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Who Needs Fundamentals?

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Oct 22, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    The USD failed to capitulate to the other major currencies on Wednesday as it fought back from its lows against the EUR and GBP. The greenback has seen an extended bout of pressure come its way for a while now but as the U.S. equity markets started to lose some ground late in its trading sessions, the USD did stabilize. Crude Oil Inventories data was released yesterday and showed that supply is still plentiful and that demand has not shown improvement. The price of Crude Oil remains at the very high end of its range and this apparently has more to do with a weak USD than increased usage. Today the U.S. will release its weekly Unemployment Claims numbers and they are expected to produce a slightly worse outcome of 516K compared to the previous result of 514K.

    Unemployment in the United States remains a critical issue and there have been whispers from White House officials who have quietly tried to dampen expectations that the problem is going to be solved in a quick manner, among them Lawrence Summers yesterday. The menacingly large numbers of jobless has created havoc with U.S. consumers spending habits, because a palpable fear exists regarding job security. The fear of losing work has put a definite crimp in the pocketbooks of the American public. While the equity markets have managed to hold onto their gains and march further upward, many questions continue to be asked about the fundamental quality of sustainable growth. Optimists seeking riskier assets have certainly put the USD in a precarious position, but there remain groups of investors who are nervous about the lack of quality in the economic data. Tomorrow the Existing Home Sales figures will be brought forth. The currency markets have been brisk this week and they are likely to keep up a dynamic pace today.

    The EUR found continued support on Wednesday and managed to hold onto its gains from previous trading sessions. There was no major economic data released from Europe yesterday and today will be relatively light with merely the Current Account statistics for the E.U. and Italian Retail Sales. The broad Current Account statistics are projecting an outcome of 1.9 billion. Tomorrow will be the biggest day of home grown numbers for the EUR as PMI data will be brought forth from both Germany and France. Also making its way forward on Friday will be the Ifo Business Climate reading from Germany. It has been a quiet week of economic reports from Europe but with tomorrow’s information waiting, investors will have a significant amount of trading ammunition on their plates. The EUR has maintained its highs against the USD in a stable fashion this week and will continue to get widespread interest.

    The Sterling has picked itself up nicely from the floor over the past week of trading. The GBP finds itself once again nearing the higher part of its trading range against the greenback. Today the U.K. will release its Retail Sales numbers and they are expected to show an increase of 0.6%, which would be an improvement over the previous report. Tomorrow the Preliminary GDP statistics are on schedule. Having put on quite a display of volatility the past two weeks, traders will be poised to look at the incoming data carefully. Like its counterpart in the U.S., the Sterling has found a wide range of debate surrounding its merits. Expect trading in the GBP to be rapid today and tomorrow.

    The JPY lost a bit of ground to the USD as the Wednesday trading session came to a close, this as the equity markets began to turn slightly negative. The JPY however does remain solidly on the stronger side of its range against the greenback and traders will examine the current consolidated pattern carefully. Gold also continues to stay within known levels and appears to be setting the table for an interesting move, one that will probably reflect risk appetite and the health of the USD.

    S&P 500 Needs To Hold, But Could Signal Dollar Strength

    Yesterday‘s candle finally showed some solid weakness. While we managed to stay within the trading channel, a new high was formed (one point over the previous) and we closed at the day’s lows. Unless some stronger than expected data surprises the market today, I would expect that we begin to make the move lower and fill the gap which I had stated last week could be either a breakaway or an exhaustion gap. If things develop as I expect I would consider it an exhaustion gap. Support 1081.16, 1075.3 1060.9, 1020.3 Resistance 1101.4, 1132.2, 1153.8

    I would like you to recall how a few weeks ago, we discussed how important it was for a product to consolidate. Well that’s exactly what it looks like gold is doing at the moment. In the previous example I had used a one hour chart to show what an effective trade this could be. Today we are looking at the daily chart and it is obvious how after a large push up the market has to take time to breath, and accept the new price range it has reached. At the moment we expect a higher push higher based on these technical’s, but as always, make sure you don’t throw everything you own into this trade, and play it with the appropriate amount of caution. Manage your risk! Support 1059.5, 1042.5, 1024, 1019.65, 1009.65 Resistance 1061.35, 1070.6.

    Taking a look at the weekly GBP/USD chart we see how this currency pair continues to trade the range. While it tested both the upper and lower ends of this range we are pushing back up towards the upper band. This channel has been holding strong since early June. As we near the 1.6741 level, Depending on the price action I will be looking to get in on the short side with a relatively tight stop. Any break above that level could be the beginning of a solid move past 1.7042. Keep your eyes on the dollar as well as the SPX. Any strong break could mean serious strength in the USD, and the basket of currencies may finally start to go stale. Support 1.6467, 1.6444, 1.6399, 1.6324, 1.6239, 1.6119 Resistance 1.6591, 1.6637, 1.6662, 1.6743, 1.7042

    As we bounced off the lows many thought that this could be it for dollar weakness. However, this currency pair is nothing but weak. We have been trading down since early March. Resistance of 1.0583 needs to hold otherwise we might easily see 1.1125 in the near future. Interestingly enough as we neared parity we formed a bullish reversal candle on the weekly chart. The retracement that we can expect should not be too large, and the downtrend should return. Support 1.416, 1.0266, 1.0205 Resistance 1.0583, 1.0791, 1.0992, 1.1125

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