Dollar worsens against Euro and Sterling after disappointing Philly Fed Index numbers.

EUR/USD

Well the Euro did rise like I thought it might and ended up breaking through 4700 and made its way all the way up to 4800! Right now both 4hr and daily stochastics are heading into overbought territory which leads me to believe that the pair’s rally (starting back on Feb. 7th) may be coming to a halt. However, both stochastics are still trending up which means I’m not going to pull the trigger too quickly. I will try to find some kind of momentum shift to the downside before entering. If you look at the 4hr chart you’ll see that we may have the makings of a bearish divergence which could add merit to my bearish beliefs.

GBP/USD

The Cable bounced up sharply after the horrible Philly Fed Index numbers and rose 200 pips to around 9600. Daily stochastics have crossed back up, which if you are following the daily chart will notice that this just continues its ranging pattern. 4hr stochastics have reached overbought territory after the sharp rise today and the price has hit resistance at its 100 and 200 SMA. In the short term we may see the pair drop to around 9550. However, I’m still uneasy about the Cable and will watch it very closely for any sudden jerks.

USD/CHF

Nothing new happened in the USD/CHF except for the fact that it continued to move in its range pattern. However, the good news is that both 4hr and daily stochastics are trending down which makes a short term drop a good possibility. Currently the pair is trading around 1.0930 and it looks like now might be a good time to go short and set a target for 1.0900 (or around there depending if you see the momentum shift- you may want to exit earlier). This could make for a nice little 30 pip profit.

USD/JPY

The USD/JPY looks like an exact carbon copy of the USD/CHF. Today we saw continued ranging movement but in the midst of it all, there seems to be an opportunity to go short and grab a quick 20-30 pip profit. Both 4hr and daily stochastics are trending down which is a good bearish sign and the 100 and 200 SMA on the 4hr chart look like a good short term support level to take profit at. Currently the pair is trading around 107.56 and I could see it traveling down to around 107.30 and even 107.00 if you’re aggressive.

 

fundamentally speaking...

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:
  • Philly Fed Index Shows Big Slump

    • A key survey of manufacturing activity in the Philadelphia area found that conditions worsened this month and that the outlook for the sector is deteriorating.
    • The Federal Reserve Bank of Philadelphia’s Business Outlook Survey index fell to -24.0 from -20.9 in January, when the index reached it’s lowest point in six years.
  • Euro Interest Rates about to Rise?

    • And don’t look now, but Eurozone inflation is rising… Of course I told you it would, given oil prices, and that the European Central Bank (ECB) would have to drag its feet to cut interest rates… (I also tried to say that on CNBC, right?) Anyway, inflation for the 13-nations that make up the euro, rose 3.1% in November… Whoa Nellie! That’s way too high, given the ECB’s ceiling of 2%!
    • The one thing to think about here is that should the ECB decide to raise rates, and the Fed decides to keep cutting rates (recall the discussion about the possibility of 50 BPS this month from the Fed) The euro would be enjoying a positive rate differential… You think the euro was popular as an offset currency to the dollar before? Wait till that happens (if it does of course!)
  • Fed Looks to End Credit Crunch
    • The Fed and other global central banks announce a new auction designed to let beleaguered financial institutions access more cash.
    • In essence, the Fed is giving beleaguered banks the opportunity to access funds it might need for year’s end without having to borrow money directly from the Fed at the discount rate of 4.75 percent.
    • The Fed added that it was coordinating with the Bank of Canada, European Central Bank, Bank of England and Swiss National Bank on the auction process in order to "address elevated pressures in short-term funding markets."
News events to watch for tomorrow :
  • None

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