When Will The Beating End For The Dollar?

EUR/USD

Ok so the Euro is still hanging around those record highs against the Dollar, and the whole world knows that the Dollar isn’t looking pretty right now. This could mean more upside for the Euro in the next month. However, for the short term, it looks like we may have a retracement to the downside. Currently the pair is trading around 5189 and both 4hr and daily stochastics are trending down. I would look for the Euro to fall down to right around 5150. From there anything can happen with such a strong bullish fundamental bias going on right now.

GBP/USD

The Cable is moving pretty erradically (spelling?) right now as it has been spiking within the 9800-9900 range. 4hr stochastics have crossed up, while daily stochastics are in overbought territory. If we zoom out a little bit on the daily chart you can see that we have a double top and double bottom formed to make a range, ahem…a rather large range, but still a range. With the way it looks, it looks like the Cable could move back down to its bottom part of the range, or at least halfway point at around 9700. We’ll see. Right now things look kind of crazy in the Cable so I don’t plan on doing anything right away. I would wait to see until things clear up a bit.

USD/CHF

Talk about dropping like a rock! The Dollar has fallen over 600 pips against the Swissy in the past 5 days. Now that is what you call momentum. With the bears dominating for so long I think way may start to see a little profit taking. 4hr stochastics are trending up while daily stochastics are in oversold territory and have flattened out. Currently the pair is trading around 1.0340 and I wouldn’t be surprised to see it travel back up to 1.0400.

USD/JPY

The Dollar is pretty much doing the same thing to the Yen as it is to the Swissy…..dropping! The pair has finally hit some kind of support around 102.50 and has since climbed up about 100 pips. 4hr stochastics are trending up while daily stochastics are flattening out in oversold territory. Currently the pair is trading around 1.0350 and I would look for it to head back up to around 104.00.

 

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:
  • Warren Buffett says we’re essentially in a recession:

  • Dollar Falls to Record Low Against Euro
    • The U.S. currency has slid 4 percent against the euro in the past three weeks as the housing slump deepened and consumer confidence tumbled, leading traders to abandon bets the dollar and the economy would rebound as the Fed cut rates.
  • Bernanke Signaling Rate Cut?

    • The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said, hewing closely to assurances he offered earlier this month.
    • ncoming barometers continue to "suggest sluggish economic activity in the near term," Bernanke told lawmakers. At the same time, he added, the Fed must keep a close eye on inflation given the recent run-up in energy and other prices paid by consumers and businesses.
      For now though, the No. 1 battle is shoring up the economy.

  • New Home Sales Slip Near A 13 Year Low
    • New home sales slipped to a nearly 13-year low in January, according to a key government report on the battered housing market.
    • The reading was below the consensus forecast of 600,000, according to economists surveyed by Briefing.com, and was the lowest reading since the 559,000 rate reported in February 1995.
  • 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!)
News events to watch for tomorrow :
  • 9:00am EDT- Fed Chairman Ben Bernanke Speaks

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