Watch out Forex, the Dollar is back in town!

EUR/USD

Oh yea, and the Euro is now dropping! I am liking what I’m seeing right now and I think we’ll see more of the Euro meltdown. The Euro dropped to 4150 but I think we’ll see the pair drop to as low as its 50 EMA on the daily chart at around 4000 sometime this week. There is a bearish divergence on the daily chart and daily stochastics are trending down nicely which supports my bearish bias, but 4hr stochastics are in oversold territory, so we may see the pair take a breather in the short term. Overall, I am still bearish on the Euro and am expecting to look for more short trades.

GBP/USD

The Cable has also decided to drop, and it is doing a real nice job of it at the moment. A bearish divergence has formed on the daily chart and daily stochastics are trending down very nice. Like the Euro, I expect the Cable to continue falling to its 100 SMA on the daily chart at 2.0200 some time this week.

USD/CHF

The Swissy made a nice run up today as it neared the 1800 level. Since my last 2 pairs I analyzed are all pro-dollar, I’m sticking with the theme and am expecting the Dollar to rally against the Franc as well. There is a bullish divergence on the daily chart and daily stochastics are trending up nicely. I am expecting this pair to continue running up to its 50 EMA on the daily chart at around 1850 some time this week.

USD/JPY

I also think the Dollar is going to run up against the Yen. Today we saw the pair bottom out at 113.50 and it began a nice rally towards the end of the day. 4hr stochastics are trending up while daily stochastics have crossed up in oversold territory. Look for the pair to continue moving up to around 115.00.

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:
  • UK September retail sales saw the highest annual growth in 3 years:
    • The Office for National Statistics reported that retail sales in September rose 6.3 pct from a year ago, the highest rise since September 2004 and above analyst expectations for a 5.6 pct increase. In August sales rose 4.8 pct year-on-year, revised down from the earlier estimate of 4.9 pct.
  • 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…
  • 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 :
  • Nothing major is coming out tomorrow.

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

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