In the exciting currency markets, the US dollar rose to a 3-week high against the Euro and a near 2-month high against the Japanese yen last week. You might be thinking, why did the US dollar gain in strength despite weak US economic data? We saw that consumer confidence is at 26-year low, the housing market is still in a sad decline and jobs are lost instead of being created. It might be tempting to think that perhaps traders are complacent about the dollar’s prospects but there are some factors which could be supporting the dollar’s favor for the immediate term. In the case of EUR/USD, long positions in the EUR/USD were reduced after EUR/USD failed to stay above 1.6000, and from a fundamental perspective, European data seems to be weaker now, as can be seen from last week’s IFO German business sentiment index which showed the biggest monthly decline since September 2001, and also there is an increased likelihood of a Fed pause after a possible 25-bp rate cut this coming Thursday. The futures market is even pricing a 30% chance that the Fed will keep the benchmark rate unchanged at 2.25%, compared with a 2% chance a week ago. There will be many major events happening this week although there is nothing major scheduled for Monday. Look out for US GDP, manufacturing, Fed rate announcement and non-farm payrolls data in the later part of the week.
Forex Trading
If you want to dodge these event risks, intraday trading will be your best weapon. EUR/USD’s nearest resistance lies around 1.5720, and nearest support is around 1.5530-50, with another possible support cushion around 1.5480-1.5510. USD/CHF’s resistance is around 1.0430, followed by 1.0460 then 1.0500.
Watch the video below:
Sunday:
Japan retail trade 2350 GMT
Monday:
ECB’s Trichet, Liebscher, Wellink speak in Vienna 0700 GMT
European Commission releases economic growth forecast 0945 GMT
New Zealand trade balance 2245 GMT
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I believe the dollar gain strength despite of the weak economic data is because of the currency correlations and the technical factors.
The EURUSD liquidation on Thursday/Friday was the result of the previous week’s high Commitment to Trade Open Interest percentage to go LONG on foreign currency’s (CHF) validated at the market top EURUSD resistance (entry 15995)… which resulted in the self-feeding spiral downward (took 150 pips). Good call on intraday trading instead of swing trading for the coming week. Watch Nonfarm Payroll FUTURES (Monday) and COT (to determine for indication of new support levels with stablization of Open Interest to signal whether or not liquidation is over on EURO FX) to come out. Keep take profits to 20-30 increments with low margin risk exposure. Calculate Murrey’s Math (8/8ths) after Tuesday for new mid range resistance/support levels. We’re still not out of a Bullish seasonal market for the EURUSD, but Yen carry trade is a good leading indicator. End of month typically signals trend reversals of previous week. Good luck, Euroforex. Skype: ki6bev11
EURUSD decline due to previous week Commitment of Trade report - high Open Interest to short EURO FX at EURUSD market resistance and Long on CHF with noncommerical orders - signaled a bearish trend that is a self-feeding spiral downward. Entry was 15994… 15606 (GRTS 377 EMA on 3hr chart); look for next COT weeks report to determine if liquidation is over (Open Interest stabilizes on majors)… or if price decline matches continuing COT Open Interest declines for short positions on EURO FX.) Calculate Murrey’s Math 8/8ths on Tuesday (30min chart) for mid range levels. Intraday trades more profitable than swing trades; 20-30 pips with a low margin risk. There will lbe ots of “pump and dump” till Wednesday - post Bernie’s speech. Mutually active correlatative pairs: USDJPY and USDCHF are key; EURUSD will follow in opposite direction. Good luck, Euroforex. Sype: ki6bev11