Columbus Day Doesn’t Stop The Dollar from Rising

EUR/USD

Well, the Euro is still continuing to drop nicely and all my bearish talk over the past couple of weeks is finally paying off. I still think we will see the Euro drop at least for the next couple of days. Both 4hr and daily stochastics are still trending down and haven’t reached oversold territory yet. Currently the pair is trading around 1.4050 and I would watch for it to continue on down to 1.4000.

GBP/USD

The Cable has been a little more choppy although it is still continuing to fall gradually. Both 4hr and daily stochastics are trending down, and daily stochastics still has a long way to go before reaching oversold territory. I would expect to see a big drop in this pair either today or tomorrow. Currently the Cable is trading around 2.0340 and I would watch for it to fall to at least 2.0300. We may even see it fall to 2.0250 or even 2.0200.

USD/CHF

The Swissy has been rallying up nicely and we may see it continue to rise in the short term. Both 4hr and daily stochastics are trending up nicely with neither being in overbought territory. Currently the pair is trading around 1.1860 and I would expect it to continue moving up to at least its 50 EMA on the daily chart which happens to be hovering around the 1.1900 mark.

USD/JPY

The Dollar has not only been on a tear against the Euro currencies, but it has also been doing pretty well against the Yen also. Today the Dollar rallied to 117.50 versus the Yen but we may be seeing the end of that rally very soon. Both 4hr and daily stochastics are in overbought territory and with the pair finding resistance at the 117.50 mark, we may see it continue to drop back down to 117.00.

I’m not really big into fundamentals but I feel that they are important to discuss. In this section I will be posting fundamental tidbits that I find interesting from various sources. If you find an article that you think would benefit everyone, please email me (Big Pippin) with your username, the article, and a link to where members can read the entire article.

Now onto the Fundamentals:
  • What’s the cause for the Dollar rally?
    • The dollars strength was not caused by the numbers released yesterday; as the ISM manufacturing data declined more than expected and the ISM Prices paid number also came in below expectations. These numbers show a US economy which is slowing and justify calls for additional interest rate cuts by the FOMC. No, the currencies, like Chuck, are taking a much needed breather. As Chuck explained yesterday, the Euro ‘gapped up’ over the weekend and this pullback is simply the markets way of filling in the gaps the currencies missed on the way up.
  • Housing Data will be extra important with the 50 BPS rate cute:
    • Let’s not blow off the housing data… After a 50 BPS rate cut last week, and the dollar’s fall VS the euro, I think the housing data will be very important.
  • The Chinese Yuan and what it could mean for the Dollar’s future:
    • And of course, if the Chinese do finally allow a much faster increase in the value of their currency, their need for holding US dollar reserves will likely shrink (i.e. much of the reserve build comes from the pegging process). And dollar for dollar they can buy more oil with a stronger currency (and every other major raw material they input—including pigs). At minimum, if this plays out, it could be yet another sentiment hit to the dollar.
News events to watch for tomorrow :
  • 4:30am ET- ECB President Trichet Speaks
  • 2:00pm ET- FOMC Minutes

For a list of all of tomorrow’s news events, check out our Forex Calendar

  • swordofrue

    I will have to disagree with you on USD/JPY, probably because I am long that pair. I think we are in for a trend change on this pair. On the weekly charts we have moving averages starting to change from downward to upward. If this pair can break 118.25 and hold above there then I will be confident in my long at 116.37. We shall see who is right, but I do agree that I am not in the clear yet :)

  • BigPippin

    I also think the pair may go up in the medium-long term since it corresponds to my bullish Dollar bias with the other pairs. I think that we may see some retracement to the short side in the next day or so which is why I am currently bearish. Thanks for your input! Happy trading!

  • swordofrue

    I will have to disagree with you on USD/JPY, probably because I am long that pair. I think we are in for a trend change on this pair. On the weekly charts we have moving averages starting to change from downward to upward. If this pair can break 118.25 and hold above there then I will be confident in my long at 116.37. We shall see who is right, but I do agree that I am not in the clear yet :)

  • BigPippin

    I also think the pair may go up in the medium-long term since it corresponds to my bullish Dollar bias with the other pairs. I think that we may see some retracement to the short side in the next day or so which is why I am currently bearish. Thanks for your input! Happy trading!