The Struggling Dollar

EUR/USD

The Euro is definitely on a roll as it has now hit 1.4900. As the interest rate differential begins to shift in the favor of the Euro we could see it really soar against the Dollar in the long run. As for now, 4hr stochastics have crossed down in overbought territory which indicates that the pair may retrace down in the short term to around 1.4850. However, with all the fundamental factors going on right now, I would be very careful about going short when the Euro is hot like this.

GBP/USD

Well the Cable did end up rallying up to 9600 like I thought it would and I still see this pair rising in the medium term. On the daily chart, stochastics are trending up and have been in oversold territory for several days now. Add to the fact that there is also a bullish divergence and you have a recipe for a nice strong rally. In the short term, 4hr stochastics have crossed down which indicates that the pair could make another drop to its bottom at around 9500. For now I would wait until there is a dip before deciding to go long.

USD/CHF

The Dollar dropped like a rock today as it fell to 1.0900 before regaining some strength. Because of the Dollar struggles, I still expect this pair to drop in the medium term. However, in the short term, 4hr stochastics are trending up in oversold territory which indicates that we could see the pair rise up to around 1.0950 before resuming its overall downtrend.

USD/JPY

Like the Swissy, the Dollar has also fallen pretty good against the Yen today. Fundamentally, the Dollar looks like it will take more blows against the Yen but for now the pair looks like it may continue up to around 108.50 since 4hr stochastics are trending up.

 

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:
  • 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 :

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