The Markets Continue With The Choppiness

EUR/USD

The Euro was once again unable to break that 4200 mark. The story was the same its been the last several days. The Euro rises above 4200 but by the end of the day it falls right back under. Now 4hr and daily stochastics are still trending up, so there still may be a short rally above 4200, but I think we might be seeing the last of the bullish run for the Euro. I’m still going to hold off, but I getting ready to short this pair very soon.

GBP/USD

Well I went on a limb yesterday, saying the Cable would break out of its range today and drop to 2.0250, but that wasn’t the case. Instead, the pair decided to stay in its range and we’re right back where we were yesterday. I’ve now gotten rid of my bias and have decided to hold off as we are seeing some VERY choppy movements across the board right now. I will wait until the majors get some sense back into them before I jump back in.

USD/CHF

The Swissy didn’t move much since yesterday’s post, but it’s range seems to be getting smaller and smaller. Anytime a pair consolidates like that, you can bet that there will be a big breakout soon. I’m sticking to my gameplan and am going to wait for this breakout and jump along for the ride.

USD/JPY

The Dollar continued to drop today and is about at the same place we saw it end up yesterday at around 116.45. 4hr stochastics have crossed down and daily stochastics are trending down nicely. I would look for the pair to continue dropping down to 116.00 by 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:
  • Eurozone ministers surely don’t want the Euro to be this strong….right?
    • As I said yesterday the Eurozone ministers were beginning their meeting to discuss the weak dollar, yen and renminbi… So… Some traders believe that means the ministers want the euro to be weaker… I believe traders that believe this are barking up the wrong tree… The European Central Bank (ECB) loves the strong euro, and I’ve explained why on several occasions in the past, but for those who missed class on those previous 1,000 times I’ve explained it… The strong euro does so much for the ECB’s mantra to provide price stability… A strong euro fights inflation, and increases its allure for foreign investment into the country. There are more reasons like the price of oil being reduced, so, you can see what I’m talking about now…
  • 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– GBP Retail Sales

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