Crude drops again..indication of a Dollar rally?

EUR/USD

Well call me dead wrong because that’s what I am! Technicals have been failing me at the moment……or have they?? Yes, I know the Euro has continued to move up once again, but our technical indicators are still indicating overextension. While my timing might be off, I still believe that the pair will drop. However, if the pair reaches 1.4200 then I will have to re-evaluate my thinking. At the moment, we still have what seems to be a bearish divergence on the 4hr chart. 4hr stochastics are still trending up but the pair seems to have found resistance at the 1.4150 mark. If the pair drops from there, we’ll have a really nice looking bearish divergence. Not to mention that the daily stochastics are and have been overbought since September 10th. I don’t have a target in mind, but look to take profits at all the 00 or 50 levels (1.4100, 1.4050, etc.)

GBP/USD

Unlike the Euro, I was actually right about the Cable. The pair did end up falling down and dropped to as low as 2.0100, but soon shot back up, making yet another sideways day. We do have a little bit of a clearer indication of future direction as both 4hr and daily stochastics are trending up but I’m not completely confident in going long at the moment. The 2.0200 level seems to be the magnet for the pair and until I see some clear movement away from that level, I’m going to keep my trigger finger on the sidelines.

USD/CHF

I was also completely wrong about the Swissy (figures, since the Swissy and Euro have a very strong negative correlation). Instead of moving up, the pair continued to drift down and dropped to as low as 1650 before moving back up. I don’t think the pair will continue to drop much lower. 4hr stochastics are trending down but are almost in oversold territory and daily stochastics are and have been in oversold territory for several days now. Look for the pair to fall back down to around 1650, but I think we should see a nice move up from there.

USD/JPY

Well my bearish bias on the Yen paid off as the pair dropped down to 114.00 yesterday. Now, we once again have conflicting indicators. 4hr stochastics are trending up and daily stochastics are trending down. Currently the pair is trading around 114.50 and I would watch for it to move back up to its 50 EMA and 100 SMA on the 4hr chart at around 115.00 before it drops again.

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:
  • 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.