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The USD Is In The Hot Seat

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

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD like a prisoner on death row got a limited reprieve on Friday. The greenback found itself struggling at lows against most of the currencies but the disappointing figures from the Non Farm Employment Change data and the dubious official Unemployment Rate did throw some caution into the marketplace. Wall Street finished the day with very slight gains. The Non Farm Employment Change statistics did show that fewer companies are dismissing workers, but the final monthly report was worse than anticipated. Added to that, the official Unemployment Rate came in worse than already feared with a 10.2% mark compared to the estimate of 9.9%. Taking all of the negative news into context it could be said that Wall Street held up rather well going into the weekend. The question becomes how investor’s will maintain their trading psychology on Monday.
    Optimism continues to be supreme on the equity front and because of this the USD looks like the poor step child of the currency markets. Today there is little in the way of economic data and it will actually remain very quiet from the States until Thursday. Thus traders will be monitor the gyrations from the stock markets early on this week and watch for politics making their way into the economic mine field. The U.S. House of Representatives passed a health care bill this weekend, but the Senate will get into the act with their own version. The question that will come from such debate will be focused on exact costs – real and imagined. Because of the financial crisis from the past year and the significant amount of money the U.S. government has already spent on trying to create stability, a fair question certainly would be where all of the money is going to come from for the health care initiative and what it will do to the federal deficit. The USD finds itself in a treacherous position and if it continues to face strong headwinds we could see new lows this week for the greenback.

    The EUR continued to capitalize on the weak USD on Friday taking the greenback to new lows before slightly retracing. Germany Factory Orders statistics were released going into the weekend and produced a 0.9% result, missing the estimate of 1.0% by a miniscule amount. Today the German Industrial Production and Trade Balance numbers will be published. Also the broad European Sentix Investor Confidence reading is on the calendar. Tomorrow German ZEW Economic Sentiment will lead a parade of releases. The EUR has essentially prospered on the heels of risk appetite rising throughout the economic realm within the international bourses. Europe still has its own problems it has to solve on the economic front. A strong EUR is not something the entire continent is going to be happy with and investors will be keen for any hints from the ECB that they are ready to intervene if the rising value of the currency gets out of hand.

    The Sterling finished the week off on a high note against the USD. While the PPI Input produced a 2.6% figure, above the expectation of 1.6% the Output data was slightly negative. Today the BRC Retail Sales Monitor and the RICS House Price Balance are both on the schedule. Both of these sectors remain a critical barometer regarding the health of the U.K. economy. Tomorrow will be a rather quiet day of releases. Investors will continue to watch the economic data but also take into consideration the daily pronouncements from the Labor government which finds itself slipping in popularity while it tries to ‘right’ the economic ship. The GBP has reemerged at the high end of its ranges against the USD and traders may continue to test this trend.

    The JPY continues to find enough takers to keep it near the high end of its range against the USD. While the trading pattern for the two currencies does remain relatively tight, the JPY has been the stronger of the two. Gold broke into new record ground going into the weekend and emerged above the 1100.00 level. The interesting thing that must be noted is that most of the other commodities remain rather tame.

    Oops Gold Did It Again, But Will Silver Tame Its Wild Brother?

    What’s truly amazing with the market action lately is the way that fundamentals, like Fridays weaker than expected data, can be pretty much completely ignored. While the Greenback attempted to rally higher, Friday, was a rather non event, with a close just above the dollar index’s day open. This was a great technical trade, where the market showed strength, the buyers won yet another battle over the sellers, and we pushed up. I continue to maintain that while this market is acting strong, with buyers picking up sell orders like squirrels hoarding nuts, something just isn’t right. Be cautious in becoming a long term investor just yet as there could be some very interesting developments over the next few months. Support 1059.3 1052.4, 1045.5, 1029.4, 1019.6, 1009.1, 992.25 Resistance 1071.5, 1073.2, 1081.5, 1086.2, 1095.8, 1101.4, 1132.2, 1153.8

    Oops it did it again! Gold has made new highs! Not only that, but we even broke over $1100. This has been one of my favourite trades in a long time. The trading setups have been as close to perfect as I have ever seen. Consolidation followed by a large push up, consolidation, followed by a large push up etc. Notice how we tested support of 1032.3 on the weekly chart, closed higher, and have burst upwards. At some point the too far too fast theory will come into affect again, but as long as we keep trading in this fashion, keep looking for great entry points, as chances are, you will probably get them. Great entry means low risk, and large profit potential. However, consider that with Friday’s selling tail. We may consolidate over 1070 until we are ready to have a solid push up over 1100. I would really like to see this commodity hold over the 1082.46 area. If it does, I will continue to expect seeing new highs quickly becoming old highs! Support 1092.87, 1087.65, 1082.46, 1078.37, 1070.6, 1066.1, 1051.3, 1046.7 Resistance 1097.53. 1101.2….

    The Sterling continues to trade in an expected fashion and we continue to trade it within the parameters of a trading channel. Friday’s recommendation holds true coming into the beginning of this week, as the pound turned in a relatively quiet day of trading. “An early attempt to trade lower was squashed on the back of the weaker greenback, strong gold prices and good support level at around 1.6466. This trading channel has made trading the sterling very exciting over the last few months. In essence we are just looking for good entry and exit points. This market is looking relatively strong, and I am hesitant to start selling at 1.6636 because it looks like it is accumulating to break over that level. And yet, resistance is name resistance for a reason, so I will be looking for a long entry if the market pushes back down after testing that level. A good quickie trade would be to sell resistance, and try and make 90 or so pips with a small risk of about 21 pips. Support 1.6466, 1.6249, 1.6119, 1.5776 Resistance 1.6636, 1.6741, 1.7042”

    Look at the XAG/USD Daily Chart. The way we closed on Friday has left me contemplating whether or not this is a signal that the large up move in its bigger brother Gold, has come to an end. If not an end then perhaps some time for it to catch its breath. While the XAU/USD keeps plowing higher, Silver has not matched the momentum, nor the strength of the gold market. We have yet to make new all time highs, and furthermore, if anything, it seems like the Silver market may be topping out. The question that we must answer is which market will conquer the other and thus pull the loser by the skin of its teeth up or down with it. Friday’s selling tail, its inability to make new highs, or break through resistance are all signs that this market may head lower over the coming week. We will keep a close eye on both these metals, and the ensuing battle. Support 17.50, 17.32, 17.22, 16.77, 16.07, 15.53, 14.73 Resistance 17.77, 17.94, 18.09, 19.46, 21.34

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