Euro cools, Dollar gains some strength

EUR/USD

To no surprise, the Euro continued to rally on Friday, breaking the 1.4200 barrier and nearly hitting 1.4300. So you might be saying…ok BP, it’s time to go with the trend and look to get in long. Well I say "Blasphemy!"…or something like that. The Euro is still going to head down. Yes those fundamentals are kicking the Dollars but right now, but technicals are still indicating a drop. Plus, I’m a firm believer that what goes up, must come down. Daily stochastics are overbought (figures…) and 4hr stochastics are somewhat trending down. However, we’re seeing a very long bearish divergence on the 4hr chart, which could indicate a big fall. Look for the Euro to to drop to 1.4200 and beyond.

GBP/USD

The Cable also soared on Friday and today it nearly reached 2.0500. Daily stochastics are in overbought territory (although they are still trending up) and 4hr stochastics are starting to trend down. Coincidentally, there is also a bearish divergence on the 4hr chart, just like the Sterling’s Euro brethren. Look for the the Cable to drop below 2.0400 some time tomorrow.

USD/CHF

The Swissy made a nice gain today as it briefly breached the 1700 before falling back down to around 1689. Daily stochastics have been in oversold territory for an extended period of time and 4hr stochastics are trending up. I would watch for the Swissy to continue traveling up to its 50 EMA on the 4hr chart at around 1725.

USD/JPY

The Yen also moved up nicely as it reaced the 116.00 mark today. I’m still getting some mixed feelings about this pair at the moment. 4hr stochastics seems to be forming a bearish divergence, but daily stochastics are still trending up. I’m going to hold off on trading this pair but my gut instict is that the pair will travel down to around 115.50 tomorrow.

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.