The Dollar Loses More Ground With Weak GDP Deflator and Chicago PMI

The Dollar lost more ground today as the GDP deflator and Chicago PMI came out lower than expected. We saw some nice movement today in the majors and today could set the trend for the rest of the week. Now on to the charts…

Chart Analysis:

EUR/USD

Last week I put out a couple trade ideas to go long if the Euro could break 3000 and set a target for the 38% Fib line which is at 3030. The Euro proceeded to stay in a range between 2900 and 3000 with the 50 EMA setting the upper band of the range and the 100 SMA setting the lower bound. Today, the Euro was finally able to break free and moved past 3000 and "magically" moved to the 38% Fib line at 3030. Now the pair faces resistance as it is approaching its 200 SMA on the 4hr chart. Both stochastics on the 4hr and daily chart are trending up and are not in overbought territory. I have a feeling the Euro will continue to inch up towards 3050 before falling back down.

GBP/USD

The Cable dropped all the way down to its 68% Fib line on the daily chart and then made a complete 180 and actually closed higher than where it opened. Both stochastics on the 4hr and daily chart are trending up which gives me an indication that the pair may still continue its upward momentum. I think if the pair can break past its 38% Fib line which is currently at 9665, it will hit 9700. I’d like to go long at 9770 with my stop behind the 38% fib line and set my target for 9700.

Trade Idea:

Buy at 9670; Stop Loss= 9640; Target= 9700

USD/CHF

Yesterday I mentioned that both the EUR/USD and USD/CHF were showing bearish divergences which gave indication that both pairs would move down. The problem with that is that the pairs have a strong negative correlation which means that when one goes up, the other goes down. So obviously there was a conflicting signal. I mentioned that I had a gut feeling that the Swissy would be the pair to drop because of that 2500 level and how the pair had such a hard time actually breaking it. I said that if the pair could break down below 2500 that it would fall hard. Today it did just that. The Swissy dropped to as low as 2427 and I think it could continue to drop as both the 4hr and daily stochastics are trending down, with the 4hr stochastics just entering oversold territory. The pair faces a lot of support below 2400 with all 3 moving averages sitting right below it so I’m not sure if the pair will have enough juice to break through them all. I’m going to wait and see what happens

USD/JPY

The Yen finally made a decent gain against the dollar and broke through both the 50 EMA and 100 SMA on the 4hr chart. Daily stochastics are trending down but the 4hr stochastics are in oversold territory so I’m not sure where the pair will go in the short term. The next closest support area I see is 120.00. We’ll see if the Yen can find enough strength to bring the dollar that low.

  • Pete

    Great charting for GBP/USD Big Pippin! Its found support at 9670 level. I noticed that your trade ideas are more ‘conservative’ compared to Pip Crawler’s (in terms on what price to short/long) – I guess everyone has their own trading style.

  • Pete

    Great charting for GBP/USD Big Pippin! Its found support at 9670 level. I noticed that your trade ideas are more ‘conservative’ compared to Pip Crawler’s (in terms on what price to short/long) – I guess everyone has their own trading style.