    It’s important to me that I show you previous posts not to point out to my readers that my thinking is correct, (because in the next example you will see how wrong I can be) but to allow you, the reader, to see and perhaps understand the thought process I go through. A trader MUST understand that they don’t have to trade every up or down move, and always look for the right opportunity. An opportunity that they understand, and can justify through proper risk management: “The Sterling was able to reverse itself towards the end of the day after bouncing of 1.6500. Today we are already seeing strength on the back of dollar weakness. With a shortened trading week in the United States, this currency could have some interesting moves. It continues to trade within a channel but I am uncertain as to how it will act once American investors are out of the equation. I think this currency has potential to sell off, if the USD is able to hold these levels. Today the greenback is acting weak and this may be the beginning of another decline. If that is really the case the pound should push higher and trade the higher end of its range. However, I think that within a week’s time, the dollar will truly bottom, and send the markets in the opposite direction. At the moment I am going to stand aside coming into the holiday.” Support 1.6496, 1.6460, 1.6249, 1.6125, 1.5769 Resistance 1.6559, 1.6600, 1.6642 1.6741, 1.6876, 1.7042

    EUR/USD:
    I had recommended in yesterday’s post to get short the Euro zone currency anywhere near resistance of 1.5060, with a stop of about 25 pips. Now, while this was a riskier trade, going against the trend and in hindsight I am chastising myself for trying to catch a top. However, I controlled it by having a set stop point. I took my loss and did not reverse my position even though I expect this currency to trade up to 1.5284 if it can hold over the 1.5060 level. The reason I did not reverse the position was because of my thoughts on the US dollar. It is easily understood that I believe the dollar should be bottoming out, and while we did push much lower yesterday it is thanksgiving and I do not want to trade the volatile markets that may develop. Furthermore, it can be seen that already today we tested support (our previous resistance) and the Greenback is retracing some of yesterdays down move. So let’s see how things develop and hopefully next week we can properly re enter the market. Support 1.5062, 1.4999, 1.4800, 1.4683, 1.4613, 1.4480 Resistance 1.5144, 1.5284, 1.5343, 1.5460.
     
  2. Rider

    Rider New Member

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    The dollar gained 0.6% versus the euro to trade at $1.4740, its highest in over a month. The greenback was up 0.9% against the U.K. pound at $1.6292.

    Despite the recent weakness, gold has rallied over the last few months, hitting a series of all-time highs in November, as traders bet the U.S. dollar will remain weak for a long time.

    But investors began to reconsider the outlook for the dollar on Friday following a much better-than-expected report on the U.S. labor market.

    "When the market sees signs of strength in the economy, it interprets it as giving room for Fed to raise rates and support the dollar," Foster said.

    The Federal Reserve has slashed interest rates to historic lows near zero percent to help bring about an economic recovery. As a result, the U.S. dollar has depreciated significantly against rival currencies this year.

    A weaker greenback tends to support prices for commodities like gold that are priced in dollars around the world.

    Fed officials have repeatedly said that interest rates will remain low for an extended period as the economy slowly recovers. On Monday, Fed Chairman Ben Bernanke said the recovery continues to face "formidable headwinds" and reiterated that inflation is not a deep concern.
     
  3. Rider

    Rider New Member

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    The dollar gained 0.9% versus the euro to trade at $1.4693, its highest in over a month. The greenback was up 0.1% against the UK pound at $1.6274.

    Despite the recent weakness, gold has rallied over the last few months, hitting a series of all-time highs in November, as traders bet the U.S. dollar will remain weak for a long time.

    A weaker greenback tends to support prices for commodities like gold that are priced in dollars around the world.

    But investors began to reconsider the outlook for the dollar on Friday following a much better-than-expected report on the U.S. labor market.

    "When the market sees signs of strength in the economy, it interprets it as giving room for Fed to raise rates and support the dollar," Foster said.

    The Federal Reserve has slashed interest rates to historic lows near zero percent to help bring about an economic recovery. As a result, the U.S. dollar has depreciated significantly against rival currencies this year.

    Fed officials have repeatedly said that interest rates will remain low for an extended period as the economy slowly recovers. On Monday, Fed Chairman Ben Bernanke said the recovery continues to face "formidable headwinds" and reiterated that inflation is not a deep concern.
     
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