Another good day for the Greenback!

The Dollar made slight gains against the Euro and Pound but ended up falling back down to about where it was yesterday. Against the Yen however, the Dollar climbed to a near 4 year high. The BOJ decided to keep rates steady at 0.25% while the US data showed improvements in housing and manufacturing, plus increases in consumer prices. It was basically a Dollar positive day, especially against the Yen.

US Consumer Price Index
Following a flat report in November, the overall CPI rose up to 0.5% in December. A rising CPI is Dollar positive. Overall, year-over-year CPI is up 2.6% for December compared to 2.0% in November. The core CPI, which the Fed pays close attention to also rose from a 0% growth in November to a 0.2% growth in December. Year-over-year growth for core CPI stayed the same at 2.6%. The thing to take away from today’s report is that the core CPI is still slightly above the Fed’s comfort zone which means that the Fed’s inflation worries are not over and interest rates aren’t going down anytime soon.

US Housing Starts
Housing starts rose 4.5% to 1.642M units from a revised 1.572M units in November. With the slump of the real estate market, this gives optimists hope that the housing market may be rebounding. However, year over year housing starts are still down 24.7% in December compared to a 28.6% decline in November. Today’s report shows us that although housing starts were positive, the overall picture still shows weakness in the housing market.

US Philadelphia Fed Index
US Philly Fed Index unexpectedly rose to 8.3 in January compared to the -2.3 number in December. Overall we’ve seen soft numbers for manufacturing but today’s Philly Fed Index shows that the sector may not be as soft as everyone thinks. Today’s report could mean a positive report for January’s ISM manufacturing report which is set to come out in early February.

Coming Up:

US Consumer Sentiment
10:00 am ET; 15:00 GMT
Previous= 91.7; Consensus= 92.5; Forecast Range= 91 to 94

Chart Analysis:

EUR/USD

The Euro is pretty much where it was yesterday and is testing its 50 SMA again. Unfortunately I was spiked in my short trade which resulted in a loss. I try to put my trades at certain levels where if they are hit it will most likely continue in the direction it is headed. It’s kind of like catching a momentum wave. I still like the trade idea from yesterday and I think I will go for it again. This time I will set my entry slightly higher so that I will buy the pair at 2975. I will target 3000 and set my stop at 2950 which is right below the 50 SMA.

Trade Idea:

Buy at 2975; Stop Loss= 2950; Target= 3000; Target 2= 3030

GBP/USD

The Cable had some pretty volatile movements today and spiked me into my long trade which unfortunately didn’t go my way. Daily stochastics is still trending up but is in overbought territory while the 4hr stochastics just left overbought territory but seems to be crossing back up. I think the pair will still make a run to 9800 but I don’t see any good entry points so I will stay on the sidelines for tomorrow.

USD/CHF

Well the Swissy did end up falling to its 50 SMA on the 4hr chart but then bounced back up to as high as 2550. But yet again the pair has failed to close above 2500 and I think this pair is set to fall down. I’d like to short the pair if it can break its 50 SMA which is currently around 2440. I will set my target for 2400 and put a stop above the 50 SMA at 2460.

Trade Idea:

Short at 2430; Stop Loss= 2460; Target= 2400; Target 2= 2380

USD/JPY

Yesterday I asked when the Yen would fall. Today was not that day since the BOJ decided to keep rates steady at .25% while the US reports all came out positive for the dollar today. As a result the pair broke past 121.00 and got as high as 121.50 before cooling off. Stochastics on both the 4hr and daily chart still indicate that the pair is going to fall but as rebellious as the Yen is, its still hard to say when. I will stay out for now.

Conclusion:

Tomorrow will be more of a technical day since the only major report out is the US Consumer Sentiment. That report could create some spikes and if the number is an extreme surprise (good or bad) it could cause a nice move in the market.